Akebia Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Akebia is a kidney-disease biopharmaceutical company whose U.S. commercial product is Auryxia; vadadustat is its lead investigational candidate. The filing was signed May 9, 2022.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $61.7 million | $52.3 million |
| Net product revenue | $41.4 million | $30.4 million |
| License, collaboration and other revenue | $20.3 million | $21.9 million |
| Cost of goods sold | $31.3 million | $34.6 million |
| Gross profit / gross margin | $30.4 million / approximately 49% | $17.7 million / approximately 34% |
| Research and development | $43.8 million | $40.6 million |
| Selling, general and administrative | $44.3 million | $41.3 million |
| Operating loss | $58.5 million | $64.9 million |
| Net loss | $62.4 million | $69.6 million |
| Basic and diluted net loss per share | $0.35 | $0.45 |
| Net cash used in operating activities | $21.6 million | $70.7 million |
Auryxia revenue increased 36% year over year, which management attributed primarily to improved payer mix. Collaboration revenue declined by $1.6 million, mainly because lower vadadustat development costs were eligible for Otsuka cost-sharing; this was partly offset by higher MTPC-related revenue. Product cost of goods sold included $5.3 million of inventory write-downs and a $0.8 million reduction in the excess-purchase-commitment liability. Q1 2021 costs included a $21.6 million inventory fair-value step-up and an $8.9 million non-cash gain from reducing excess purchase commitments.
At March 31, 2022, cash and cash equivalents were $174.6 million; current assets were $302.7 million and current liabilities $253.9 million. Total assets were $535.4 million, total liabilities $509.2 million, and stockholders’ equity $26.1 million, down from $76.5 million at year-end 2021. The balance sheet reports $97.8 million of current debt. The $100 million Pharmakon term loan bears interest at three-month LIBOR plus 7.50%, subject to a 2.00% floor and 3.35% cap; principal repayments were scheduled to begin in September 2022. The loan is secured by specified assets, including Auryxia-related assets and cash.
Operating cash use improved year over year, with cash flow affected by working-capital changes, including a $33.4 million increase in deferred revenue. Financing provided $47.5 million, including $40.0 million received from Vifor for a repayable working-capital fund and $7.2 million of net equity proceeds. Cash, cash equivalents and restricted cash totaled $177.7 million at quarter-end.
Material developments and outlook
- Vadadustat U.S. application: The FDA issued a complete response letter on March 29, 2022, concluding it could not approve the NDA in its present form. The filing cites FDA safety concerns including failure to meet the MACE non-inferiority endpoint in non-dialysis patients, increased thromboembolic events driven by vascular-access thrombosis in dialysis patients, and potential drug-induced liver injury. Akebia planned to request an FDA end-of-review conference within 90 days; the filing does not establish a resolution, approval path, or additional-trial requirement.
- Other vadadustat markets: Otsuka’s European application remained under review; management said it was cautious about potential approval for non-dialysis patients because the PRO2TECT program did not meet its primary safety endpoint. Vadadustat was marketed in Japan as Vafseo by MTPC. The FDA placed a partial hold on U.S. pediatric vadadustat trials in April 2022.
- Workforce and spending: After the CRL, Akebia announced workforce reductions of approximately 42% (47% including most open positions), followed by a further management reduction in May. It expected approximately $16.5 million in aggregate restructuring charges, primarily in Q2 2022; a separate May disclosure estimated approximately $4.5 million related to the further reduction. Management aimed to refocus on Auryxia and reduce expenses, but warned savings and business effects were uncertain.
- Going concern and liquidity: Management concluded that substantial doubt existed about the company’s ability to continue as a going concern for at least 12 months after issuance of the financial statements. It believed cash could fund the current operating plan for at least 12 months, but that plan relied on cost reductions and amendments to partner and supply contracts that were not fully within Akebia’s control; management assessed the likelihood of success as less than probable. Pharmakon’s amended covenant requires future specified filings to have no going-concern qualification; failure could trigger default and acceleration, which Akebia might lack cash to repay. Akebia reported no event of default as of March 31.
- Vifor arrangements: Vifor paid a $25 million upfront license payment and contributed $40 million to a working-capital fund that Akebia must repay over time. The license payment remained deferred revenue because of regulatory and reimbursement uncertainties. A CRL-related termination or other specified events may require repayment of the working-capital fund.
- Commercial and operating risks: Management expected COVID-19 to continue to pressure revenue growth among its CKD patient population. Auryxia faces reimbursement restrictions, competition and agreed generic-entry licenses beginning March 20, 2025, subject to FDA approval and certain earlier-entry circumstances. The company also disclosed substantial supply commitments, inventory-obsolescence exposure, and reliance on third-party manufacturers.
- Controls and legal matters: Disclosure controls were ineffective because a material weakness in inventory controls remained unremediated. Securities litigation concerning the 2018 merger and vadadustat disclosures was ongoing; Akebia said it could not estimate a reasonably possible loss range. The filing also describes patent proceedings and other litigation-related risks.
Key changes versus the prior comparable period
- Revenue rose $9.4 million, driven by higher Auryxia sales; collaboration revenue fell $1.6 million.
- Gross margin improved to approximately 49% from 34%, principally reflecting the absence of the prior-year inventory fair-value step-up and excess-commitment gain effects in product costs.
- Net loss narrowed by $7.2 million, while R&D and SG&A increased by $3.2 million and $3.0 million, respectively.
- Operating cash use declined by $49.1 million, but Q1 2022 financing included a repayable $40 million Vifor working-capital contribution; it should not be treated as recurring operating cash generation.
- Cash and cash equivalents increased from $149.8 million at December 31, 2021 to $174.6 million at March 31, 2022, while stockholders’ equity fell by $50.3 million.
Important facts for investors to verify
- What FDA feedback and any subsequent conference establish about vadadustat’s regulatory path, required studies, timing and cost.
- Whether Akebia can satisfy Pharmakon’s going-concern and other covenants in later filings, avoid acceleration, and maintain adequate liquidity.
- Actual cash runway and the extent to which planned contract amendments, infrastructure reductions and workforce actions deliver savings; track restructuring costs against estimates.
- Auryxia prescription and net-revenue trends, payer mix, rebate reserves, inventory write-downs and purchase commitments, particularly amid COVID-19 effects and reduced staffing.
- Repayment and termination terms for Vifor’s working-capital fund, and whether any trigger could require repayment or affect the secured loan.
- Progress in remediating the inventory-control material weakness and any related financial-reporting adjustments.
- Potential outcomes and financial exposure from securities litigation, intellectual-property proceedings, and Auryxia generic entry and supply obligations.