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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________

Commission File Number 001-36352
AKEBIA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-8756903
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
   
 245 First Street, Cambridge, MA
 02142
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (617871-2098
n/a
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.00001 per shareAKBAThe Nasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
Accelerated filer
    
Non-accelerated filer¨Smaller reporting company
    
  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Outstanding at October 31, 2022
183,962,083



NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are being made pursuant to the provisions of the U.S. Private Securities Litigation Reform Act of 1995 with the intention of obtaining the benefits of the “safe harbor” provisions of that Act. All statements contained in this Quarterly Report on Form 10‑Q other than statements of historical fact are forward-looking statements. These forward-looking statements may be accompanied by words such as “anticipate,” “believe,” “build,” “can,” “contemplate,” “continue,” “could,” “should,” “designed,” “estimate,” “project,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “strategy,” “seek,” “target,” “will,” “would,” and other words and terms of similar meaning, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements about:
the potential therapeutic benefits, safety profile, and effectiveness of vadadustat; 
our expectations regarding our participation in a meeting with the U.S. Food and Drug Administration, or FDA, to discuss our Formal Dispute Resolution Request, or FDRR, with respect to the development of vadadustat, if any, following our receipt of a complete response letter to our new drug application for vadadustat for the treatment of anemia due to chronic kidney disease in adult patients, including the timing of a potential response to the FDRR from the FDA;
that delivering value broadly to the kidney community, as well as others who may benefit from our medicines, will result in delivering value for stockholders;
our pipeline and portfolio, including its potential, and our related research and development activities;
the timing of or likelihood of regulatory filings and approvals, including with respect to labeling or other restrictions, the potential approval of vadadustat and our outlook related thereto, and potential indications for vadadustat;
the timing, investment and associated activities involved in continued commercialization of Auryxia® (ferric citrate), its growth opportunities and our ability to execute thereon;
the potential indications, demand and market opportunity, potential and acceptance of Auryxia and vadadustat, if approved, including the size of eligible patient populations; 
the potential therapeutic applications of the hypoxia inducible factor pathway;
our competitive position, including estimates, developments and projections relating to our competitors and their products and product candidates, and our industry; 
our expectations, projections and estimates regarding our capital requirements, need for additional capital, financing our future cash needs, costs, expenses, revenues, capital resources, cash flows, financial performance, profitability, tax obligations, liquidity, growth, contractual obligations, the period of time our cash resources and collaboration funding will fund our current operating plan, our internal control over financial reporting and disclosure controls and procedures, and remediation of the material weakness we have identified in our internal control over financial reporting relating to our inventory process or any future deficiencies or material weaknesses in our internal controls and procedures; 
the direct or indirect impacts of the COVID-19 pandemic on our business, operations and the markets and communities in which we and our partners, collaborators, vendors, and customers operate;
our manufacturing, supply and quality matters and any recalls, write-downs, impairments or other related consequences or potential consequences;
estimates, beliefs and judgments related to the valuation of intangible assets, goodwill, contingent consideration, debt and other assets and liabilities, including our impairment analysis and our methodology and assumptions regarding fair value measurements;
the timing of the availability and disclosure of clinical trial data and results;
our and our collaborators’ strategy, plans and expectations with respect to the development, manufacturing, supply, commercialization, launch, marketing and sale of Auryxia and vadadustat, if approved, and the associated timing thereof; 
the designs of our studies, and the type of information and data expected from our studies and the expected benefits thereof;
our ability to maintain any marketing authorizations we currently hold or will obtain, including our marketing authorizations for Auryxia and our ability to complete post-marketing requirements with respect thereto;
our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms and processes on a timely basis, or at all, with third-party payors for Auryxia and vadadustat, if approved;



the timing of initiation of our clinical trials and plans to conduct preclinical studies and clinical trials in the future; 
the timing and amounts of payments from or to our collaborators and licensees, and the anticipated arrangements and benefits under our collaboration and license agreements, including with respect to milestones and royalties; 
our intellectual property position, including obtaining and maintaining patents, and the timing, outcome and impact of administrative, regulatory, legal and other proceedings relating to our patents and other proprietary and intellectual property rights, patent infringement suits that we have filed or may file, or other actions that we may take against companies, and the timing and resolution thereof;
expected ongoing reliance on third parties, including with respect to the development, manufacturing, supply and commercialization of Auryxia and vadadustat, if approved;
accounting standards and estimates, their impact, and their expected timing of completion;
estimated periods of performance of key contracts;
our facilities, lease commitments, and future availability of facilities;
cybersecurity;
insurance coverage;
remediation of our material weakness;
estimates with respect to our ability to operate as a going concern;
management of personnel, including our management team, and our employees, including employee compensation, employee relations, and our ability to attract, train and retain high quality employees;
the implementation of our business model, current operating plan, and strategic plans for our business, product candidates and technology, and business development opportunities including potential collaborations, alliances, mergers, acquisitions or licensing of assets;
our workforce reduction, future charges expected to be incurred in connection therewith and estimated reductions in net cash required for operating activities in connection therewith; and
the timing, outcome and impact of current and any future legal proceedings.

Any or all of these forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. These forward-looking statements involve risks and uncertainties, including those that are discussed below under the heading "Risk Factor Summary", and the risk factors identified further in Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q, that could cause our actual results, financial condition, performance or achievements to be materially different from those indicated in these forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason. Unless otherwise stated, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

This Quarterly Report on Form 10-Q also contains estimates and other information concerning our industry and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Unless otherwise expressly stated, we obtained this industry, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to “Akebia,” “we,” “us,” “our,” “the Company,” and similar references refer to Akebia Therapeutics, Inc. and, where appropriate, its subsidiaries, including Keryx Biopharmaceuticals, Inc.

AURYXIA®, AKEBIA Therapeutics®, VafseoTM and their associated logos are trademarks of Akebia and/or its affiliates. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. All website addresses given in this Quarterly Report on Form 10-Q are for information only and are not intended to be an active link or to incorporate any website information into this document.



RISK FACTORS SUMMARY

Investing in our common stock involves numerous risks, including the risks summarized below and described in further detail in “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects. These risks include, but are not limited to, the following:
We have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses and cannot guarantee when, if ever, we will become profitable or attain positive cash flows.
We will require substantial additional financing to achieve our goals. A failure to obtain this necessary capital when needed, or on acceptable terms, could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
Our independent registered public accounting firm included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in our Annual Report on Form 10-K. Any future concerns relating to our ability to continue as a going concern would materially adversely affect us.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product and product candidates on unfavorable terms to us.
If we fail to regain compliance with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
We may not be successful in our efforts to identify, acquire, in-license, discover, develop and commercialize additional products or product candidates or our decisions to prioritize the development of certain product candidates over others may not be successful, which could impair our ability to grow.
We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates or technologies or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense.
Our business has been and may continue to be, directly or indirectly, adversely affected by the COVID-19 pandemic.
Our obligations in connection with the loan agreement with Pharmakon and requirements and restrictions in the loan agreement could adversely affect our financial condition and restrict our operations.
Our Royalty Interest Acquisition Agreement with HealthCare Royalty Partners IV, L.P. contains various covenants and other provisions, which, if violated, could materially adversely affect our financial condition.
Our business is substantially dependent on the commercial success of Auryxia. If we are unable to continue to successfully commercialize Auryxia, our results or operations and financial condition will be materially harmed.
If we are unable to maintain or expand, or, if vadadustat is approved, initiate, sales and marketing capabilities or enter into additional agreements with third parties, we may not be successful in commercializing Auryxia, vadadustat, if approved, or any other product candidates that may be approved.
Our, or our partners', failure to obtain or maintain adequate coverage, pricing and reimbursement for Auryxia, vadadustat, if approved, or any other future approved products, could have a material adverse effect on our or our collaboration partners’ ability to sell such approved products profitably and otherwise have a material adverse impact on our business.
We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do.
The commercialization of RionaTM and VafseoTM in Japan and our current and potential future efforts with respect to the development and commercialization of our products and product candidates outside of the United States subject us to a variety of risks associated with international operations, which could materially adversely affect our business.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and we will incur additional costs in connection with, and may experience delays in completing, or ultimately be unable to complete, the development and, if approved, commercialization of vadadustat and any other product candidates.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired.
Conducting clinical trials outside of the United States, as we have done historically and as we may decide to do in the future, presents additional risks and complexities and, if we decide to conduct a clinical trial outside of the United States in the future, we may not complete such trials successfully, in a timely manner, or at all, which could affect our ability to obtain regulatory approvals.
Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired, may cause undesirable side effects or have other properties that may delay or prevent marketing approval or limit their commercial potential.
We may not be able to obtain marketing approval for, or successfully commercialize, vadadustat or any other product candidate, or we may experience significant delays in doing so, any of which would materially harm our business.
Products approved for marketing are subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties, including withdrawal of marketing approval, if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, or product candidates, when and if any of them is approved.
We are subject to a complex regulatory scheme that requires significant resources to ensure compliance and our failure to comply with applicable laws could subject us to government scrutiny or enforcement, potentially resulting in costly



investigations, fines, penalties or sanctions, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
We will incur significant liability if it is determined that we are promoting any “off-label” use of Auryxia or any other product we may develop, in-license or acquire or if it is determined that any of our activities violates the federal Anti-Kickback Statute.
Disruptions in the FDA, regulatory authorities outside the U.S. and other government agencies caused by global health concerns or funding shortages could prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.
Compliance with privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations.
Legislative and regulatory healthcare reform may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain for any products that are approved in the United States or foreign jurisdictions.
We depend on collaborations with third parties for the development and commercialization of Auryxia, Riona, Vafseo and vadadustat and if these collaborations are not successful or if our collaborators terminate their agreements with us, we may not be able to capitalize on the market potential of Auryxia, Riona, Vafseo and vadadustat, and our business could be materially harmed.
We may seek to establish additional collaborations and, if we are not able to establish them on commercially reasonable terms, or at all, we may have to alter our development and commercialization plans.
We rely upon third parties to conduct all aspects of our product manufacturing and the loss of these manufacturers, their failure to supply us on a timely basis, or at all, or their failure to successfully carry out their contractual duties or comply with regulatory requirements, cGMP requirements, or guidance could cause delays in or disruptions to our supply chain and substantially harm our business.
We rely upon third parties to conduct our clinical trials and certain of our preclinical studies. If they do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain or maintain marketing approval for Auryxia, vadadustat or any of our product candidates, and our business could be substantially harmed.
If the licensor of certain intellectual property relating to Auryxia terminates, modifies or threatens to terminate existing contracts or relationships with us, our business may be materially harmed.
If we are unable to adequately protect our intellectual property, third parties may be able to use our intellectual property, which could adversely affect our ability to compete in the market.
We may not be able to protect our intellectual property rights throughout the world.
The intellectual property that we own or have licensed and related non-patent exclusivity relating to our current and future products is, and may be, limited, which could adversely affect our ability to compete in the market and adversely affect the value of Auryxia.
The market entry of one or more generic competitors or any third party’s attempt to challenge our intellectual property rights will likely limit Auryxia sales and have an adverse impact on our business and results of operation.
Litigation, including third party claims of intellectual property infringement, may be costly and time consuming and may delay or harm our drug discovery, development and commercialization efforts.
We are currently involved in an opposition and invalidation proceedings and may in the future be involved in additional lawsuits or administrative proceedings to challenge the patents of our competitors or to protect or enforce our patents, which could be expensive, time consuming, and unsuccessful.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
If we fail to attract, retain and motivate senior management and qualified personnel, we may be unable to successfully develop, obtain and/or maintain marketing approval of and commercialize vadadustat or commercialize Auryxia.
Our cost savings plan and the associated workforce reduction implemented in April and May 2022 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
We may encounter difficulties in managing our growth, including with respect to our employee base, and managing our operations successfully.
We have identified a material weakness in our internal control over financial reporting relating to our inventory process. If we are not able to remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.
We are currently subject to legal proceedings that could result in substantial costs and divert management's attention, and we could be subject to additional legal proceedings.
Our stock price has been and may continue to be volatile, which could result in substantial losses for holders or future purchasers of our common stock and lawsuits against us and our officers and directors.



Akebia Therapeutics, Inc.

Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I—FINANCIAL INFORMATION
Item 1.  Financial Statements.

AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$144,761 $149,800 
Inventory40,039 38,195 
Accounts receivable, net23,094 50,875 
Prepaid expenses and other current assets29,618 33,140 
Total current assets237,512 272,010 
Property and equipment, net5,622 6,754 
Operating lease assets30,337 33,852 
Goodwill55,053 55,053 
Other intangible assets, net81,095 108,127 
Other assets26,275 49,754 
Total assets$435,894 $525,550 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$19,708 $33,588 
Accrued expenses and other current liabilities87,364 104,456 
Short-term deferred revenue1,265 20,906 
Current portion of refund liability to customer13,681  
Current portion of long-term debt65,947 97,543 
Total current liabilities187,965 256,493 
Deferred revenue, net of current portion43,296 21,474 
Operating lease liabilities, net of current portion30,683 33,703 
Derivative liability760 1,820 
Liability related to sale of future royalties, net58,236 53,079 
Refund liability to customer, net of current portion26,788  
Other non-current liabilities74,313 82,525 
Total liabilities422,041 449,094 
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock $0.00001 par value, 25,000,000 shares authorized; 0 shares issued and
   outstanding at September 30, 2022 and December 31, 2021
  
Common stock $0.00001 par value; 350,000,000 shares authorized at September 30, 2022 and December 31, 2021; 183,951,583 and 177,000,963 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
2 1 
Additional paid-in capital1,559,206 1,536,800 
Accumulated other comprehensive loss6 6 
Accumulated deficit(1,545,361)(1,460,351)
Total stockholders' equity13,853 76,456 
Total liabilities and stockholders' equity$435,894 $525,550 
 
See accompanying notes to unaudited condensed consolidated financial statements.
7


AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Revenues:
Product revenue, net$42,239 $36,753 $127,390 $100,120 
License, collaboration and other revenue6,725 12,003 110,032 53,853 
Total revenues48,964 48,756 237,422 153,973 
Cost of goods sold:
Product28,936 6,933 60,859 76,012 
Amortization of intangibles9,011 9,011 27,032 27,032 
Total cost of goods sold37,947 15,944 87,891 103,044 
Operating expenses:
Research and development27,350 40,471 97,210 118,296 
Selling, general and administrative30,918 46,357 108,052 129,336 
License expense743 870 2,323 2,460 
Restructuring 180  14,711  
Total operating expenses59,191 87,698 222,296 250,092 
Operating loss(48,174)(54,886)(72,765)(199,163)
Other income (expense):
Interest expense(3,952)(5,085)(14,051)(14,853)
Other income1,167 427 2,712 1,854 
Loss on extinguishment of debt(906) (906) 
Net loss$(51,865)$(59,544)$(85,010)$(212,162)
Net loss per share - basic and diluted$(0.28)$(0.34)$(0.47)$(1.30)
Weighted-average number of common shares - basic and diluted183,882,446 173,782,151 182,375,443 163,050,769 
Comprehensive loss:
Net loss$(51,865)$(59,544)$(85,010)$(212,162)
Other comprehensive loss - unrealized loss on debt securities   (7)
Total comprehensive loss$(51,865)$(59,544)$(85,010)$(212,169)
 
See accompanying notes to unaudited condensed consolidated financial statements.


8


AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
 Common Stock  
 Number of
Shares
$0.00001
Par Value
Additional Paid-In
Capital
Unrealized
Gain/(Loss)
Accumulated
Deficit
Total Stockholders'
Equity
Balance at December 31, 2020148,074,085 $1 $1,425,115 $13 $(1,177,511)$247,618 
Issuance of common stock, net of
   issuance costs
9,228,017 1 29,497 — — 29,498 
Proceeds from sale of stock under
   employee stock purchase plan
154,276 — 367 — — 367 
Stock-based compensation expense— — 5,992 — — 5,992 
Restricted stock unit vesting1,063,711 — — — — — 
Unrealized loss— — — (4)— (4)
Net loss— — — — (69,580)(69,580)
Balance at March 31, 2021158,520,089 $2 $1,460,971 $9 $(1,247,091)$213,891 
Issuance of common stock, net of
   issuance costs
10,446,160 — 37,266 — — 37,266 
Stock-based compensation expense— — 6,515 — — 6,515 
Restricted stock unit vesting685,174 — — — — — 
Unrealized loss— — — (3)— (3)
Net loss— — — — (83,038)(83,038)
Balance at June 30, 2021169,651,423 $2 $1,504,752 $6 $(1,330,129)$174,631 
Issuance of common stock, net of
   issuance costs
4,730,466  16,092 — — 16,092 
Proceeds from sale of stock under
   employee stock purchase plan
152,917 — 379 — — 379 
Share-based compensation expense— — 5,592 — — 5,592 
Restricted stock unit vesting17,183 — — — — — 
Net loss— — — — (59,544)(59,544)
Balance at September 30, 2021174,551,989 $2 $1,526,815 $6 $(1,389,673)$137,150 
Balance at December 31, 2021177,000,963 $1 $1,536,800 $6 $(1,460,351)$76,456 
Issuance of common stock, net of
   issuance costs
4,404,600 1 7,177 — — 7,178 
Proceeds from sale of stock under
   employee stock purchase plan
191,146 — 367 — — 367 
Stock-based compensation expense— — 4,536 — — 4,536 
Restricted stock unit vesting1,789,326 — — — — — 
Net loss— — — — (62,421)(62,421)
Balance at March 31, 2022183,386,035 $2 $1,548,880 $6 $(1,522,772)$26,116 
Stock-based compensation expense— — 6,841 — — 6,841 
Exercise of options142,440 — 67 — — 67 
Restricted stock unit vesting176,179 — — — — — 
Net income— — — — 29,276 29,276 
Balance at June 30, 2022183,704,654 $2 $1,555,788 $6 $(1,493,496)$62,300 
Share-based compensation expense— — 3,375 — — 3,375 
Proceeds from sale of stock under
   employee stock purchase plan
144,000 — 43 — — 43 
Restricted stock unit vesting102,929 — — — — — 
Net loss— — — — (51,865)(51,865)
Balance at September 30, 2022183,951,583 $2 $1,559,206 $6 $(1,545,361)$13,853 
 
See accompanying notes to unaudited condensed consolidated financial statements
9


AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
10


 Nine Months Ended
 September 30, 2022September 30, 2021
Operating activities:
Net loss$(85,010)$(212,162)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,246 1,485 
Amortization of intangibles27,032 27,032 
Amortization of premium/discount on investments (15)
Non-cash interest expense related to sale of future royalties6,352 6,779 
Non-cash royalty revenue related to sale of future royalties(1,195)(425)
Non-cash collaboration revenue(9,550) 
Non-cash R&D expense3,941  
Non-cash interest expense1,467 852 
Non-cash operating lease expense(1,818)(1,415)
Non-cash loss on extinguishment of debt406  
Fair value step-up of inventory sold or written off 21,575 
Write-down of inventory10,002 7,126 
Change in excess inventory purchase commitments12,422 15,376 
Stock-based compensation14,808 18,099 
Change in fair value of derivative liability(1,060)(490)
Changes in operating assets and liabilities:
Accounts receivable27,781 (22,837)
Inventory1,405 (35,282)
Prepaid expenses and other current assets9,131 (25,020)
Other long-term assets14,817 4,728 
Accounts payable(17,420)(14,933)
Accrued expense(22,364)15,099 
Operating lease liabilities1,771 1,173 
Deferred revenue2,181 3,098 
Other non-current liabilities(14,820) 
Net cash used in operating activities(18,475)(190,157)
Investing activities:
Purchase of equipment(114)(59)
Proceeds from the maturities of available for sale securities 40,000 
Net cash (used in) provided by investing activities(114)39,941 
Financing activities:
Proceeds from sale of future royalties, net 44,783 
Proceeds from refund liabilities to customers40,000  
Proceeds from the issuance of common stock, net of issuance costs7,122 82,799 
Proceeds from the sale of stock under employee stock purchase plan410 746 
Proceeds from the exercise of stock options67  
Payments on debt(33,000) 
Net cash provided by financing activities14,599 128,328 
(Decrease) in cash, cash equivalents, and restricted cash(3,990)(21,888)
Cash, cash equivalents, and restricted cash at beginning of the period151,839 231,132 
Cash, cash equivalents, and restricted cash at end of the period$147,849 $209,244 
Non-cash financing activities
Unpaid offering costs$ $57 
 
See accompanying notes to unaudited condensed consolidated financial statements
11


Akebia Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.Nature of Organization and Operations

Akebia Therapeutics, Inc., referred to as Akebia or the Company, was incorporated in the State of Delaware in 2007. Akebia is a biopharmaceutical company with the purpose of bettering the lives of people impacted by kidney disease. The Company has one commercial product, Auryxia® (ferric citrate), which is approved by the U.S. Food and Drug Administration, or FDA, and marketed for two indications in the United States: the control of serum phosphorus levels in adult patients with chronic kidney disease, or CKD, on dialysis, or DD-CKD, and the treatment of iron deficiency anemia, or IDA, in adult patients with CKD not on dialysis, or NDD-CKD. Ferric citrate is also approved and marketed in Japan as an oral treatment for IDA in adult patients for the improvement of hyperphosphatemia in such patients with DD-CKD and NDD-CKD under the trade name Riona (ferric citrate hydrate).

Vadadustat, the Company’s lead investigational product candidate, is an investigational oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH, inhibitor designed to mimic the physiologic effect of altitude on oxygen availability. On March 29, 2022, the Company received a complete response letter, or CRL, from the FDA. The CRL provided that the FDA had completed its review of the Company's new drug application, or NDA, for vadadustat for the treatment of anemia due to CKD in adult patients and had determined that it could not approve the NDA in its present form. In July 2022, the Company held an end of review meeting with the FDA to inform the Company's next steps with respect to the potential U.S. approval of vadadustat, if any, and in October 2022, the Company submitted a Formal Dispute Resolution Request, or FDRR, with the FDA. The FDRR focuses on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult patients on dialysis in light of safety concerns expressed by the FDA in the CRL related to the rate of adjudicated thromboembolic events driven by vascular access thrombosis for vadadustat compared to the active comparator and the risk of drug-induced liver injury. On May 12, 2022, the Company received notice from its former collaboration partner, Otsuka Pharmaceutical Co. Ltd., or Otsuka, that Otsuka had elected to terminate the Collaboration and License Agreement dated December 18, 2016, or the Otsuka U.S. Agreement, and the Collaboration and License Agreement dated April 25, 2017, or the Otsuka International Agreement. On June 30, 2022, the Company and Otsuka entered into a Termination and Settlement Agreement, or the Termination Agreement, pursuant to which, among other things, the Company and Otsuka agreed to terminate the Otsuka U.S. Agreement and the Otsuka International Agreement as of June 30, 2022 (see Note 4 for further details). In October 2021, Otsuka submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in adult patients with DD-CKD and NDD-CKD to the European Medicines Agency, or EMA. In connection with the Termination Agreement, Otsuka transferred the MAA for vadadustat with the EMA to the Company. Vadadustat is approved in Japan as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD patients under the trade name VafseoTM, and marketed and sold in Japan by Mitsubishi Tanabe Pharma Corporation, or MTPC.

In addition, the Company continues to explore additional development opportunities to expand its pipeline and portfolio of novel therapeutics.

Since inception, the Company has devoted most of its resources to research and development, including its preclinical and clinical development activities, commercializing Auryxia, and providing general and administrative support for these operations. The Company began recording revenue from the U.S. sales of Auryxia and revenue from sublicensing rights to Auryxia in Japan from the Company’s Japanese partners, Japan Tobacco, Inc. and its subsidiary Torii Pharmaceutical Co., Ltd., collectively JT and Torii, in December 2018. Additionally, following regulatory approval of vadadustat in Japan, the Company began recognizing royalty revenues from MTPC from the sale of Vafseo in August 2020. In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or HCR, or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 6 for additional information). The Company has not generated a profit to date, and may never generate profits, from product sales. Vadadustat and the Company’s other potential product candidates are subject to long development cycles, and the Company may be unsuccessful in its efforts to develop, obtain marketing approval for or market vadadustat and its other potential product candidates. If the Company does not successfully commercialize Auryxia, vadadustat, if approved, or any other potential product candidate, it may be unable to achieve profitability.

Going Concern
 
The Company’s management completed its going concern assessment in accordance with Accounting Standards Codification, or ASC, 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or ASC 205-40. Pursuant to the requirements of ASC 205-40, the Company’s management must evaluate whether there are conditions or events,
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considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

When substantial doubt exists under this methodology, the Company’s management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of the Company’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

As of September 30, 2022, the Company had cash and cash equivalents of approximately $144.8 million. The Company believes that its cash resources will be sufficient to allow the Company to fund its current operating plan through at least the next twelve months from the filing of this Quarterly Report on Form 10-Q. However, the Company's operating plan includes assumptions pertaining to cost avoidance measures and the reduction of overhead costs that would result from the planned amendment of contractual arrangements with certain supply and collaboration partners, and the reduction of operating expenses. Therefore, because these cost avoidance measures and certain other elements of the Company's operating plan are outside of its control, including the planned amendment of contractual arrangements with certain supply and collaboration partners, and the reduction of operating expenses, there is uncertainty as to whether the Company's cash resources will be adequate to support its operations for a period through at least the next twelve months from the date of issuance of these financial statements.

In addition, on July 15, 2022, or the Effective Date, the Company entered into the Second Amendment and Waiver with BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, or the Second Amendment and Waiver, which amends and waives certain provisions of the loan agreement entered on November 11, 2019, between the Company, with Keryx Biopharmaceuticals, Inc., or Keryx, as guarantor, and the Collateral Agent, as collateral agent and a lender, and BioPharma Credit Investments V (Master) LP as a lender, or the Loan Agreement, as amended by the First Amendment and Waiver among the Collateral Agent, the Lenders and the Company, dated February 18, 2022, or the First Amendment and Waiver. The Collateral Agent and the Lenders are collectively referred to as Pharmakon (see Note 11). Pursuant to the Second Amendment and Waiver, on the Effective Date, the Company made prepayments totaling $25.0 million together with a prepayment premium of $0.5 million plus all accrued and unpaid interest on such prepayments of principal to the Effective Date, and Pharmakon agreed to waive or modify certain covenants in the Loan Agreement (see Note 11). If an event of default occurs and is continuing under the Loan Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement, which the Company may not have the available cash resources to repay at such time. For example, pursuant to covenants in the Loan Agreement, the Company's Annual Reports on Form 10-K must not be subject to any qualification as a going concern. If any of the Company's future Annual Reports on Form 10-K is subject to any qualification related to going concern, it will result in an event of default under the Loan Agreement.

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plans to alleviate the conditions that raise substantial doubt through cost avoidance measures, including amending contractual arrangements with certain supply and collaboration partners, and reducing operating expenses, for the Company to continue as a going concern for a period of twelve months from the date the financial statements are issued. However, the Company has concluded that the likelihood that its plan to extend its cash runway from one or more of these approaches will be successful, while reasonably possible, is less than probable. Accordingly, the Company has concluded that substantial doubt exists about its ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities, other than obligations under the Loan Agreement classified as current, that might result from the outcome of the uncertainties described above.

2.Summary of Significant Accounting Policies

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP, for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

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In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. Interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any other future period.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Management has determined that the Company operates in one segment, which is the business of developing and commercializing novel therapeutics for people with kidney disease. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission on March 1, 2022, or the 2021 Annual Report on Form 10-K.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2021 Annual Report on Form 10-K and are updated below as necessary.
New Accounting Pronouncements – Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard.

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: prepaid and accrued research and development expense, operating lease assets and liabilities, derivative liabilities, refund liabilities to customers, other non-current liabilities, including the excess purchase commitment liability, stock-based compensation expense, product and collaboration revenues including various rebates and reserves related to product sales, non-cash interest expense on the liability related to sale of future royalties, inventories, income taxes, intangible assets and goodwill.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

3.Product Revenue and Reserves for Variable Consideration
To date, the Company’s only source of product revenue has been from the U.S. sales of Auryxia. Total net product revenue was $42.2 million and $36.8 million for the three months ended September 30, 2022 and 2021, respectively, and $127.4 million and $100.1 million for the nine months ended September 30, 2022 and 2021, respectively. The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2022 and 2021 (in thousands):
 
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 Chargebacks
and Discounts
Rebates, Fees
and other
Deductions
ReturnsTotal
Balance at December 31, 2021$1,278 $26,625 $475 $28,378 
Current provisions related to sales in current year8,592 64,322 3,692 76,606 
Adjustments related to prior year sales(248)33  (215)
Credits/payments made(8,194)(65,611)(3,669)(77,474)
Balance at September 30, 2022$1,428 $25,369 $498 $27,295 
Balance at December 31, 2020$802 $39,912 $649 $41,363 
Current provisions related to sales in current year8,911 105,432 4,866 119,209 
Adjustments related to prior year sales(1)(1,590) (1,591)
Credits/payments made(8,593)(99,518)(4,979)(113,090)
Balance at September 30, 2021$1,119 $44,236 $536 $45,891 
 
Chargebacks, discounts and returns are recorded as a direct reduction of revenue on the unaudited condensed consolidated statement of operations with a corresponding reduction to accounts receivable on the unaudited condensed consolidated balance sheets. Rebates, distribution-related fees, and other sales-related deductions are recorded as a reduction in revenue on the unaudited condensed consolidated statement of operations with a corresponding increase to accrued liabilities or accounts payable on the unaudited condensed consolidated balance sheets.

Accounts receivable, net related to product sales was approximately $24.0 million and $24.6 million as of September 30, 2022 and December 31, 2021, respectively.

4.License, Collaboration and Other Significant Agreements
During the three and nine months ended September 30, 2022 and 2021, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of September 30, 2022:
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
License, Collaboration and Other Revenue:(in thousands)(in thousands)
MTPC Agreement$5,487 $2,555 $13,885 $7,167 
Otsuka U.S. Agreement 6,144 86,773 28,988 
Otsuka International Agreement 1,860 5,503 13,532 
Total Proportional Performance Revenue$5,487 $10,559 $106,161 $49,687 
JT and Torii1,238 1,444 3,871 4,093 
MTPC Other Revenue   73 
Total License, Collaboration and Other Revenue$6,725 $12,003 $110,032 $53,853 
 
 September 30, 2022
 Short-TermLong-TermTotal
Deferred Revenue:(in thousands)
MTPC Agreement$1,265 $ $1,265 
Vifor Pharma Agreement 43,296 43,296 
Total$1,265 $43,296 $44,561 

The following table presents changes in the Company’s contract assets and liabilities during the nine months ended September 30, 2022 and 2021 (in thousands):
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Nine Months Ended September 30, 2022Balance at
Beginning of
Period
AdditionsDeductionsBalance at End
of Period
Contract assets:    
Accounts receivable(1)$19,094 $92,612 $(109,836)$1,870 
Prepaid expenses and other current assets$4,309 $9,550 $(8,250)$5,609 
Contract liabilities:
Deferred revenue$42,380 $66,307 $(64,126)$44,561 
Accounts payable$3,171 $ $(3,171)$ 
Accrued expenses and other current liabilities$ $ $ $ 
Nine Months Ended September 30, 2021
Contract assets:
Accounts receivable(1)$3,045 $38,795 $(20,427)$21,413 
Prepaid expenses and other current assets$1,722 $1,725 $(5)$3,442 
Contract liabilities:
Deferred revenue$40,559 $65,890 $(62,792)$43,657 
Accounts payable$7,227 $ $(7,227)$ 
Accrued expenses and other current liabilities$10,000 $ $ $10,000 
 
(1)Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement as of September 30, 2022 and 2021 and December 31, 2021 and 2020. Also excludes accounts receivable related to amounts due to the Company from product sales which are included in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2022 and December 31, 2021.

During the three and nine months ended September 30, 2022 and 2021, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands):
 
 Three Months Ended September 30,Nine Months Ended September 30,
Revenue Recognized in the Period:2022202120222021
Amounts included in deferred revenue at the beginning of the period$5,047 $9,159 $29,574 $20,363 
Performance obligations satisfied in previous periods$ $ $ $ 
 
Mitsubishi Tanabe Pharma Corporation Collaboration Agreement
Summary of Agreement
On December 11, 2015, the Company and MTPC entered into the MTPC Agreement, providing MTPC with exclusive development and commercialization rights to vadadustat in Japan and certain other Asian countries, collectively, the MTPC Territory. In addition, the Company will supply vadadustat for both clinical and commercial use in the MTPC Territory, subject to MTPC’s option to manufacture commercial drug product in the MTPC Territory. In February 2021, the Company entered into the Royalty Agreement with HCR, whereby the Company sold its right to receive royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 6 for additional information). A more detailed description of the MTPC Agreement and the Company's evaluation of this agreement under ASC 606 can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.
The Company identified two performance obligations in connection with its material promises under the MTPC Agreement as follows: (i) License, Research and Clinical Supply Performance Obligation and (ii) Rights to Future Know-How Performance Obligation. The Company allocates the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. The Company developed a best estimate of the standalone selling price for the Rights to Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement and determined it is immaterial. As such, the
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Company did not develop a best estimate of standalone selling price for the License, Research and Clinical Supply Performance Obligation and allocated the entire transaction price to this performance obligation. The deliverables associated with the License, Research and Clinical Supply Performance Obligation were satisfied as of June 30, 2018.
As of September 30, 2022, the transaction price was comprised of: (i) the up-front payment of $20.0 million, (ii) the cost for the Phase 2 studies of $20.5 million, (iii) the cost of all clinical supply provided to MTPC for the Phase 3 studies, (iv) $10.0 million in development milestones received, (v) $25.0 million in regulatory milestones received, comprised of $10.0 million relating to the NDA filing in Japan and $15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $2.4 million in royalties from net sales of Vafseo. As of September 30, 2022, all development milestones and $25.0 million in regulatory milestones have been achieved. No other regulatory milestones have been assessed as probable of being achieved and as a result have been fully constrained. The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. Revenue for the License, Research and Clinical Supply Performance Obligation for the MTPC Agreement is being recognized using a proportional performance method, for which all deliverables have been completed. During the three and nine months ended September 30, 2022, the Company recognized revenue from MTPC royalties totaling approximately $0.4 million and $1.2 million, respectively, and approximately $0.3 million and $0.4 million during the three and nine months ended September 30, 2021, respectively. As noted above, in February 2021, the Company entered into the Royalty Agreement, whereby the Company sold its right to receive these royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 6 for additional information). The revenue is classified as license, collaboration and other revenue in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022, the Company recorded $0.2 million in accounts receivable, no deferred revenue, and no contract assets. There were no asset or liability balances classified as long-term in the unaudited condensed consolidated balance sheet as of September 30, 2022.
Supply of Drug Product to MTPC
On July 15, 2020, the Company and its collaboration partner MTPC entered into a supply agreement, or the MTPC Supply Agreement. The MTPC Supply Agreement includes the terms and conditions under which the Company will supply vadadustat drug product to MTPC for commercial use in Japan and certain other Asian countries, as contemplated by the MTPC Agreement. A more detailed description of this supply agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

The Company recognized $