Akebia Therapeutics(US:AKBA)2022-08-03 16:00Part I. Financial Information This section presents Akebia Therapeutics, Inc.'s unaudited condensed consolidated financial statements, management's discussion, market risk disclosures, and internal controls Item 1. Financial Statements This section presents Akebia Therapeutics, Inc.'s unaudited condensed consolidated financial statements, highlighting increased Q2 revenues, a shift to net income, and management's going concern doubt - Management concluded substantial doubt exists about the Company's ability to continue as a going concern for at least twelve months due to uncertainties in funding its operating plan32 Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $143,893 | $149,800 | | Total current assets | $304,163 | $272,010 | | Total assets | $521,804 | $525,550 | | Total current liabilities | $233,680 | $256,493 | | Total liabilities | $459,504 | $449,094 | | Total stockholders' equity | $62,300 | $76,456 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $126,759 | $52,913 | $188,458 | $105,217 | | Operating income (loss) | $33,902 | $(79,341) | $(24,591) | $(144,277) | | Net income (loss) | $29,276 | $(83,038) | $(33,145) | $(152,618) | | Net income (loss) per share - basic | $0.16 | $(0.51) | $(0.18) | $(0.97) | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(52,280) | $(133,887) | | Net cash (used in) provided by investing activities | $(114) | $39,941 | | Net cash provided by financing activities | $47,536 | $111,846 | | (Decrease) increase in cash | $(4,858) | $17,900 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, including a 32% Auryxia revenue increase, the Otsuka collaboration termination, and a 42% workforce reduction, while acknowledging ongoing going concern doubt - The FDA issued a Complete Response Letter (CRL) for vadadustat's NDA on March 29, 2022, preventing approval for anemia due to CKD, with next steps for U.S. dialysis patient approval under review159 - Following the vadadustat CRL, Akebia implemented a 42% workforce reduction in April 2022, incurring a $14.5 million restructuring charge in Q2 2022 to refocus on Auryxia and its development portfolio164197 Comparison of Results of Operations (in thousands) | Line Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $43,703 | $32,959 | $85,151 | $63,367 | | License, collaboration and other revenue | $83,056 | $19,954 | $103,307 | $41,850 | | Research and development | $26,027 | $37,214 | $69,860 | $77,825 | | Selling, general and administrative | $32,807 | $41,651 | $77,134 | $82,979 | | Restructuring | $14,531 | $0 | $14,531 | $0 | | Net income (loss) | $29,276 | $(83,038) | $(33,145) | $(152,618) | - The termination of the Otsuka collaboration on June 30, 2022, resulted in $81.1 million in Q2 2022 collaboration revenue, including a $55.0 million termination payment191 - As of June 30, 2022, cash and cash equivalents totaled $143.9 million, with management's belief in sufficient funding contingent on external cost avoidance and contract amendments, contributing to going concern uncertainty208213 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from interest rate fluctuations on cash and foreign currency exchange rates, particularly for Japanese yen-denominated royalty payments - Primary market risks include interest rate risk on $143.9 million in cash and cash equivalents and foreign exchange risk from Japanese yen-denominated royalty payments229230 - A 5.0% change in the JPY/USD exchange rate would have impacted revenues by approximately $0.1 million for the six months ended June 30, 2022230 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2022, due to a material weakness in internal control over inventory - Management concluded that disclosure controls and procedures were not effective as of June 30, 2022, due to a material weakness in internal control over financial reporting232 - The material weakness pertains to ineffective inventory controls, specifically regarding reconciliation review, costing validation, excess and obsolete reserve assessment, and physical count verification234 - Remediation efforts for the material weakness are ongoing, but it was not considered remediated as of June 30, 2022234235 Part II. Other Information This section details Akebia Therapeutics, Inc.'s legal proceedings, significant risk factors, and other required disclosures Item 1. Legal Proceedings Akebia is engaged in extensive intellectual property litigation against FibroGen for vadadustat and is defending against stockholder class-action lawsuits related to the 2018 Keryx merger - The company is engaged in extensive patent litigation against FibroGen, Inc. across Europe, Japan, and the UK, challenging HIF-related patent validity with mixed results and ongoing appeals238244246 - Akebia is defending against putative class-action lawsuits from former Keryx stockholders alleging misleading disclosures in the 2018 merger registration statement regarding vadadustat's safety and commercial prospects252254 - A federal securities class action filed in March 2022 alleges materially false and misleading statements regarding the Phase 3 PRO2TECT clinical trial and vadadustat's commercial viability257 Item 1A. Risk Factors The company faces significant risks including historical losses, going concern doubt, Auryxia's commercial dependency, FDA CRL for vadadustat, and internal control weaknesses - The company has a history of significant losses, with a $1.5 billion accumulated deficit as of June 30, 2022, and uncertain profitability, exacerbated by the FDA's CRL for vadadustat261262 - Substantial doubt exists about the company's ability to continue as a going concern, driven by reliance on external cost-saving measures and loan agreement covenants regarding going concern qualification279280282 - The business is substantially dependent on Auryxia's commercial success, facing risks from competition, pricing pressure, and an adverse Medicare coverage decision for its IDA indication316328 - The FDA's CRL for vadadustat cited safety concerns, including failure to meet a primary safety endpoint in non-dialysis patients, increased thromboembolic risk in dialysis patients, and potential drug-induced liver injury368381 - A material weakness in internal control over financial reporting persists, specifically related to the inventory process, impacting its completeness, accuracy, and valuation514515 - The 42% workforce reduction implemented in April/May 2022 following the CRL may not yield anticipated savings and could disrupt operations, including Auryxia commercialization509510 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the quarter ended June 30, 2022 - No unregistered sales of equity securities occurred during the three months ended June 30, 2022566 Item 5. Other Information The company reported no other information for this item during the period - The company reported no information for this item566 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, various agreements, and officer certifications - Key exhibits include the Termination and Settlement Agreement with Otsuka Pharmaceutical Co. Ltd. and the Second Amendment and Waiver to the loan agreement with BioPharma Credit PLC568