Akebia Therapeutics, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing was signed March 1, 2022. This is an annual report, not a standalone fourth-quarter report.
Business context
Akebia is a kidney-disease-focused biopharmaceutical company. Its U.S. commercial product is Auryxia (ferric citrate), approved for hyperphosphatemia in adults with dialysis-dependent CKD and iron-deficiency anemia in adults with non-dialysis CKD. Vadadustat, an investigational oral treatment for CKD-related anemia in the U.S. and Europe, was approved and marketed in Japan as Vafseo. The company also licensed praliciguat for development in focal segmental glomerulosclerosis.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $213.6 million | $295.3 million |
| U.S. product revenue, net (Auryxia) | $142.2 million | $128.9 million |
| License, collaboration and other revenue | $71.4 million | $166.4 million |
| Cost of goods sold | $153.4 million | $295.9 million |
| Operating loss | $265.3 million | $376.4 million |
| Net loss | $282.8 million | $383.5 million |
| Net loss per share, basic and diluted | $1.70 | $2.77 |
| Cash used in operating activities | $253.0 million | $110.4 million |
| Cash and cash equivalents | $149.8 million | $228.7 million |
| Cash, cash equivalents and restricted cash | $151.8 million | $231.1 million |
| Current assets / current liabilities | $272.0 million / $256.5 million | $371.4 million / $187.1 million |
| Term-loan principal / carrying amount | $100.0 million / $97.5 million, classified current | $100.0 million / $96.4 million, classified long-term |
| Liability from sale of future royalties | $53.1 million | None reported |
Consolidated revenue less reported cost of goods sold was $60.2 million, or approximately 28% of revenue; this includes collaboration revenue, so it is not a product-only gross margin. The company reported an accumulated deficit of $1.46 billion and stockholders’ equity of $76.5 million at year-end. Cash and available-for-sale securities were $149.8 million at December 31, 2021, down from $268.7 million a year earlier.
Material changes versus FY2020
- Total revenue fell $81.7 million (about 28%), chiefly because Otsuka collaboration funding declined as the global Phase 3 vadadustat program moved into close-out. Collaboration and other revenue decreased $95.0 million.
- Auryxia product revenue increased $13.3 million (about 10%), attributed mainly to higher units sold and improved payer mix, partly offset by COVID-19-related effects on CKD patients.
- Research and development expense declined $70.6 million as Phase 3 vadadustat costs decreased. Selling, general and administrative expense rose $20.2 million, mainly from marketing, headcount and one-time legal costs.
- Net loss narrowed by $100.6 million, in part because FY2020 included a $115.5 million Auryxia intangible-asset impairment; FY2021 had no comparable impairment. Operating cash use nevertheless increased by $142.6 million, reflecting payments including payroll, rebates and inventory.
- FY2021 product cost of goods sold included substantial non-cash items, including $33.4 million of charges related to excess purchase commitments, $21.6 million of inventory fair-value step-up charges and $15.6 million of inventory write-downs and reserves. The excess purchase commitment liability reached $76.7 million.
Outlook, financing, risks and unusual items
- Vadadustat: FDA accepted the NDA for standard review, with a PDUFA target action date of March 29, 2022; the FDA said it was not then planning an advisory committee meeting. Otsuka submitted an EU marketing application in October 2021. Akebia cautioned that approval for non-dialysis CKD patients was uncertain: vadadustat met hemoglobin efficacy endpoints but failed the PRO 2 TECT primary cardiovascular-safety endpoint (MACE hazard ratio 1.17; 95% CI 1.01–1.36). In dialysis-dependent patients, INNO 2 VATE met its MACE non-inferiority endpoint (hazard ratio 0.96; 95% CI 0.83–1.11). Vadadustat was already marketed in Japan.
- Liquidity and going concern: Management said existing cash was expected to fund its current operating plan for at least 12 months from filing, but additional funding would be needed beyond that. Management and the auditor identified substantial doubt about the company’s ability to continue as a going concern. Approval-related milestones and other financing sources are uncertain. The Pharmakon loan covenant requires specified future reports not to include a going-concern qualification; breach could trigger default and acceleration. The loan was classified as current at year-end.
- Debt and funding arrangements: The $100 million Pharmakon term loan is secured and bears interest at a floating rate. The 2021 royalty monetization generated $44.8 million net proceeds, but the royalty-sale liability was $53.1 million at year-end and incurred $9.1 million of non-cash interest expense in 2021. Akebia raised $88.2 million net through at-the-market stock sales during 2021, diluting shareholders.
- Subsequent Vifor agreement: In February 2022, after year-end, Akebia amended its vadadustat license with Vifor. Vifor received exclusive sales rights for specified U.S. dialysis and specialty-pharmacy customers; Akebia retains non-dialysis rights and rights for dialysis customers outside that group. Akebia is to receive about 66% of profit, net of specified costs; Vifor agreed to a $25 million upfront payment and a repayable $40 million working-capital facility. Vifor also bought 4 million shares for $20 million.
- Auryxia market and supply: Medicare does not cover Auryxia for its IDA indication and requires prior authorization for the hyperphosphatemia indication. Litigation challenging the CMS decision was dismissed in October 2021, leaving those coverage restrictions in place. Settlements with generic applicants generally allow U.S. generic entry beginning March 20, 2025, subject to FDA approval and possible earlier-entry provisions. The company relies on third-party manufacturers and faces significant Auryxia minimum-purchase commitments.
- Controls and audit: Management and the auditor concluded internal control over financial reporting was ineffective because of an unremediated material weakness in inventory controls, including reconciliation review, cost validation, reserve assessment and physical-count verification. The auditor issued an adverse opinion on internal control, but an unqualified opinion on the financial statements.
- Other notable matters: The company reported ongoing shareholder litigation relating to the Keryx merger and ongoing vadadustat patent proceedings. It also disclosed one severe hepatic-injury case with jaundice in the vadadustat clinical program; attributed hepatocellular injury was reported in less than 1% of patients, and reported cases resolved after drug discontinuation. COVID-19 was cited as a continuing headwind to revenue growth and a potential source of operational, supply and trial disruption.
Most important facts for investors to verify
- FDA and other regulatory outcomes for vadadustat, particularly the scope of any approval given the failed NDD-CKD MACE endpoint, and any resulting launch timing, label limits or additional study requirements.
- Cash burn, financing needs and access to capital, alongside the going-concern assessment and compliance with Pharmakon’s liquidity, sales and reporting covenants.
- Auryxia sales trends, Medicare access and payer mix, inventory reserves, and the $76.7 million excess purchase commitment liability and related supplier commitments.
- Commercial terms, execution and funding effects of the February 2022 Vifor arrangements, including the repayable working-capital facility and the allocation of U.S. dialysis customers.
- Progress in remediating the inventory-control material weakness and any effects of further corrections, write-downs or audit findings.
- Potential outcomes of merger-related shareholder suits and patent disputes, and the timing and commercial effect of generic Auryxia entry.