Akero(US:AKRO)2025-05-12 11:30PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements The company reported a net loss of $70.7 million for Q1 2025, with total assets increasing to $1.16 billion, primarily driven by a follow-on offering Nature of the Business and Liquidity Akero is a clinical-stage company developing EFX for MASH, with $1.128 billion in cash sufficient for 12 months of operations - The company's lead product candidate is efruxifermin (EFX), an analog of FGF21, for the treatment of MASH, with a global Phase 3 program called SYNCHRONY ongoing34 - The company has incurred recurring losses, with a net loss of $70.7 million for the three months ended March 31, 2025, and an accumulated deficit of $896.9 million as of that date38161 - As of March 31, 2025, the company had $1.128 billion in cash, cash equivalents, and marketable securities, expected to fund operations for at least 12 months from the report's issuance date40 Loan Payable and Warrant Liability The company has a $150 million loan with Hercules Capital, with $35 million drawn and compliance with covenants as of March 31, 2025 - The company has a term loan agreement with Hercules for up to $150 million, with $35 million drawn across Tranche I and II commitments as of the report date7980 - The loan bears a variable interest rate and requires interest-only payments until January 1, 2026, followed by principal and interest payments until the maturity date of March 1, 202781 Loan Payable Details (as of March 31, 2025) | (In thousands) | Amount | | :--- | :--- | | Total principal outstanding | $35,000 | | Unamortized discount and issuance costs | ($1,573) | | Loan Payable (Net) | $35,475 | | Loan Payable - current | $6,664 | | Loan Payable - noncurrent | $28,811 | Stockholder's Equity The company raised $378.4 million net in Q1 2025 through a follow-on offering, significantly increasing stockholder's equity - In March 2024, a follow-on public offering of 12,650,000 shares of common stock generated net proceeds of $344.8 million99 - In January 2025, the company sold 6,427,170 shares of common stock and 1,958,247 pre-funded warrants in a public offering, receiving net proceeds of $378.4 million102 - In January 2025, the company sold 380,488 shares of common stock under its ATM agreement, generating gross proceeds of $10.6 million101 Commitments and Contingencies The company has $34.2 million in purchase commitments and an operating lease, with a stockholder lawsuit dismissed - As of March 31, 2025, the company had non-cancelable purchase and other commitments with contract research and manufacturing organizations totaling $34.2 million144 - A stockholder lawsuit filed on April 26, 2024, alleging misstatements regarding the Phase 2b SYMMETRY study, was dismissed without prejudice on May 5, 2025, and the company intends to vigorously defend against the lawsuit if an amended complaint is filed148211 Condensed Consolidated Balance Sheets (Unaudited) | (In thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $185,922 | $340,238 | | Marketable securities (Short & Long-term) | $942,374 | $457,591 | | Total current assets | $713,151 | $770,380 | | Total assets | $1,155,843 | $825,886 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $42,439 | $39,754 | | Loan payable, noncurrent | $28,811 | $35,297 | | Total liabilities | $71,997 | $75,774 | | Total stockholders' equity | $1,083,846 | $750,112 | | Total liabilities and stockholders' equity | $1,155,843 | $825,886 | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) | (In thousands, except per share amounts) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Research and development | $69,567 | $50,650 | | General and administrative | $11,315 | $9,304 | | Total operating expenses | $80,882 | $59,954 | | Loss from operations | ($80,882) | ($59,954) | | Interest and other income, net | $11,311 | $7,601 | | Net loss | ($70,725) | ($53,344) | | Net loss per common share, basic and diluted | ($0.90) | ($0.90) | Condensed Consolidated Statements of Cash Flows (Unaudited) | (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($67,664) | ($35,140) | | Net (cash used in) provided by investing activities | ($482,183) | $57,849 | | Net cash provided by financing activities | $395,531 | $366,938 | | Net (decrease) increase in cash and cash equivalents | ($154,316) | $389,647 | | Cash and cash equivalents at end of period | $185,922 | $623,854 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a $70.7 million net loss for Q1 2025, driven by increased R&D, with $1.128 billion in cash expected to fund operations into 2028 - The company is a clinical-stage company focused on its lead product candidate, efruxifermin (EFX), for the treatment of MASH, with its ongoing global Phase 3 program, SYNCHRONY, designed to support marketing approval applications155 - As of March 31, 2025, the company had cash, cash equivalents, and marketable securities of $1.128 billion, which is believed to be sufficient to fund the current operating plan into 2028165 - The company has incurred significant operating losses since inception, with a net loss of $70.7 million for the three months ended March 31, 2025, and an accumulated deficit of $896.9 million161 Results of Operations The company's net loss increased to $70.7 million for Q1 2025, driven by a 37% rise in R&D and 22% rise in G&A expenses Comparison of Results of Operations (Q1 2025 vs Q1 2024) | (in thousands) | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $69,567 | $50,650 | $18,917 | 37% | | General and administrative | $11,315 | $9,304 | $2,011 | 22% | | Total operating expenses | $80,882 | $59,954 | $20,928 | 35% | | Net loss | ($70,725) | ($53,344) | ($17,381) | 33% | - R&D expenses increased by $18.9 million (37%) YoY, primarily due to a $10.9 million increase in CRO expenses for ongoing clinical trials and a $6.6 million increase in third-party contract manufacturing expenses for EFX178 - G&A expenses increased by $2.0 million (22%) YoY, mainly due to a $1.0 million increase in legal and professional services and a $0.6 million increase in stock-based compensation179 Liquidity and Capital Resources The company financed operations through equity offerings, providing $395.5 million in Q1 2025, holding $1.128 billion in cash - In January 2025, the company raised gross proceeds of $402.5 million from a follow-on public offering and $10.6 million from its ATM offering182 - As of March 31, 2025, the company had cash, cash equivalents, and marketable securities totaling $1.128 billion183 Summary of Cash Flows (Three Months Ended March 31) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($67,664) | ($35,140) | | Net (cash used in) provided by investing activities | ($482,183) | $57,849 | | Net cash provided by financing activities | $395,531 | $366,938 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate, foreign currency, and inflation risks, with no material impact expected from a 10% rate change - Interest Rate Risk: The company's investments in marketable securities and its variable interest rate term loan are subject to interest rate risk, though a hypothetical 10% change in rates is not expected to have a material impact201203 - Foreign Currency Risk: The company has some transactions in foreign currencies (primarily Euro and British Pound) and is subject to foreign exchange risk, though the impact of a 10% change is not considered material204 - Inflation Risk: Rising inflation could increase the costs of clinical trials, manufacturing, and labor, potentially affecting the company's operations and product development205 Controls and Procedures Management concluded that disclosure controls were effective as of March 31, 2025, with no material changes to internal control - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level207 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting208 PART II. OTHER INFORMATION Legal Proceedings A stockholder lawsuit alleging misstatements was dismissed without prejudice on May 5, 2025 - A class-action lawsuit, Klobus v. Akero Therapeutics, Inc., was filed on April 26, 2024, alleging misstatements regarding the Phase 2b SYMMETRY study for stock purchased between September 13, 2022, and October 9, 2023211 - On May 5, 2025, the court dismissed the lawsuit without prejudice, and the company intends to vigorously defend against the suit if an amended complaint is filed211 Risk Factors The company faces numerous risks related to EFX development, manufacturing, regulatory approval, financial condition, and intellectual property Risks Related to Clinical Development and Manufacturing The company faces clinical development and manufacturing risks, including patient enrollment, competition, and reliance on third parties - Patient enrollment for MASH clinical trials is challenging due to difficulties in diagnosis and significant competition for recruiting patients, which could cause delays213214 - The company faces intense competition from numerous large pharmaceutical and biotechnology companies (e.g., Eli Lilly, Novo Nordisk, Madrigal) that have greater financial and technical resources217 - The company relies on third-party manufacturers (Boehringer Ingelheim for API, Vetter for drug product) and CROs, exposing it to risks of production difficulties, supply delays, and failure to meet regulatory standards like cGMP and GCP226232235 Risks Related to Business, Industry and Intellectual Property The company's business is heavily dependent on EFX success, relies on an Amgen license, and faces significant IP challenges - The company is heavily dependent on the success of EFX, its only product candidate, and failure to gain regulatory approval or successfully commercialize EFX would severely impact the business246 - The company's rights to EFX are based on a license agreement with Amgen, and a breach of this agreement could lead to the loss of development and commercialization rights261262 - The company's success depends on its ability to obtain and maintain intellectual property protection, with risks that patents may not issue, may be invalidated, or may not provide sufficient protection against competitors278279 Risks Related to Government Regulation The company faces significant regulatory risks, including lengthy FDA approval, post-market scrutiny, healthcare reforms, and compliance with various laws - The regulatory approval process is lengthy, time-consuming, and unpredictable, and the company has limited experience conducting late-stage clinical trials and has never obtained approval for a product319320 - Even if approved, products remain subject to extensive regulatory scrutiny, including potential labeling changes, post-marketing studies, or withdrawal from the market if new safety issues arise336 - Healthcare reform, such as the Inflation Reduction Act (IRA), could impact drug pricing through government negotiations and rebates, potentially affecting the ability to profitably sell products if approved346352 Risks Related to Financial Condition and Need for Capital The company has a history of significant losses, requires substantial additional capital, and its debt agreement contains restrictive covenants - The company has a history of significant losses, reporting a net loss of $70.7 million for Q1 2025 and an accumulated deficit of $896.9 million as of March 31, 2025389 - The company will require substantial additional capital to complete the development and commercialization of EFX, and future funding may not be available on acceptable terms, or at all395 - The term loan with Hercules subjects the company to restrictive covenants and requires repayment in an event of default, which could adversely affect the business400403 Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended March 31, 2025, the company did not issue or sell any unregistered securities that had not been previously disclosed - No unregistered sales of equity securities occurred during the quarter ended March 31, 2025467 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None468 Mine Safety Disclosures This item is not applicable to the company - Not applicable469 Other Information The company disclosed an officer adopted a Rule 10b5-1 trading plan on January 6, 2025, for 20,000 securities Rule 10b5-1 Trading Plan Adoption | Name and Title | Date Adopted | Duration | Aggregate Securities to be Sold | | :--- | :--- | :--- | :--- | | Patrick Lamy, Senior Vice President Commercial Strategy | January 6, 2025 | 365 days | 20,000 | Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications - The report includes certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906473 - The exhibit list includes corporate governance documents such as the Fourth Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws473