UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended June 30, 2023
OR
For the transition period from __________to__________
Commission File Number 001-36352
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
Registrant’s telephone number, including area code: (617 ) 871-2098
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 class | Trading symbol(s) | Name of each exchange on which registered | ||||||
The | ||||||||
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 | |||||||||
| 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 August 25, 2023 was 188,313,807 .
CAUTIONARY 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 with respect to the development of vadadustat, if any, following our receipt of a complete response letter to and our End of Dispute Type A meeting with the U.S. Food and Drug Administration regarding our new drug application for vadadustat for the treatment of anemia due to chronic kidney disease in adult patients, including the timing of when we expect to resubmit the new drug application for vadadustat and when we expect the Prescription Drug User Fee Act date;
•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 will fund our current operating plan, estimates with respect to our ability to operate as a going concern, our internal control over financial reporting and disclosure controls and procedures, and any future deficiencies or material weaknesses in our internal controls and procedures;
•the direct or indirect impacts of the recent 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 asset, goodwill, 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;
•our plans with respect to commercializing Vafseo® in Europe;
•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;
•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 reductions, 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 Factors 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.
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.
•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 comply 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 recent 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 Riona® and Vafseo in Japan, Vafseo in Europe 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 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 in many instances only have a single supplier, 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 and administrative proceedings, including third party claims of intellectual property infringement and opposition/invalidation proceedings against third party patents, may be costly and time consuming and may delay or harm our drug discovery, development and commercialization efforts.
•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 reductions implemented in April, May and November 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 partnerships and operations successfully.
•We have identified a material weakness in our internal control over financial reporting as of December 31, 2022 relating to our product return reserves that resulted in a revision of our financial statements for the years ended December 31, 2022, 2021 and 2020. If we are not able to remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in our internal control over financial reporting 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.
Form 10-Q
For the Quarter Ended June 30, 2023
TABLE OF CONTENTS
| Page | ||||||||
| Part I | ||||||||
| Item 1 | 2 | |||||||
| Condensed Consolidated Balance Sheet | 2 | |||||||
| Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) | 3 | |||||||
| Condensed Consolidated Statements of Stockholders' (Deficit) Equity | 4 | |||||||
| Condensed Consolidated Statements of Cash Flows | 5 | |||||||
| Notes to the Condensed Consolidated Financial Statements | 6 | |||||||
| Item 2 | ||||||||
| Item 3 | ||||||||
| Item 4 | ||||||||
| Item 1 | ||||||||
| Item 1A | ||||||||
| Item 2 | ||||||||
| Item 3 | ||||||||
| Item 4 | ||||||||
| Item 5 | ||||||||
| Item 6 | ||||||||
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 consolidated subsidiaries. On December 12, 2018, in connection with the consummation of the merger (Merger) with Keryx Biopharmaceuticals, Inc. (Keryx), Keryx became a wholly owned subsidiary of the Company.
AURYXIA®, AKEBIA Therapeutics®, Vafseo® 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. Solely for convenience, trademarks, trade names, and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other company.
Akebia Therapeutics, Inc. | Form 10-Q | Page 1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Akebia Therapeutics, Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| (dollars in thousands, except per share amounts) | June 30, 2023 | December 31, 2022 | ||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Inventories | ||||||||||||||
| Accounts receivable, net | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Operating right-of-use assets | ||||||||||||||
| Intangible asset, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Other long-term assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and stockholders' (deficit) equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||
| Short-term deferred revenue | ||||||||||||||
| Current portion of long-term debt | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Deferred revenue, net of current portion | ||||||||||||||
| Long-term operating lease liabilities | ||||||||||||||
| Embedded debt derivative | ||||||||||||||
| Long-term debt, net | ||||||||||||||
| Liability related to sale of future royalties | ||||||||||||||
| Refund liability to customer | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies (Note 13) | ||||||||||||||
| Stockholders' (deficit) equity: | ||||||||||||||
Preferred stock $ outstanding at June 30, 2023 and December 31, 2022 | ||||||||||||||
Common stock $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders' (deficit) equity | ( | |||||||||||||
| Total liabilities and stockholders' (deficit) equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Akebia Therapeutics, Inc. | Form 10-Q | Page 2
Akebia Therapeutics, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
(dollars in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Product revenue, net | $ | $ | $ | $ | ||||||||||||||||||||||
| License, collaboration and other revenue | ||||||||||||||||||||||||||
| Total revenues | ||||||||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||||||||
| Product | ||||||||||||||||||||||||||
| Amortization of intangible asset | ||||||||||||||||||||||||||
| Total cost of goods sold | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||
| License expense | ||||||||||||||||||||||||||
| Restructuring | ( | |||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating (loss) income | ( | ( | ( | |||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other (expense) income | ( | |||||||||||||||||||||||||
| Loss on lease termination | ( | ( | ||||||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
| Comprehensive (loss) income | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
| Net (loss) income per share: | ||||||||||||||||||||||||||
| Basic | $( | $ | $( | $( | ||||||||||||||||||||||
| Diluted | $( | $ | $( | $( | ||||||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Akebia Therapeutics, Inc. | Form 10-Q | Page 3
Akebia Therapeutics, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||
| (dollars in thousands) | Shares | Amount | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs | — | — | |||||||||||||||||||||||||||||||||
| Proceeds from sale of stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Restricted stock unit vesting | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Exercise of options | — | — | — | ||||||||||||||||||||||||||||||||
| Restricted stock unit vesting | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||
| (dollars in thousands) | Shares | Amount | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Proceeds from sale of stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Restricted stock unit vesting | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Restricted stock unit vesting | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Akebia Therapeutics, Inc. | Form 10-Q | Page 4
Akebia Therapeutics, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended June 30, | ||||||||||||||
| (dollars in thousands) | 2023 | 2022 | ||||||||||||
| Operating Activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Amortization of intangible asset | ||||||||||||||
| Non-cash interest expense related to sale of future royalties | ||||||||||||||
| Non-cash royalty revenue related to sale of future royalties | ( | ( | ||||||||||||
| Non-cash collaboration revenue | ( | |||||||||||||
| Non-cash research and development expense | ||||||||||||||
| Non-cash interest expense | ||||||||||||||
| Non-cash operating lease expense | ( | ( | ||||||||||||
| Non-cash write-off from termination of lease | ( | |||||||||||||
| Write-down of inventory | ||||||||||||||
| Change in excess inventory purchase commitments | ||||||||||||||
| Stock-based compensation expense | ||||||||||||||
| Change in fair value of embedded debt derivative | ( | |||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | ( | |||||||||||||
| Inventory | ( | |||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Other long-term assets | ( | |||||||||||||
| Accounts payable | ( | ( | ||||||||||||
| Accrued expense and other current liabilities | ( | ( | ||||||||||||
| Operating lease liabilities | ||||||||||||||
| Deferred revenue | ( | |||||||||||||
| Other long-term liabilities | ( | |||||||||||||
| Net cash used in operating activities | ( | ( | ||||||||||||
| Investing Activities: | ||||||||||||||
| Purchases of equipment | ( | |||||||||||||
| Net cash used in investing activities | ( | |||||||||||||
| Financing Activities: | ||||||||||||||
| Proceeds from refund liabilities to customers | ||||||||||||||
| Proceeds from issuance of common stock, net of issuance costs | ||||||||||||||
| Proceeds from issuances of stock under employee stock purchase plan | ||||||||||||||
| Proceeds from the exercise of stock options | ||||||||||||||
| Repayments of term debt | ( | |||||||||||||
| Net cash (used in) provided by financing activities | ( | |||||||||||||
| Decrease in cash, cash equivalents and restricted cash | ( | ( | ||||||||||||
| Cash, cash equivalents and restricted cash — beginning of period | ||||||||||||||
| Cash, cash equivalents and restricted cash — end of period | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Akebia Therapeutics, Inc. | Form 10-Q | Page 5
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.NATURE OF BUSINESS
Akebia Therapeutics, Inc., referred to as Akebia or the Company, was incorporated in the State of Delaware in 2007. Akebia is a fully integrated 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 (FDA), and marketed for two indications in the United States: the control of serum phosphorus levels in adult patients with chronic kidney disease (CKD) on dialysis (DD-CKD), and the treatment of iron deficiency anemia (IDA) in adult patients with CKD not on dialysis (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 (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 (CRL) from the FDA. The CRL provided that the FDA had completed its review of the Company's new drug application (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 October 2022, the Company submitted a Formal Dispute Resolution Request with the FDA and focused on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients in light of safety concerns expressed by the FDA in the CRL for dialysis patients 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. In May 2023, the Office of New Drugs (OND) denied the Company's appeal but provided a path forward for the Company to resubmit the NDA for vadadustat for the treatment of anemia due to CKD for dialysis dependent patients without the need for the Company to generate additional clinical data. In July 2023, the Company held an End of Dispute Type A meeting with the FDA to align on the contents of the NDA resubmission. The Company expects to resubmit the NDA by the end of the third quarter of 2023, with a potential Prescription Drug User Fee Act (PDUFA) date that the Company projects will be in March 2024.
In October 2021, the Company's former collaboration partner, Otsuka Pharmaceutical Co. Ltd. (Otsuka), submitted a Marketing Authorization Application (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 (EMA). In connection with the Termination and Settlement Agreement with Otsuka dated June 30, 2022 (Termination Agreement), Otsuka transferred the MAA for vadadustat with each of the EMA, the United Kingdom, Switzerland and Australia to the Company. In April 2023, the European Commission (EC) approved the marketing authorization of vadadustat under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis. In May 2023, the United Kingdom (UK) Medicines and Healthcare products Regulatory Agency approved the marketing authorization of vadadustat under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis. In June 2023, the Swiss Agency for Therapeutics Products approved the marketing authorization for vadadustat under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis. 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 Vafseo, and marketed and sold in Japan by Mitsubishi Tanabe Pharma Corporation (MTPC). Vadadustat is also approved in Korea as a treatment for anemia due to CKD in DD-CKD patients.
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. (HCR) (Royalty Agreement), whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC (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.
Akebia Therapeutics, Inc. | Form 10-Q | Page 6
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2022, and notes thereto, which are included in the Company's Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A that was filed with the Securities and Exchange Commission (SEC) on August 28, 2023 (2022 Annual Report on Form 10-K/A). Since the date of those financial statements, there have been no material changes to the Company's significant accounting policies.
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 six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any other future period.
Basis of Presentation and Principals of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (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 (ASU) of the Financial Accounting Standards Board (FASB).
Certain monetary amounts, percentages, and other figures included elsewhere in these unaudited condensed consolidated financial statements have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
Segment Information
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker as of June 30, 2023 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment, which is the business of developing and commercializing novel therapeutics for people with kidney disease.
Revision of Previously Issued Financial Statements
In connection with the preparation of its consolidated financial statements as of and for the three and six months ended June 30, 2023, the Company identified immaterial prior period errors related to the identification, evaluation and accounting for product returns in its previously issued consolidated financial statements.
In accordance with SAB No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” and as described further in Note 3, Revision of Previously Issued Financial Statements, the Company evaluated the errors and determined the related impacts were not material to its financial statements for the prior year periods when they occurred, but that correcting the errors in the current period would be
Akebia Therapeutics, Inc. | Form 10-Q | Page 7
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
significant to the Company's results of operations for the three and six months ended June 30, 2023. Accordingly, the Company has revised previously reported financial information for such immaterial errors. A summary of revisions to certain previously reported financial information presented herein for comparative purposes is included in Note 3, Revision of Previously Issued Financial Statements.
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, revenue and expenses, and the disclosure of contingent assets and liabilities as of and during the reported period. Management bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. In certain circumstances, 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. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to: prepaid and accrued research and development expense, right-of-use assets and liabilities, embedded debt derivative, refund liabilities to customers, other long-term liabilities, stock-based compensation expense, and certain judgments regarding product and collaboration revenues including various rebates, returns and reserves related to product sales, non-cash interest expense on the liability related to sale of future royalties, inventories, income taxes, intangible asset 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.
Reconciliation of Cash, Cash Equivalents and Restricted Cash
In determining its cash, cash equivalents and restricted cash, the Company considers only those highly liquid investments, readily convertible to cash which as of June 30, 2023 primarily included funds invested in money market funds. The following table reconciles cash, cash equivalents and restricted cash reported within the Company's consolidated balance sheet to the total amounts showing in the consolidated statement of cash flows:
| (in thousands) | June 30, 2023 | December 31, 2022 | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in other long-term assets | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
3.REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Akebia Therapeutics, Inc. | Form 10-Q | Page 8
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| December 31, | |||||||||||||||||
| (in thousands) | 2020 | 2021 | 2022 | ||||||||||||||
| Included in accrued expenses and other current liabilities: | |||||||||||||||||
| Product return reserves and other product revenue allowances | $ | $ | $ | ||||||||||||||
| Included in other long-term liabilities: | |||||||||||||||||
| Product return reserves | |||||||||||||||||
| Total understatement of product return reserves and other product revenue allowances | $ | $ | $ | ||||||||||||||
Further, as a result of the Product Return Reserve Errors, revenue was overstated by $0.1 million, $1.9 million and $0.6 million, and accounts receivable was understated by $1.1 million, $0.7 million and $0.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. The changes did not impact cash or ending cash balances in the Company’s consolidated balance sheets in the periods presented in this report or in previously issued annual and quarterly financial statements.
In addition to the Product Return Reserve Errors, the Company has corrected other immaterial misstatements in the revised consolidated financial statements for the years ended December 31, 2022, 2021 and 2020 and related quarterly periods, including a $1.4
The Company assessed the materiality of the Product Return Reserve Errors, including the presentation on prior period consolidated financial statements in accordance with the SEC Staff Accounting Bulletin No. 99, Materiality, codified in ASC Topic 250, Accounting Changes and Error Corrections (ASC 250). Based on this assessment, the Company evaluated the materiality of the impacts caused by the Product Return Reserve Errors and concluded that they do not result in a material misstatement of the Company's previously issued consolidated financial statements but would materially misstate the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023. As a result, the Company determined that it was necessary to revise the consolidated financial statements it previously issued with respect to the fiscal years ended December 31, 2022, 2021 and 2020 and filed an amendment to its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 with the SEC on August 28, 2023 to reflect the revisions.
The following tables reflect the impact of this revision on the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2022 (dollars in thousands, except per share amounts):
| June 30, 2022 | ||||||||||||||||||||
| Condensed Consolidated Balance Sheet | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Inventories | $ | $ | $ | |||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Total assets | $ | $ | $ | |||||||||||||||||
| Accrued expenses and other current liabilities | $ | $ | $ | |||||||||||||||||
| Total current liabilities | ||||||||||||||||||||
| Other non-current liabilities | ||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||
| Accumulated deficit | ( | ( | ( | |||||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | $ | |||||||||||||||||
Akebia Therapeutics, Inc. | Form 10-Q | Page 9
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Condensed Consolidated Statement of Operations and Comprehensive Income | Three Months Ended June 30, 2022 | |||||||||||||||||||
| As Previously Reported | Adjustment | As Revised | ||||||||||||||||||
| Product revenue, net | $ | $ | ( | $ | ||||||||||||||||
| Selling, general and administrative | ( | |||||||||||||||||||
| Operating income | ||||||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| Comprehensive income | $ | 29,276 | $ | 173 | $ | 29,449 | ||||||||||||||
| Earnings per share - basic | $ | $ | $ | |||||||||||||||||
| Earnings per share - diluted | $ | $ | $ | |||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||
| Condensed Consolidated Statement of Operations and Comprehensive Income | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Product revenue, net | $ | $ | ( | $ | ||||||||||||||||
| Cost of goods sold, product | ||||||||||||||||||||
| Selling, general and administrative | ( | |||||||||||||||||||
| Operating loss | ( | ( | ( | |||||||||||||||||
| Net loss and comprehensive loss | ( | ( | ( | |||||||||||||||||
| Net loss per share - basic and diluted | $( | $( | $( | |||||||||||||||||
| June 30, 2022 | |||||||||||||||||
| Condensed Consolidated Statement of Stockholders' (Deficit) Equity | As Previously Reported | Adjustment | As Revised | ||||||||||||||
| Accumulated deficit | $ | ( | $ | ( | $ | ( | |||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||
| Condensed Consolidated Statement of Cash Flows | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
| Change in excess inventory purchase commitments | ( | |||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | ( | ( | ||||||||||||||||||
| Inventory | ( | ( | ||||||||||||||||||
| Other long-term assets | ||||||||||||||||||||
| Accrued expenses and other current liabilities | ( | ( | ( | |||||||||||||||||
| Other non-current liabilities | ( | ( | ||||||||||||||||||
| Net cash used in operating activities | $ | ( | $ | $ | ( | |||||||||||||||
Akebia Therapeutics, Inc. | Form 10-Q | Page 10
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables reflect the impact of this revision on the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2023 and 2022 (dollars in thousands, except per share amounts):
| March 31, 2023 | ||||||||||||||||||||
| Condensed Consolidated Balance Sheet | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Inventories | $ | $ | ( | $ | ||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Prepaid expenses and other current assets | ( | |||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Total assets | $ | $ | $ | |||||||||||||||||
| Accrued expenses and other current liabilities | $ | $ | $ | |||||||||||||||||
| Total current liabilities | ||||||||||||||||||||
| Other non-current liabilities | ||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||
| Accumulated deficit | ( | ( | ( | |||||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | $ | |||||||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||||||
| Condensed Consolidated Statement of Operations and Comprehensive Income | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Product revenue, net | $ | $ | ( | $ | ||||||||||||||||
| Cost of goods sold, product | ||||||||||||||||||||
| Selling, general and administrative | ( | |||||||||||||||||||
| Operating loss | ( | ( | ( | |||||||||||||||||
| Net loss | $ | (26,217) | $ | (661) | $ | (26,878) | ||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Earnings per share - basic and diluted | $ | ( | $ | ( | $ | ( | ||||||||||||||
| March 31, 2023 | ||||||||||||||||||||
| Condensed Consolidated Statement of Stockholders' (Deficit) Equity | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Accumulated deficit | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||||||
| Condensed Consolidated Statement of Cash Flows | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | ||||||||||||||||||||
| Accrued expenses and other current liabilities | ( | ( | ( | |||||||||||||||||
| Other non-current liabilities | ||||||||||||||||||||
| Net cash used in operating activities | $ | ( | $ | ( | $ | ( | ||||||||||||||
Akebia Therapeutics, Inc. | Form 10-Q | Page 11
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| March 31, 2022 | ||||||||||||||||||||
| Condensed Consolidated Balance Sheet | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Inventories | $ | $ | $ | |||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Total assets | $ | $ | $ | |||||||||||||||||
| Accrued expenses and other current liabilities | $ | $ | $ | |||||||||||||||||
| Total current liabilities | ||||||||||||||||||||
| Other non-current liabilities | ||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||
| Accumulated deficit | ( | ( | ( | |||||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | $ | |||||||||||||||||
| Three Months Ended March 31, 2022 | ||||||||||||||||||||
| Condensed Consolidated Statement of Operations and Comprehensive Income | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Product revenue, net | $ | $ | ( | $ | ||||||||||||||||
| Cost of goods sold, product | ||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||
| Operating loss | ( | ( | ( | |||||||||||||||||
| Net loss | $ | (62,421) | $ | (1,088) | $ | (63,509) | ||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Earnings per share - basic and diluted | $( | $ | $( | |||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||
| Condensed Consolidated Statement of Stockholders' (Deficit) Equity | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Accumulated deficit | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Three Months Ended March 31, 2022 | ||||||||||||||||||||
| Condensed Consolidated Statement of Cash Flows | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
| Change in excess inventory purchase commitments | ( | |||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | ( | ( | ( | |||||||||||||||||
| Inventory | ( | ( | ( | |||||||||||||||||
| Other long-term assets | ||||||||||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||||||||
| Net cash used in operating activities | $ | ( | $ | $ | ( | |||||||||||||||
Akebia Therapeutics, Inc. | Form 10-Q | Page 12
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| December 31, 2021 | ||||||||||||||||||||
| Condensed Consolidated Statement of Stockholders' (Deficit) Equity | As Previously Reported | Adjustment | As Revised | |||||||||||||||||
| Accumulated deficit | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Net loss | $ | ( | $ | $ | ( | |||||||||||||||
The consolidated balance sheet as of December 31, 2022 has been revised in this Quarterly Report on Form 10-Q.
4.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 $43.3 million for the three months ended June 30, 2023 and 2022, respectively, and $77.0 million and $84.7 million for the six months ended June 30, 2023 and 2022, respectively. Product revenue allowance and reserve categories were as follows:
| (in thousands) | Chargebacks and Discounts | Rebates, Fees and other Deductions | Product Returns | Total | ||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ||||||||||||||||||||||
| Current provisions related to sales in current year | ||||||||||||||||||||||||||
| Adjustments related to prior year sales | ( | ( | ( | |||||||||||||||||||||||
| Credits/payments made | ( | ( | ( | ( | ||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ||||||||||||||||||||||
| (in thousands) | Chargebacks and Discounts | Rebates, Fees and other Deductions | Product Returns | Total | ||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ||||||||||||||||||||||
| Current provisions related to sales in current year | ||||||||||||||||||||||||||
| Adjustments related to prior year sales | ||||||||||||||||||||||||||
| Credits/payments made | ( | ( | ( | ( | ||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ||||||||||||||||||||||
Chargebacks, discounts and estimated product returns are recorded as a reduction of revenue in the period the related product revenue is recognized in the unaudited condensed consolidated statement of operations and comprehensive income (loss). Chargebacks are recorded as a reduction to accounts receivable while discounts, rebates, fees and other deductions are recorded with a corresponding increase to accrued expenses and other current liabilities or accounts payable on the unaudited condensed consolidated balance sheets. Estimated product returns for the period related to product sales are recorded as other long-term liabilities in the unaudited condensed consolidated balance sheet.
Accounts receivable, net related to product sales, was approximately $18.2 million and $37.3 million as of June 30, 2023 and December 31, 2022, respectively.
Akebia Therapeutics, Inc. | Form 10-Q | Page 13
Akebia Therapeutics, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.LICENSE, COLLABORATION AND OTHER REVENUE
The Company recognized the following revenues from its license, collaboration and other revenue agreements (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| License, collaboration and other revenue: | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| MTPC Collaboration Agreement | $ | $ | $ | $ | ||||||||||||||||||||||
| Otsuka U.S. Agreement | ||||||||||||||||||||||||||
| Otsuka International Agreement | ||||||||||||||||||||||||||
| Total collaboration revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| JT and Torii Sublicense Agreement | ||||||||||||||||||||||||||
| Medice License Agreement | ||||||||||||||||||||||||||
| Total license, collaboration and other revenue | $ | $ | $ | $ | ||||||||||||||||||||||
The following table presents changes in the Company’s contract assets and liabilities (in thousands):
| Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||
| Balance at Beginning of Period | Additions | Deductions | Balance at End of Period | |||||||||||||||||||||||
| Contract assets: | ||||||||||||||||||||||||||
Accounts receivable(1) | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Prepaid expenses and other current assets | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Contract liability: | ||||||||||||||||||||||||||
| Deferred revenue | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||
| Balance at Beginning of Period | Additions | Deductions | Balance at End of Period | |||||||||||||||||||||||
| Contract assets: | ||||||||||||||||||||||||||
Accounts receivable(1) | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Prepaid expenses and other current assets | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Contract liabilities: | ||||||||||||||||||||||||||
| Deferred revenue | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Accounts payable | $ | $ | $ | ( | $ | |||||||||||||||||||||
(1) Excludes accounts receivable related to amounts due to the Company from product sales of Auryxia which are included in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2023 and 2022.
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 June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| Revenue Recognized in the Period: | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Deferred revenue — beginning of the period | $ | $ | $ | $ | ||||||||||||||||||||||
During the three and six months ended June 30, 2023 and 2022, the Company recognized no
MTPC Collaboration 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), which was amended effective as of December 2, 2022. In addition, the Company supplies vadadustat to MTPC for both clinical and commercial use in the MTPC Territory. In February 2021, the Company entered into the Royalty Agreement
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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). See Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of the MTPC Agreement.
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 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 June 30, 2023, 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) $4.0 million in royalties from net sales of Vafseo. As of June 30, 2023, 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 six months ended June 30, 2023, the Company recognized revenue from MTPC royalties totaling approximately $0.5 million and $0.9 million, respectively, and approximately $0.4 million and $0.7 million during the three and six months ended June 30, 2022, 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 June 30, 2023, there were no 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 June 30, 2023.
Supply of Drug Product to MTPC
On July 15, 2020, the Company and its collaboration partner MTPC entered into a supply agreement (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. See Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of this supply agreement.
On December 16, 2022, the Company, MTPC, and Esteve Química, S.A. (Esteve) executed an Assignment of Supply Agreement (Esteve Assignment Agreement), pursuant to which the Supply Agreement between the Company and Esteve (Esteve Agreement) (see Note 13) was assigned to MTPC. The Esteve Assignment Agreement transferred the rights and obligations of the Company under the Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by the Company and accepted by Esteve. As such, the transferred purchase orders will continue to have a binding effect on MTPC to take delivery of the product from Esteve in accordance with the terms of the Esteve Agreement. The Company will have no further obligation to take delivery of, or pay for, product delivered by Esteve under the transferred purchase orders.
The Company recognized no revenue and $3.7 million in revenue under the MTPC Supply Agreement during the three and six months ended June 30, 2023, respectively, and no revenue and $7.6 million during the three and six months ended June 30, 2022, respectively. As of June 30, 2023, the Company recorded no
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Cyclerion License Agreement
On June 4, 2021, the Company entered into a License Agreement (Cyclerion Agreement) with Cyclerion Therapeutics Inc. (Cyclerion), pursuant to which Cyclerion granted the Company an exclusive global license under certain intellectual property rights to research, develop and commercialize praliciguat, an investigational oral soluble guanylate stimulator.
Under the terms of the Cyclerion Agreement, the Company made an upfront payment of $3.0 million in cash to Cyclerion, which was paid and recorded to research and development expense in June 2021. Substantially all of the fair value of the assets acquired in conjunction with the Cyclerion Agreement was concentrated in the acquired license. As a result, the Company accounted for this transaction as an asset acquisition under ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The upfront payment was charged to expense at acquisition, as it relates to a development stage compound with no alternative future use. In addition, Cyclerion is eligible to receive up to an aggregate of $222.0 million from the Company in specified development and regulatory milestone payments on a product-by-product basis. Cyclerion will also be eligible to receive specified commercial milestones as well as tiered royalties ranging from a low-single-digit- to mid-double-digit percentage of net sales, on a product-by-product basis, and subject to reduction upon expiration of patent rights or the launch of a generic product in the territory. A more detailed description of this agreement can be found in Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A.
CSL Vifor License Agreement
On May 12, 2017, the Company entered into a License Agreement (Vifor Agreement) with Vifor (International) Ltd. (now a part of CSL Limited) (CSL Vifor), pursuant to which the Company granted CSL Vifor an exclusive license to sell vadadustat solely to Fresenius Kidney Care Group LLC, an affiliate of Fresenius Medical Care North America (FMCNA) in the United States. On April 8, 2019, the Company and CSL Vifor entered into an Amended and Restated License Agreement (Vifor First Amended Agreement), which amended and restated in full the Vifor Agreement. On February 18, 2022, the Company and CSL Vifor entered into a Second Amended and Restated License Agreement (Vifor Second Amended Agreement), which amends and restates the Vifor First Amended Agreement.
Pursuant to the Vifor Second Amended Agreement, the Company granted CSL Vifor an exclusive license to sell vadadustat to FMCNA and its affiliates, including Fresenius Kidney Care Group LLC, to certain third party dialysis organizations approved by the Company, to independent dialysis organizations that are members of certain group purchasing organizations, and to certain non-retail specialty pharmacies (collectively, the Supply Group) in the United States (Vifor Territory). Pursuant to the Vifor Second Amended Agreement, CSL Vifor agreed that it would not sell or otherwise supply vadadustat until the FDA has granted regulatory approval for vadadustat for the treatment of anemia due to CKD in adult patients with DD-CKD in the Vifor Territory and until CSL Vifor has entered a supply agreement with the applicable member of the Supply Group.
Similar to the Vifor First Amended Agreement, the Vifor Second Amended Agreement is structured as a profit share arrangement between the Company and CSL Vifor in which the Company will receive approximately 66 % of the profit, net of certain pre-specified costs. Under the Vifor Second Amended Agreement, CSL Vifor made an upfront payment to the Company of $25.0 million in lieu of the previously disclosed milestone payment of $25.0 million that CSL Vifor was to pay the Company following approval of vadadustat by the FDA, as established under the Vifor First Amended Agreement.
Unless earlier terminated, the Vifor Second Amended Agreement will expire upon the later of the expiration of all patents that claim or cover vadadustat or expiration of marketing or regulatory exclusivity for vadadustat in the Vifor Territory. CSL Vifor may terminate the Vifor Second Amended Agreement in its entirety upon 30 months' prior written notice after the first anniversary of the receipt of regulatory approval, if approved from the FDA for vadadustat for dialysis-dependent CKD patients. The Company may terminate the Vifor Second Amended Agreement in its entirety for convenience, following the earlier of a certain period of time elapsing or following certain specified regulatory events, and upon six months ’ prior written notice. If the Company so terminates for convenience, subject to specified exceptions, the Company will pay a termination fee to CSL Vifor. In addition, either party may, subject to a cure period, terminate the Vifor Second Amended Agreement in the event of the other party’s uncured material breach or bankruptcy.
Investment Agreement
In connection with the Vifor Agreement, in May 2017, the Company and CSL Vifor entered into an investment agreement (First Investment Agreement), pursuant to which the Company sold an aggregate of 3,571,429 shares of the Company’s common stock (2017 Shares) to CSL Vifor at a price per share of $14.00 for a total of $50.0 million. The amount representing the premium over the closing stock price of $12.69 on the date of the transaction, totaling $4.7 million, was determined by the Company to represent consideration related to the Vifor Agreement.
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CSL Vifor agreed to a lock-up restriction such that it agreed not to sell the 2017 Shares for a period of time following the effective date of the First Investment Agreement as well as a customary standstill agreement. In addition, the First Investment Agreement contains voting agreements made by CSL Vifor with respect to the 2017 Shares. The 2017 Shares have not been registered pursuant to the Securities Act of 1933, as amended, or the Securities Act, and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.
In connection with entering into the Vifor Second Amended Agreement, on February 18, 2022, the Company and CSL Vifor entered into an investment agreement (Second Investment Agreement), pursuant to which the Company sold an aggregate of 4,000,000 shares of its common stock (2022 Shares) to CSL Vifor for a total of $20 million on February 22, 2022. The amount representing the premium over the grant date fair value on the date of the transaction, $13.6 million, was determined by the Company to represent the consideration related to the Vifor Second Amended Agreement. CSL Vifor has agreed to a lock-up restriction to not sell or otherwise dispose of the 2022 Shares for a period of time following the effective date of the Second Investment Agreement as well as a customary standstill agreement. In addition, the Second Investment Agreement contains voting agreements made by CSL Vifor with respect to the 2022 Shares. The 2022 Shares have not been registered pursuant to the Securities Act and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder, as the transaction did not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act. See Note 5 of the Notes to the Consolidat