Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 2023 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 No. 001-38944 | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 June 30, 2023 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 No. 001-38944 Akero Therapeutics, Inc. (Exact name of registrant as specified in its charter) Delaware 81-5266573 (State or othe ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Condensed Consolidated Financial Statements](index=7&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Akero Therapeutics, Inc.'s unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, statements of operations, stockholders' equity, cash flows, and detailed notes on business and accounting policies [Condensed Consolidated Balance Sheets (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28Unaudited%29) This section presents the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Total current assets | $347,489 | $355,173 | | Total assets | $348,818 | $356,570 | | Total current liabilities | $16,678 | $19,083 | | Total liabilities | $42,473 | $30,008 | | Total stockholders' equity | $306,345 | $326,562 | - The company's total assets decreased by **$7,752 thousand** from December 31, 2022, to March 31, 2023, primarily driven by a decrease in short-term marketable securities[23](index=23&type=chunk) - Total liabilities increased by **$12,465 thousand**, mainly due to a significant increase in noncurrent loan payable[23](index=23&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of operations and comprehensive loss, detailing revenues, expenses, and net loss for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - Key Figures (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $21,787 | $20,514 | | General and administrative | $6,966 | $5,537 | | Total operating expenses | $28,753 | $26,051 | | Loss from operations | $(28,753) | $(26,051) | | Interest expense | $(457) | $0 | | Other income, net | $3,379 | $22 | | Net loss | $(25,831) | $(26,029) | | Net loss per common share | $(0.55) | $(0.74) | - Net loss slightly decreased by **$198 thousand (1%)** from **$26,029 thousand** in Q1 2022 to **$25,831 thousand** in Q1 2023, despite increased operating expenses[27](index=27&type=chunk) - Other income, net, significantly increased to **$3,379 thousand** in Q1 2023 from **$22 thousand** in Q1 2022, primarily due to higher interest income[27](index=27&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Deficit%29%20%28Unaudited%29) This section outlines changes in stockholders' equity (deficit) for the three months ended March 31, 2023, reflecting net loss, stock option exercises, and stock-based compensation Condensed Consolidated Statements of Stockholders' Equity (Deficit) - Key Changes (in thousands) | Metric | Three Months Ended March 31, 2023 | | :----------------------------------------- | :-------------------------------- | | Balances at December 31, 2022 | $326,562 | | Exercise of stock options | $456 | | Vested warrants issued pursuant to loan agreement | $330 | | Stock-based compensation expense | $4,844 | | Net loss | $(25,831) | | Balances at March 31, 2023 | $306,345 | - Total stockholders' equity decreased from **$326,562 thousand** at December 31, 2022, to **$306,345 thousand** at March 31, 2023, primarily due to the net loss incurred[30](index=30&type=chunk) - Stock-based compensation expense contributed **$4,844 thousand** to additional paid-in capital during the quarter[30](index=30&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(24,632) | $(22,876) | | Net cash provided by investing activities | $17,590 | $22,750 | | Net cash provided by financing activities | $15,153 | $132 | | Net increase in cash, cash equivalents and restricted cash | $8,111 | $6 | - Net cash used in operating activities increased to **$24,632 thousand** in Q1 2023 from **$22,876 thousand** in Q1 2022[33](index=33&type=chunk) - Net cash provided by financing activities significantly increased to **$15,153 thousand** in Q1 2023, primarily due to **$15,000 thousand** in proceeds from loan payable[33](index=33&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the company's business, significant accounting policies, fair value measurements, and specific financial line items, along with commitments and subsequent events [1. Nature of the business and basis of presentation](index=11&type=section&id=1.%20Nature%20of%20the%20business%20and%20basis%20of%20presentation) Akero Therapeutics, Inc. is a clinical-stage biotechnology company developing EFX for NASH, currently in Phase 2b trials and planning Phase 3, while incurring significant losses and relying on additional funding - Akero Therapeutics is a clinical-stage company developing efruxifermin (EFX) for non-alcoholic steatohepatitis (NASH), a disease with no approved therapies[35](index=35&type=chunk) - EFX is an analog of FGF21, currently in two Phase 2b clinical trials (HARMONY for F2-F3 fibrosis and SYMMETRY for F4 fibrosis) and planning a multi-trial Phase 3 program (SYNCHRONY) to initiate in H2 2023[35](index=35&type=chunk) Net Losses and Accumulated Deficit (in thousands) | Period | Net Loss | Accumulated Deficit (as of period end) | | :----------------------------------- | :--------- | :------------------------------------- | | Three Months Ended March 31, 2023 | $(25,831) | $(448,168) | | Three Months Ended March 31, 2022 | $(26,029) | N/A | | Year Ended December 31, 2022 | $(112,033) | N/A | | Year Ended December 31, 2021 | $(100,777) | N/A | - The company expects its existing cash, cash equivalents, and short-term marketable securities of **$343,222 thousand** as of March 31, 2023, to fund operations for at least 12 months from the issuance date of the financial statements[41](index=41&type=chunk) [2. Summary of significant accounting policies](index=12&type=section&id=2.%20Summary%20of%20significant%20accounting%20policies) This note outlines the company's significant accounting policies for interim financial statements, estimates, cash, marketable securities, leases, R&D, stock-based compensation, loan payable, and warrant liabilities, with no material impact from recent pronouncements - Unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim reporting and Regulation S-X, Rule 10-01, reflecting all necessary normal recurring adjustments[43](index=43&type=chunk) - Significant estimates include research and development expenses, stock-based compensation, warrant liabilities, and valuation allowance for deferred tax assets[44](index=44&type=chunk) - Research and development costs are expensed as incurred, including personnel, stock-based compensation, third-party license fees, and external costs for clinical trials and manufacturing[53](index=53&type=chunk) - Stock-based awards are measured at fair value on the grant date and expensed over the vesting period, with forfeitures accounted for as they occur[58](index=58&type=chunk) - Warrants issued under the Loan Agreement are accounted for as liabilities and measured at fair value using the Black-Scholes model, subject to remeasurement at each balance sheet date[63](index=63&type=chunk) [3. Fair value measurements](index=16&type=section&id=3.%20Fair%20value%20measurements) The company classifies its financial assets and liabilities measured at fair value into a three-level hierarchy, with most assets in Level 1 or 2, and warrant liabilities in Level 3 Financial Assets and Liabilities Measured at Fair Value (in thousands) | Category | March 31, 2023 Total | Level 1 | Level 2 | Level 3 | | :------------------------ | :------------------- | :--------- | :--------- | :-------- | | Money market funds | $204,575 | $204,575 | $— | $— | | U.S. Treasury securities | $58,826 | $58,826 | $— | $— | | Corporate debt securities | $5,493 | $— | $5,493 | $— | | U.S. Government agency securities | $15,483 | $— | $15,483 | $— | | Commercial paper | $13,973 | $— | $13,973 | $— | | Total assets | $298,350 | $263,401 | $34,949 | $— | | Warrant liabilities | $162 | $— | $— | $162 | - The Loan Payable is classified as a Level 3 liability, with its carrying value approximating fair value as of March 31, 2023[71](index=71&type=chunk) - No transfers between Level 1, Level 2, and Level 3 occurred during the three months ended March 31, 2023, or the twelve months ended December 31, 2022[70](index=70&type=chunk) [4. Short-term marketable securities](index=18&type=section&id=4.%20Short-term%20marketable%20securities) This note summarizes the company's short-term marketable securities, primarily money market funds, U.S. Treasury securities, corporate debt, U.S. Government agency securities, and commercial paper, all with maturities under one year Short-term Marketable Securities (in thousands) | Security Type | March 31, 2023 Fair Value | December 31, 2022 Fair Value | | :---------------------------- | :------------------------ | :--------------------------- | | Money market funds | $204,575 | $137,286 | | U.S. Treasury securities | $58,826 | $58,721 | | Corporate debt securities | $5,493 | $5,476 | | U.S. Government agency securities | $15,483 | $62,954 | | Commercial paper | $13,973 | $27,739 | | Total | $298,350 | $292,176 | - The fair value of money market funds increased significantly from **$137,286 thousand** at December 31, 2022, to **$204,575 thousand** at March 31, 2023[74](index=74&type=chunk)[75](index=75&type=chunk) - U.S. Government agency securities saw a substantial decrease in fair value from **$62,954 thousand** to **$15,483 thousand** over the same period[74](index=74&type=chunk)[75](index=75&type=chunk) [5. Accrued expenses and other current liabilities](index=18&type=section&id=5.%20Accrued%20expenses%20and%20other%20current%20liabilities) This note details the components of accrued expenses and other current liabilities, primarily including accrued external research and development expenses, employee compensation and benefits, and legal and professional fees Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :---------------------------------------- | :------------- | :---------------- | | Accrued external research and development expenses | $7,091 | $9,789 | | Accrued employee compensation and benefits | $1,741 | $804 | | Accrued legal and professional fees | $356 | $197 | | Short-term lease liability and other | $410 | $325 | | Total | $9,598 | $11,115 | - Accrued external R&D expenses decreased by **$2,698 thousand**, while accrued employee compensation and benefits increased by **$937 thousand**[76](index=76&type=chunk) [6. Loan Payable and Warrant Liability](index=19&type=section&id=6.%20Loan%20Payable%20and%20Warrant%20Liability) The company entered a **$100 million** loan agreement with Hercules Capital, drawing **$25 million** by March 31, 2023, with variable interest and associated warrants accounted for as liabilities - Akero Therapeutics entered a Loan Agreement with Hercules Capital, Inc. for an aggregate principal amount of **$100,000 thousand**, available in four tranches[79](index=79&type=chunk) - As of March 31, 2023, **$25,000 thousand** has been borrowed (**$10,000 thousand** at closing, **$15,000 thousand** on March 10, 2023)[80](index=80&type=chunk)[90](index=90&type=chunk) - The loan matures on January 1, 2027, with interest-only payments through July 1, 2024 (extendable to July 1, 2025)[81](index=81&type=chunk) - Warrants to purchase common stock were issued to Hercules, with an initial fair value of **$227 thousand** recognized in equity and **$41 thousand** as warrant liabilities. An additional **$330 thousand** in warrants were reclassified from warrant liability to additional paid-in capital in March 2023[86](index=86&type=chunk)[88](index=88&type=chunk) Warrant Liability Valuation Assumptions (March 31, 2023) | Assumption | Value | | :------------------------ | :-------- | | Expected term (in years) | 6.2 | | Expected volatility | 78.55 % | | Risk-free interest rate | 3.55 % | | Expected dividend yield | 0.00 % | [7. Stockholder's equity (deficit)](index=20&type=section&id=7.%20Stockholder%27s%20equity%20%28deficit%29) This note details the company's common stock, preferred stock, and loan-related warrants, outlining authorized and outstanding shares, and shares reserved for equity plans and future issuances - As of March 31, 2023, **150,000,000** shares of common stock were authorized, with **46,979,056** shares issued and outstanding[91](index=91&type=chunk)[99](index=99&type=chunk) - The company completed several public offerings, including an IPO in June 2019, follow-on offerings in July 2020 and September 2022, and a registered direct offering to Pfizer Inc. in June 2022, raising significant net proceeds[92](index=92&type=chunk)[93](index=93&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - An At-The-Market (ATM) facility was established in March 2023, allowing the company to sell up to **$200,000 thousand** in common stock, though no sales were made under this new agreement by March 31, 2023[96](index=96&type=chunk) Shares Reserved for Issuance (as of March 31, 2023) | Category | Shares Reserved | | :------------------------------------------------ | :-------------- | | Options outstanding under 2018 Plan | 1,546,966 | | Options outstanding under 2019 Plan | 4,380,514 | | Restricted stock units outstanding under 2019 Plan | 151,427 | | Warrants to purchase common stock (Loan Agreement) | 45,898 | | Options available for future grant | 3,629,128 | | Warrants available for future grant | 137,700 | | Common stock available for ATM program | 5,714,286 | | 2019 Employee Stock Purchase Plan | 1,598,311 | | Total | 17,204,230 | [8. Stock-based awards](index=22&type=section&id=8.%20Stock-based%20awards) This note details the company's stock compensation plans, including valuation assumptions, option activity, and stock-based compensation expense for the 2018, 2019 Stock Option and Incentive Plans, and the 2019 Employee Stock Purchase Plan - The 2019 Stock Option and Incentive Plan, effective June 18, 2019, replaced the 2018 Plan and allows for equity-based incentive awards to officers, employees, directors, and consultants[105](index=105&type=chunk)[106](index=106&type=chunk) Stock Option Valuation Assumptions (Weighted Average) | Assumption | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Expected term (in years) | 6.03 | 5.77 | | Expected volatility | 77.52 % | 72.69 % | | Weighted average risk-free interest rate | 3.84 % | 1.42 % | | Expected dividend yield | 0.00 % | 0.00 % | Stock Option Activity Summary (December 31, 2022 to March 31, 2023) | Metric | Number of Options | Weighted-Average Exercise Price per Share | | :-------------------------------------- | :---------------- | :---------------------------------------- | | Balance outstanding, December 31, 2022 | 5,780,004 | $18.88 | | Options granted | 253,259 | $47.39 | | Options exercised | (105,783) | $4.31 | | Balance outstanding, March 31, 2023 | 5,927,480 | $20.36 | Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Classified within research and development expense | $1,697 | $1,111 | | Classified within general and administrative expense | $3,147 | $2,200 | | Total stock-based compensation expense | $4,844 | $3,311 | [9. Amgen license agreement](index=24&type=section&id=9.%20Amgen%20license%20agreement) The company holds an exclusive global license from Amgen for EFX for NASH and other metabolic diseases, involving upfront payments, clinical and commercial milestone payments, and tiered royalties on net sales - Akero Therapeutics has an exclusive global license from Amgen for EFX, an FGF21 analog, for NASH and other serious metabolic diseases[121](index=121&type=chunk) - The agreement involved an upfront payment of **$5,000 thousand** and issuance of Series A Preferred Stock to Amgen[122](index=122&type=chunk) - Future obligations include a **$7,500 thousand** milestone payment for the first patient dosed in a Phase 3 clinical trial, up to **$30,000 thousand** for marketing approvals, and up to **$75,000 thousand** for commercial milestones[123](index=123&type=chunk) - Tiered royalties ranging from low to high single-digit percentages on annual net sales are payable to Amgen[124](index=124&type=chunk) [10. Income taxes](index=25&type=section&id=10.%20Income%20taxes) The company recorded no income tax benefits due to net operating losses and R&D tax credits, reflecting realization uncertainty, and found no material impact from the CARES Act, California AB85, or the Inflation Reduction Act - No income tax benefits were recorded for net operating losses or R&D tax credits due to uncertainty of realizing a benefit[128](index=128&type=chunk) - The CARES Act and California AB85 had no significant impact on the company's income tax provision[129](index=129&type=chunk)[131](index=131&type=chunk) - The Inflation Reduction Act of 2022 is not expected to have a material impact on the condensed consolidated financial statements[132](index=132&type=chunk) - Beginning in 2022, the Tax Cuts and Jobs Act of 2017 requires amortization of R&D expenditures over five or fifteen years, which the company has estimated for federal taxable income[133](index=133&type=chunk) [11. Net loss per share](index=26&type=section&id=11.%20Net%20loss%20per%20share) This note provides the calculation of basic and diluted net loss per common share, excluding potentially dilutive securities as their effect would be anti-dilutive Net Loss Per Common Share (Basic and Diluted) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(25,831) | $(26,029) | | Weighted average common shares outstanding | 46,944,059 | 35,005,501 | | Net loss per share, basic and diluted | $(0.55) | $(0.74) | - Potentially dilutive securities (stock options, warrants, unvested RSUs) were excluded from diluted EPS calculation as they were anti-dilutive[135](index=135&type=chunk)[137](index=137&type=chunk) [12. Commitments and contingencies](index=27&type=section&id=12.%20Commitments%20and%20contingencies) This note outlines the company's commitments and contingencies, including COVID-19 impact, operating lease obligations, R&D and manufacturing commitments, indemnification agreements, and legal proceedings - The COVID-19 pandemic did not significantly impact financial results for Q1 2023 and Q1 2022, but future impacts on clinical trials and business plans remain uncertain[138](index=138&type=chunk) Operating Lease Liability Maturities (in thousands) | Year | Amount | | :-------------------- | :----- | | 2023 (remaining) | $242 | | 2024 | $331 | | 2025 | $341 | | 2026 | $351 | | 2027 | $208 | | Total future minimum lease payments | $1,473 | - As of March 31, 2023, non-cancelable purchase and other commitments for R&D and manufacturing totaled **$14,318 thousand**[144](index=144&type=chunk) - The company is not a party to any litigation and has not accrued any liabilities related to indemnification agreements[145](index=145&type=chunk)[146](index=146&type=chunk) [13. Subsequent event](index=29&type=section&id=13.%20Subsequent%20event) Subsequent to the reporting period, the company raised significant net proceeds through its At-The-Market (ATM) facility by selling common stock - From April 4 through May 11, 2023, the company raised **$124,212 thousand** in net proceeds from the sale of **3,006,052** shares of common stock under its ATM facility at an average price of **$42.38** per share[148](index=148&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for Q1 2023, covering its NASH focus, EFX progress, financial performance, liquidity, funding needs, and the impact of COVID-19 and macroeconomic factors [Overview](index=30&type=section&id=Overview) This overview highlights Akero Therapeutics' clinical-stage focus on developing EFX for NASH, its promising Phase 2b results, plans for a Phase 3 program, and its accumulated net losses - Akero Therapeutics is a clinical-stage company focused on developing efruxifermin (EFX) for non-alcoholic steatohepatitis (NASH), with EFX showing potential as a best-in-class medicine[150](index=150&type=chunk) - EFX demonstrated statistically significant fibrosis regression (**41%** for 50mg, **39%** for 28mg vs. **20%** placebo) and NASH resolution (**76%** for 50mg, **47%** for 28mg vs. **15%** placebo) in the Phase 2b HARMONY study[151](index=151&type=chunk) - The company plans to initiate a multi-trial Phase 3 program named SYNCHRONY in the second half of 2023, following an End-of-Phase 2 meeting with the FDA[150](index=150&type=chunk)[157](index=157&type=chunk) - EFX has received Fast Track and Breakthrough Therapy designations from the FDA and Priority Medicines (PRIME) designation from the EMA[155](index=155&type=chunk) Net Losses and Accumulated Deficit (in millions) | Period | Net Loss | Accumulated Deficit (as of March 31, 2023) | | :----------------------------------- | :--------- | :----------------------------------------- | | Three Months Ended March 31, 2023 | $(25.8) | $(448.2) | | Three Months Ended March 31, 2022 | $(26.0) | N/A | | Year Ended December 31, 2022 | $(112.0) | N/A | | Year Ended December 31, 2021 | $(100.8) | N/A | [Impact of the COVID-19 Pandemic](index=32&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic did not materially impact the company's financial results or ongoing clinical trials and manufacturing for the reported periods - The COVID-19 pandemic did not significantly impact the company's financial results for the three months ended March 31, 2023, and 2022[165](index=165&type=chunk) - Ongoing Phase 2b HARMONY and SYMMETRY trials have not been materially impacted by the pandemic[165](index=165&type=chunk) - Manufacturing of GMP drug substance and drug product for Phase 2b and Phase 3 clinical trials has progressed without adverse impact from COVID-19[166](index=166&type=chunk) [Components of our results of operations](index=33&type=section&id=Components%20of%20our%20results%20of%20operations) This section details the components of the company's results of operations, including the absence of revenue, expected increases in R&D and G&A expenses, and the nature of interest and other income - The company has not generated any revenue since inception and does not expect to generate product sales revenue in the near future[169](index=169&type=chunk) - Research and development expenses are expensed as incurred and are expected to increase substantially with planned clinical development activities[170](index=170&type=chunk)[171](index=171&type=chunk) - General and administrative expenses are expected to increase due to increased headcount and costs associated with operating as a public company[176](index=176&type=chunk) - Interest expense primarily relates to the term loan with Hercules, and other income primarily consists of interest income from cash and marketable securities[178](index=178&type=chunk)[179](index=179&type=chunk) [Results of operations](index=35&type=section&id=Results%20of%20operations) This section analyzes the company's financial performance for the three months ended March 31, 2023, compared to 2022, detailing changes in operating expenses, interest expense, other income, and net loss Summary of Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Research and development | $21,787 | $20,514 | $1,273 | 6 % | | General and administrative | $6,966 | $5,537 | $1,429 | 26 % | | Total operating expenses | $28,753 | $26,051 | $2,702 | 10 % | | Loss from operations | $(28,753) | $(26,051) | $(2,702) | 10 % | | Interest expense | $(457) | $0 | $(457) | - | | Other income, net | $3,379 | $22 | $3,357 | 15,259 % | | Net loss | $(25,831) | $(26,029) | $198 | (1) % | - Research and development expenses increased by **$1.3 million (6%)** due to a **$1.6 million** increase in personnel and other R&D related expenses, partially offset by a **$0.3 million** decrease in direct EFX program costs[181](index=181&type=chunk) - General and administrative expenses increased by **$1.4 million (26%)**, primarily due to a **$0.9 million** increase in stock-based compensation and a **$0.4 million** increase in wage-related expenses[182](index=182&type=chunk) - Other income, net, increased by **$3.4 million**, mainly driven by a **$3.6 million** increase in interest income from cash, cash equivalents, and short-term marketable securities[184](index=184&type=chunk) [Liquidity and capital resources](index=36&type=section&id=Liquidity%20and%20capital%20resources) This section discusses the company's liquidity and capital resources, including its cash position, historical funding sources, and cash flow activities for the three months ended March 31, 2023 and 2022 - As of March 31, 2023, the company had **$343.2 million** in cash, cash equivalents, and short-term marketable securities[185](index=185&type=chunk) - The company has funded operations through public offerings, an equity investment from Pfizer Inc., and a term loan from Hercules, with total gross proceeds of **$692.7 million** since inception[185](index=185&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(24,632) | $(22,876) | | Net cash provided by investing activities | $17,590 | $22,750 | | Net cash provided by financing activities | $15,153 | $132 | | Net increase in cash, cash equivalents and restricted cash | $8,111 | $6 | - Cash provided by financing activities in Q1 2023 included **$15.0 million** from the Hercules Term Loan and **$0.5 million** from stock option exercises[191](index=191&type=chunk) [Description of Indebtedness](index=37&type=section&id=Description%20of%20Indebtedness) This section details the company's outstanding borrowings under its loan and security agreement with Hercules, including the principal amount, interest rate, and repayment terms - The company has **$25.0 million** in outstanding borrowings under a loan and security agreement with Hercules, with an additional **$10.0 million** available at its discretion[192](index=192&type=chunk) - The loan bears interest at the greater of **7.65%** or the prime rate plus **3.65%**, with interest-only payments until July 1, 2024, followed by principal and interest payments until January 1, 2027[192](index=192&type=chunk) [Funding requirements](index=37&type=section&id=Funding%20requirements) This section outlines the company's anticipated need for additional funding to complete clinical development, commercialization, and potential acquisitions, with future funding dependent on various operational and market factors - The company expects to require additional funding to complete clinical development of EFX, commercialize it if approved, and pursue in-licenses or acquisitions of other product candidates[195](index=195&type=chunk) - Future funding will depend on factors such as the progress and costs of clinical trials, manufacturing, regulatory approvals, intellectual property maintenance, market acceptance, and commercialization efforts[194](index=194&type=chunk) - Financing is expected through equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements[196](index=196&type=chunk) [Contractual obligations and other commitments](index=38&type=section&id=Contractual%20obligations%20and%20other%20commitments) This section details the company's contractual obligations and other commitments, noting an increase in non-cancelable purchase and other arrangements primarily due to clinical trial activities - Non-cancelable purchase and other arrangements increased to **$15.8 million** as of March 31, 2023, from **$8.8 million** as of December 31, 2022, primarily due to increased purchase obligations for clinical trial activities[198](index=198&type=chunk) [Critical accounting policies and estimates](index=38&type=section&id=Critical%20accounting%20policies%20and%20estimates) This section confirms no material changes to the company's critical accounting policies and estimates through March 31, 2023, from those disclosed in its Fiscal 2022 Form 10-K - There were no material changes to the company's critical accounting policies through March 31, 2023, from those disclosed in its Fiscal 2022 Form 10-K[199](index=199&type=chunk) [Recent accounting pronouncements](index=38&type=section&id=Recent%20accounting%20pronouncements) This section states that no recently adopted accounting standards had a material impact on the company's condensed consolidated financial statements as of March 31, 2023 - There were no recently adopted accounting standards that had a material impact on the company's condensed consolidated financial statements as of March 31, 2023[65](index=65&type=chunk)[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to interest rate, foreign currency, and inflation risks, noting that while hypothetical changes would not materially impact financial statements, rising inflation could affect business costs - The company is exposed to interest rate risk due to its cash, cash equivalents, short-term marketable securities (**$343.2 million** as of March 31, 2023), and a variable interest rate term loan[202](index=202&type=chunk)[204](index=204&type=chunk) - A hypothetical **10%** relative change in interest rates would not have a material impact on the condensed consolidated financial statements[204](index=204&type=chunk) - Foreign currency risk is primarily related to transactions denominated in Euro and British Pound, but a hypothetical **10%** change in exchange rates would not have a material impact[205](index=205&type=chunk) - While inflation has not had a material effect to date, sustained rising inflation could negatively impact product development and operations costs[206](index=206&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter - As of March 31, 2023, the company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level[208](index=208&type=chunk) - No changes in internal control over financial reporting occurred during the three months ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[210](index=210&type=chunk) - All control systems have inherent limitations, meaning they can only provide reasonable, not absolute, assurance of achieving control objectives[211](index=211&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers other essential information, including legal proceedings, comprehensive risk factors, equity security sales, defaults, and exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings expected to have a material adverse impact on its financial position, results of operations, or cash flow as of March 31, 2023 - As of March 31, 2023, the company was not a party to any legal proceedings expected to have a material adverse impact on its financial position, results of operations, or cash flow[212](index=212&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section details numerous risks and uncertainties that could materially and adversely affect Akero Therapeutics' business, covering clinical development, manufacturing, business strategy, intellectual property, government regulation, financial condition, commercialization, operations, and general economic factors [Risks Related to the Clinical Development and Manufacturing of our Product Candidate](index=40&type=section&id=Risks%20Related%20to%20the%20Clinical%20Development%20and%20Manufacturing%20of%20our%20Product%20Candidate) This section outlines risks associated with the clinical development and manufacturing of the company's product candidates, including challenges in patient enrollment, competition, trial delays, and reliance on third-party manufacturers [Risks Related to Clinical Development](index=40&type=section&id=Risks%20Related%20to%20Clinical%20Development) Clinical development faces significant risks including difficulties in patient enrollment and retention, substantial competition, and potential delays or failures in clinical trials, compounded by reliance on third parties for trial conduct - Enrollment and retention of patients in clinical trials is expensive, time-consuming, and can be hindered by factors like difficulty identifying NASH patients, competition, and public health crises[214](index=214&type=chunk)[215](index=215&type=chunk) - The biotechnology industry is highly competitive, with numerous pharmaceutical and biotechnology companies pursuing NASH treatments, many with greater resources and experience[218](index=218&type=chunk) - Clinical trials for EFX and future product candidates may experience delays or failures due to regulatory issues, funding, negative results, difficulties with CROs/sites, patient recruitment, or unforeseen safety issues[222](index=222&type=chunk)[223](index=223&type=chunk) - Reliance on third parties (CROs, investigators) to conduct clinical trials means limited control over their activities, and their failure to comply with GCP or meet deadlines could delay or prevent regulatory approval[227](index=227&type=chunk)[228](index=228&type=chunk) [Risks Related to the Manufacturing of our Product Candidate](index=44&type=section&id=Risks%20Related%20to%20the%20Manufacturing%20of%20our%20Product%20Candidate) Manufacturing of the company's product candidates is complex, highly regulated, and relies heavily on third-party manufacturers, introducing risks of production difficulties, supply disruptions, and failure to meet regulatory standards - The company relies on third-party manufacturers (Boehringer Ingelheim for API, Vetter for drug product/device) for EFX, increasing risks related to supply, cost, and regulatory compliance[234](index=234&type=chunk)[239](index=239&type=chunk) - Manufacturing processes are complex and susceptible to product loss, contamination, equipment failure, and other disruptions, which could delay clinical programs or limit supply[235](index=235&type=chunk) - Development of a new lyophilized EFX DP-device combination for Phase 3 requires demonstrating comparability to earlier formulations, and regulatory authorities may require additional studies[238](index=238&type=chunk) - Failure of third-party manufacturers to comply with cGMP or QSR regulations could result in sanctions, delays, or withdrawal of product candidates[241](index=241&type=chunk) [Risks Related to Our Business, Industry and Intellectual Property](index=47&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Industry%20and%20Intellectual%20Property) This section addresses risks related to the company's business model, industry competition, and intellectual property, including dependence on EFX, challenges in business development, reliance on third-party licenses, employee matters, and the complexities of IP protection and litigation [Risks Related to Business Development](index=47&type=section&id=Risks%20Related%20to%20Business%20Development) The company's business is heavily dependent on the success of EFX, its sole product candidate, and faces risks if EFX fails to achieve regulatory approval or market acceptance, alongside challenges in resource allocation and combination therapy development - The company is heavily dependent on the success of EFX, its only product candidate, and its failure to receive regulatory approval or achieve market acceptance would significantly harm the business[249](index=249&type=chunk) - Focusing resources on EFX for NASH may cause the company to miss more profitable opportunities with other therapeutic candidates or indications[254](index=254&type=chunk)[255](index=255&type=chunk) - Success in earlier-stage clinical trials does not guarantee similar results in later trials, and flaws in trial design may not become apparent until late stages[258](index=258&type=chunk) - Developing EFX in combination with other therapies exposes the company to risks related to the approval, safety, efficacy, manufacturing, and supply of those co-therapies[261](index=261&type=chunk)[262](index=262&type=chunk) [Risks Related to our License and Third-Parties](index=50&type=section&id=Risks%20Related%20to%20our%20License%20and%20Third-Parties) The company's reliance on its license agreement with Amgen for EFX exposes it to significant financial obligations and the risk of losing development and commercialization rights if the agreement is breached, while establishing collaborations for future product candidates also presents challenges - The company is obligated to make significant milestone payments to Amgen for EFX, including **$7.5 million** for the first patient in a Phase 3 trial, up to **$30 million** for marketing approvals, and up to **$75 million** for commercial milestones, plus tiered royalties[264](index=264&type=chunk) - Breaching the Amgen license agreement could result in the loss of rights to develop and commercialize EFX[265](index=265&type=chunk) - Disputes with Amgen over intellectual property scope or obligations could adversely affect the business[266](index=266&type=chunk)[269](index=269&type=chunk) - Establishing collaborations for EFX or future product candidates is competitive and complex, and failure to do so on favorable terms could force the company to alter development and commercialization plans[271](index=271&type=chunk)[273](index=273&type=chunk) [Risks Related to Employee Matters and Growth](index=52&type=section&id=Risks%20Related%20to%20Employee%20Matters%20and%20Growth) The company's success hinges on its ability to attract and retain highly skilled employees amidst intense competition, while also facing risks from potential employee misconduct and challenges in effectively managing future growth and potential acquisitions - The company must attract and retain qualified clinical, scientific, technical, and management personnel, facing significant competition in the biotechnology industry[275](index=275&type=chunk)[276](index=276&type=chunk) - Employee misconduct, including noncompliance with regulatory standards, healthcare fraud, or data privacy laws, could lead to investigations, penalties, and reputational harm[277](index=277&type=chunk)[278](index=278&type=chunk) - Difficulties in managing growth, including expanding capabilities and integrating potential acquisitions, could adversely affect operations[280](index=280&type=chunk)[281](index=281&type=chunk) [Risks Related to Protecting Our Intellectual Property](index=53&type=section&id=Risks%20Related%20to%20Protecting%20Our%20Intellectual%20Property) Protecting intellectual property (IP) is crucial but difficult and costly, with uncertainties regarding patent issuance, scope, validity, and enforceability, and the risk of failure to secure or maintain IP rights or obtain necessary licenses - Success depends on obtaining and maintaining adequate intellectual property protection for product candidates, including patents and trade secrets[282](index=282&type=chunk) - Uncertainties exist regarding whether pending patent applications will issue, if issued patents will effectively prevent competition, and if prior art or challenges could invalidate patents[283](index=283&type=chunk)[285](index=285&type=chunk) - Patent prosecution is expensive and time-consuming, and the company may not be able to file or prosecute all necessary applications, or may rely on licensors to do so[287](index=287&type=chunk) - Patent terms may be inadequate to protect competitive position, as patents might expire before or shortly after commercialization[292](index=292&type=chunk) - Protecting IP rights globally is challenging due to varying legal protections and enforcement difficulties in foreign countries[293](index=293&type=chunk)[295](index=295&type=chunk) - Failure to obtain necessary third-party intellectual property rights or technology could prevent development and commercialization of product candidates[300](index=300&type=chunk)[301](index=301&type=chunk) - Inability to protect confidential information and trade secrets, due to breaches or independent development by competitors, would harm the business[304](index=304&type=chunk) [Risks Related to Intellectual Property Litigation](index=57&type=section&id=Risks%20Related%20to%20Intellectual%20Property%20Litigation) The company faces significant risks from intellectual property litigation, including lawsuits to protect its own IP or defending against infringement claims, which are expensive, time-consuming, and unpredictable, potentially leading to substantial costs, loss of rights, or inability to commercialize products - The company may become involved in lawsuits to protect or enforce its intellectual property, or defend against third-party infringement claims, which are expensive, time-consuming, and unpredictable[305](index=305&type=chunk)[310](index=310&type=chunk) - An unfavorable outcome in IP litigation could lead to invalidation of patents, inability to commercialize products, significant damages (including treble damages for willful infringement), or the need to obtain costly licenses[307](index=307&type=chunk)[312](index=312&type=chunk)[315](index=315&type=chunk) - Third parties may allege misappropriation of their IP or claim ownership of the company's IP, potentially leading to litigation, loss of rights, or personnel[316](index=316&type=chunk)[317](index=317&type=chunk) - Intellectual property rights have limitations and may not adequately protect the business, as competitors might develop similar products not covered by existing patents or independently develop technologies[319](index=319&type=chunk) - Changes in patent law, such as those from the U.S. Supreme Court or the Leahy-Smith America Invents Act, could diminish the value of patents and impair the ability to protect product candidates[323](index=323&type=chunk)[324](index=324&type=chunk) [Risks Related to Government Regulation](index=61&type=section&id=Risks%20Related%20to%20Government%20Regulation) This section covers risks related to government regulation, including challenges in obtaining and maintaining regulatory approval, ongoing compliance obligations, and the impact of healthcare reform and other laws on product commercialization and profitability [Risks Related to Obtaining Regulatory Approval](index=61&type=section&id=Risks%20Related%20to%20Obtaining%20Regulatory%20Approval) The company has limited experience in clinical trials and has never obtained product approval, making the regulatory process lengthy, unpredictable, and uncertain, especially for EFX as a combination product, with expedited designations not guaranteeing faster approval or altered standards, and international approvals presenting distinct challenges - The company has limited experience in conducting clinical trials and has never obtained regulatory approval for any product, leading to potential delays and increased costs[325](index=325&type=chunk) - The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming, and inherently unpredictable, with no guarantee of approval for EFX or future candidates[326](index=326&type=chunk)[327](index=327&type=chunk) - EFX is a combination product (biologic-device), requiring coordinated review within regulatory agencies, which could lead to delays in the approval process[330](index=330&type=chunk) - While EFX has received Breakthrough Therapy and Fast Track designations, these do not guarantee a faster development, review, or approval process, nor do they change approval standards[331](index=331&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - Failure to obtain regulatory approval in international jurisdictions would prevent marketing EFX outside the United States, as approval procedures vary and can involve additional testing and time[339](index=339&type=chunk)[340](index=340&type=chunk) [Risks Related to Ongoing Regulatory Obligations](index=64&type=section&id=Risks%20Related%20to%20Ongoing%20Regulatory%20Obligations) Even if regulatory approval is obtained, products remain subject to extensive scrutiny and ongoing obligations, with harmful side effects discovered post-approval potentially leading to revoked approvals, product recalls, or costly product liability claims, and non-compliance with manufacturing, labeling, or promotional regulations resulting in severe penalties - If harmful side effects are discovered after approval, regulatory approvals could be revoked, or the company could face costly product liability claims, leading to decreased sales or product withdrawal[341](index=341&type=chunk)[342](index=342&type=chunk) - Approved products are subject to ongoing regulatory requirements for manufacturing, quality control, labeling, safety surveillance, and promotion, with potential for significant restrictions or post-approval studies[343](index=343&type=chunk)[344](index=344&type=chunk) - Failure to comply with cGMP, QSR, or other regulatory requirements, or identification of undesirable side effects, could lead to sanctions, product recalls, suspension of marketing, or withdrawal of approval[345](index=345&type=chunk) - Advertising and promotion are heavily scrutinized; impermissible promotion for off-label uses can lead to enforcement actions, false claims litigation, civil and criminal penalties, and exclusion from federal healthcare programs[348](index=348&type=chunk)[349](index=349&type=chunk) [Risks Related to Healthcare Regulation](index=66&type=section&id=Risks%20Related%20to%20Healthcare%20Regulation) Healthcare reform initiatives may negatively impact product profitability through changes in pricing, reimbursement, and coverage, while relationships with healthcare providers are subject to complex anti-kickback, fraud and abuse, and data protection laws, with violations potentially leading to severe penalties, and foreign governments imposing strict price controls - Healthcare reform measures, such as the Affordable Care Act and the Inflation Reduction Act of 2022, may negatively impact the ability to profitably sell products by affecting pricing, reimbursement, and coverage[351](index=351&type=chunk)[352](index=352&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) - Relationships with customers and third-party payors are subject to anti-kickback, fraud and abuse, transparency, and other healthcare laws (e.g., federal Anti-Kickback Statute, False Claims Act, HIPAA), violations of which could lead to criminal sanctions, civil penalties, and exclusion from government programs[364](index=364&type=chunk)[365](index=365&type=chunk) - Failure to comply with health and data protection laws and regulations, including CCPA, CPRA, and GDPR, could lead to government enforcement actions, private litigation, and adverse publicity[368](index=368&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) - Governments outside the United States, particularly in the EU, impose strict price controls, which could adversely affect revenue if pricing is set at unsatisfactory levels[378](index=378&type=chunk) - Healthcare insurance coverage and reimbursement may be limited or unavailable for approved products, making it difficult to sell them profitably[380](index=380&type=chunk)[381](index=381&type=chunk) - Compliance with U.S. and foreign export/import controls, sanctions, embargoes, and anti-corruption laws (e.g., FCPA) is required, and violations can lead to criminal liability and other serious consequences[388](index=388&type=chunk) - Inadequate funding or disruptions to government agencies like the FDA and SEC could hinder their operations, delaying product development or commercialization[389](index=389&type=chunk)[390](index=390&type=chunk) [Risks Related to Our Financial Condition and Need for Additional Capital](index=75&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Need%20for%20Additional%20Capital) The company has a history of significant operating losses and expects this to continue, necessitating substantial additional capital to fund ongoing research, development, and potential commercialization efforts, with its limited operating history and dependence on EFX making future profitability uncertain, and the existing term loan imposing covenants and repayment obligations that could restrict operations or lead to debt acceleration - The company has incurred significant operating losses since inception, with net losses of **$25.8 million** in Q1 2023 and an accumulated deficit of **$448.2 million** as of March 31, 2023[392](index=392&type=chunk) - As a clinical-stage biotechnology company with a limited operating history and no revenue to date, future profitability is uncertain and highly speculative[394](index=394&type=chunk)[396](index=396&type=chunk) - Additional capital will be required to finance operations, particularly for later-stage clinical development of EFX and potential commercialization, which may not be available on acceptable terms[399](index=399&type=chunk)[401](index=401&type=chunk) - The term loan with Hercules includes customary covenants and restrictions on business operations, and an event of default could require immediate repayment of outstanding indebtedness[404](index=404&type=chunk)[405](index=405&type=chunk) - The company's level of indebtedness and debt service obligations could adversely affect its financial condition and ability to fund operations, reducing available funds for R&D and other activities[406](index=406&type=chunk)[407](index=407&type=chunk) [Risks Related to Commercialization and Market Acceptance](index=78&type=section&id=Risks%20Related%20to%20Commercialization%20and%20Market%20Acceptance) This section outlines risks related to the commercialization and market acceptance of the company's product candidates, including unfavorable pricing, inadequate reimbursement, product liability, and the challenges of establishing sales and marketing infrastructure [Risks Related to Commercialization](index=78&type=section&id=Risks%20Related%20to%20Commercialization) Even if approved, the company's products may face unfavorable pricing regulations, inadequate third-party reimbursement, and healthcare reform initiatives that could hinder profitability, alongside the inherent risk of product liability lawsuits and challenges in establishing sales and marketing infrastructure - Approved products may be subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives, which could harm the business[408](index=408&type=chunk)[409](index=409&type=chunk) - Product liability lawsuits, arising from clinical trials or commercialized products, could result in substantial liabilities, decreased demand, reputational damage, and significant costs[411](index=411&type=chunk)[412](index=412&type=chunk) - The company lacks an existing sales, marketing, and distribution infrastructure and faces risks in building its own or relying on third parties, which could delay product launch or reduce profitability[414](index=414&type=chunk)[415](index=415&type=chunk) [Risks Related to Market Acceptance](index=80&type=section&id=Risks%20Related%20to%20Market%20Acceptance) Even with regulatory approval, the commercial success of the company's product candidates depends on achieving adequate market acceptance among physicians, patients, and third-party payors, with factors such as efficacy, safety, cost-effectiveness, and reimbursement levels influencing prescription rates and overall market penetration - Commercial success depends on adequate market acceptance by physicians, patients, third-party payors, and the medical community[417](index=417&type=chunk) - Factors influencing market acceptance include efficacy, safety, timing of market introduction, clinical indications, cost-effectiveness, reimbursement, ease of administration, and marketing efforts[418](index=418&type=chunk) - If products do not achieve adequate acceptance, the company may not generate sufficient revenue or achieve profitability[419](index=419&type=chunk) [Risks Related to Our Operations](index=81&type=section&id=Risks%20Related%20to%20Our%20Operations) Operating as a public company incurs significant costs and demands substantial management time for compliance and governance, with failures in internal controls or computer systems, including cyber-attacks, potentially harming financial results and reputation, and the use of hazardous materials exposing the company to material liability - Operating as a public company incurs significant legal, accounting, and compliance costs, diverting management time and resources[420](index=420&type=chunk)[423](index=423&type=chunk) - Failure to maintain effective internal controls over financial reporting could lead to inaccurate financial reports, fraud, and loss of investor confidence[424](index=424&type=chunk)[425](index=425&type=chunk) - Computer system failures, cyber-attacks, or deficiencies in cybersecurity could disrupt operations, lead to intellectual property theft, data loss, and significant remediation costs[426](index=426&type=chunk)[427](index=427&type=chunk) - The use of hazardous materials and chemicals in research, handled by third parties, exposes the company to environmental and health and safety laws and potential material liability from contamination or injury[429](index=429&type=chunk) [General Risk Factors](index=83&type=section&id=General%20Risk%20Factors) The company's business is susceptible to unfavorable global economic conditions, including rising inflation, interest rates, and supply chain constraints, which can increase costs and affect funding, while adverse developments in the financial services industry could impair access to capital, and its transition to a 'smaller reporting company' impacts disclosure requirements and compliance costs - Unfavorable global economic conditions, including political unrest or military action, could adversely affect the business, financial condition, or results of operations[430](index=430&type=chunk)[432](index=432&type=chunk) - Macroeconomic factors like rising inflation, interest rates, and supply chain constraints can increase business costs and affect the ability to raise capital[433](index=433&type=chunk) - Adverse developments in the financial services industry, such as bank failures (e.g., SVB), could impair access to funding sources and other credit arrangements[434](index=434&type=chunk)[435](index=435&type=chunk)[438](index=438&type=chunk) - The company no longer qualifies as an 'emerging growth company' but requalified as a 'smaller reporting company' and 'non-accelerated filer' for 2022, impacting disclosure requirements and compliance costs[439](index=439&type=chunk)[440](index=440&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended March 31, 2023, the company did not issue or sell any unregistered securities that had not been previously disclosed - No unregistered securities were issued or sold during the three months ended March 31, 2023, that had not been previously disclosed[460](index=460&type=chunk) [Item 3. Defaults Upon Senior Securities](index=89&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities during the reporting period[461](index=461&type=chunk) [Item 4. Mine Safety Disclosures](index=89&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[462](index=462&type=chunk) [Item 5. Other Information](index=90&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[463](index=463&type=chunk) [Item 6. Exhibits](index=91&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the company's certificate of incorporation, bylaws, certifications of principal officers, and XBRL interactive data files - The exhibit index includes the Fourth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Certifications of Principal Executive and Financial Officers, and Inline XBRL Instance Document and Taxonomy Extension files[465](index=465&type=chunk) [Signatures](index=92&type=section&id=Signatures) The report is duly signed on behalf of Akero Therapeutics, Inc. by its President and Chief Executive Officer and Executive Vice President, Chief Financial Officer and Head of Corporate Development on May 15, 2023 - The report was signed by Andrew Cheng, M.D., Ph.D., President and Chief Executive Officer, and William White, Executive Vice President, Chief Financial Officer and Head of Corporate Development, on May 15, 2023[470](index=470&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022. OR (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 601 Gateway Boulevard, Suite 350 South San Francisco, CA (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (650) ...

Efficacy of EFX in NASH Treatment - EFX demonstrated substantial reductions in liver fat, with 100% of patients achieving at least a 30% relative reduction in liver fat across multiple dose groups (28mg, 50mg, 70mg) compared to 10% in the placebo group[34] - High rates of fibrosis improvement were observed, with 62% of EFX-treated patients showing at least a 1-stage improvement in fibrosis and no worsening of NASH[38] - Significant improvements in fibrosis biomarkers were noted, including a reduction in Pro-C3 levels by -6.1 µg/L, -5.9 µg/L, and -6.7 µg/L in the 28mg, 50mg, and 70mg EFX groups, respectively, compared to a -1.5 µg/L change in the placebo group[54] - High response rates on NASH resolution were achieved, with 58% of patients in the 50mg EFX group achieving NASH resolution compared to 20% in the placebo group[148] - Clinically meaningful improvements in glycemic control were observed, with patients experiencing a reduction in HbA1c levels[71] Safety and Tolerability - The most frequent drug-related treatment-emergent adverse events (TEAEs) were diarrhea (36%), nausea (34%), and increased appetite (22%) across all EFX dose groups[82] - In the F4 cohort, diarrhea was observed in 41% of patients treated with EFX 50mg, and nausea was observed in 29% of patients treated with EFX 50mg[142] Financial Position and Development Strategy - The company had approximately $165 million in cash on hand as of Q1 2022, providing a cash runway into Q3 2023[5] - Akero Therapeutics is building momentum toward Phase 3 pivotal trials, with two parallel Phase 2b trials underway: HARMONY (F2-F3) and SYMMETRY (F4, compensated)[5] - HARMONY trial results are expected in Q3 2022[5]