Akero(US:AKRO)2024-02-28 16:00PART I Business Akero Therapeutics is a clinical-stage company developing efruxifermin (EFX) for MASH, with a global Phase 3 program initiated after positive Phase 2b results - Akero is a clinical-stage company focused on developing treatments for MASH, with its lead product candidate being efruxifermin (EFX), an analog of fibroblast growth factor 21 (FGF21)27 - The company's Phase 3 program, SYNCHRONY, began enrollment in December 2023 and consists of three trials: SYNCHRONY Histology, SYNCHRONY Real-World, and SYNCHRONY Outcomes, targeting both pre-cirrhotic and cirrhotic MASH33 - EFX has received Fast Track and Breakthrough Therapy designations from the FDA, and a PRIME designation from the EMA, highlighting its potential to address a high unmet medical need in MASH treatment34 - Akero acquired exclusive global development and commercialization rights to EFX from Amgen Inc. in June 2018, with patent protection potentially extending up to 2034 in the U.S., and potential extensions to 204536 Overview Akero Therapeutics is developing EFX for MASH, with Phase 2b trials showing significant fibrosis regression and MASH resolution, leading to a global Phase 3 program Phase 2b HARMONY Study (Pre-Cirrhotic MASH, F2-F3) Week 24 Results | Endpoint | Placebo (%) | EFX 28mg (%) | EFX 50mg (%) | | :--- | :--- | :--- | :--- | | ≥1-Stage Fibrosis Improvement w/o Worsening MASH | 20 | 39 | 41 | | MASH Resolution w/o Worsening Fibrosis | 15 | 47 | 76 | | Combined Fibrosis Improvement & MASH Resolution | 5 | 29 | 41 | Phase 2b SYMMETRY Study (Cirrhosis, F4) Week 36 Results | Endpoint | Placebo (%) | EFX 28mg (%) | EFX 50mg (%) | | :--- | :--- | :--- | :--- | | ≥1-Stage Fibrosis Improvement w/o Worsening MASH | 14 | 22 | 24 | | MASH Resolution w/o Worsening Fibrosis | 26 | 67 (Statistically Significant) | 60 (Statistically Significant) | - EFX has been generally well-tolerated in clinical trials, with most adverse events being mild or moderate, primarily gastrointestinal issues and injection site reactions, and low discontinuation rates due to treatment-emergent adverse events32 Our Strategy Akero's strategy focuses on advancing EFX for MASH through clinical development, scaling manufacturing, preparing for U.S. commercialization, and expanding its pipeline - Advance EFX through clinical development for both pre-cirrhotic (F2-F3) and cirrhotic (F4, compensated) MASH, leveraging promising Phase 2b data39 - Scale manufacturing with partners Boehringer Ingelheim and Vetter Pharma, and prepare for commercialization in the U.S. while exploring strategic collaborations for other key markets40 - Explore EFX for additional metabolic disease indications and build a broader pipeline through development, acquisition, or in-licensing of new product candidates4142 MASH Overview MASH is a severe, progressive liver disease with no approved therapies, driven by obesity, and EFX aims to address its metabolic drivers and fibrosis - MASH is a severe form of MASLD, leading to liver inflammation and fibrosis that can progress to cirrhosis and liver failure, closely linked to the global obesity epidemic45 - The prevalence of MASH with advanced fibrosis (F2-F4) in the U.S. is projected to grow from 6.7 million in 2016 to 14.1 million by 203046 - Currently, there are no approved therapies for MASH, with the standard of care being diet and exercise, but adherence is low; one investigational drug, resmetirom, has completed Phase 3 trials and could be approved in March 20245356 Clinical Evaluation of EFX EFX is in a comprehensive Phase 3 SYNCHRONY program for MASH, building on positive Phase 2b results showing significant fibrosis improvement and MASH resolution - The Phase 3 SYNCHRONY program consists of three trials: SYNCHRONY Histology for pre-cirrhotic MASH (F2-F3), SYNCHRONY Real-World for non-invasively diagnosed MASH, and SYNCHRONY Outcomes for cirrhosis due to MASH6971 HARMONY Study (F2-F3 MASH) Week 24 Histology Results | Endpoint | Placebo (%) | EFX 28mg (%) | EFX 50mg (%) | | :--- | :--- | :--- | :--- | | ≥1-Stage Fibrosis Improvement w/o Worsening MASH | 20 | 39 | 41 | | MASH Resolution w/o Worsening Fibrosis | 15 | 47 | 76 | SYMMETRY Study (F4 MASH) Week 36 Histology Results | Endpoint | Placebo (%) | EFX 28mg (%) | EFX 50mg (%) | | :--- | :--- | :--- | :--- | | ≥1-Stage Fibrosis Improvement w/o Worsening MASH | 14 | 22 | 24 | | MASH Resolution w/o Worsening Fibrosis | 26 | 67 (p<0.001) | 60 (p<0.001) | - In a study combining EFX with GLP-1 therapy (Cohort D), patients achieved a statistically significant 65% relative reduction in liver fat compared to a 10% reduction for GLP-1 alone after 12 weeks31137 Intellectual Property and Commercialization Akero's commercial success depends on its exclusive EFX license, patent protection, third-party manufacturing, and U.S. commercialization strategy in a competitive MASH market - Akero has an exclusive global license agreement with Amgen for EFX, which includes milestone payments up to $105 million and tiered royalties on net sales141143 - As of February 14, 2024, the EFX patent portfolio includes 209 issued patents and 17 pending applications worldwide, with U.S. patents expected to expire in 2029 but potentially extendable to 2034147148 - The company relies on external CMOs for manufacturing: Boehringer Ingelheim for drug substance and Vetter Pharma for the drug product, including a new lyophilized drug-device combination for Phase 3 trials151152153 - The company faces intense competition from numerous multinational pharmaceutical and biotechnology companies developing therapies for MASH155156 Government Regulation Akero's operations are subject to extensive FDA and international regulations, covering EFX development, expedited approval, manufacturing, and post-market compliance, including data privacy - Biological products in the U.S. are regulated by the FDA under the FD&C Act and PHS Act, requiring a multi-step process including nonclinical studies, an effective IND, three phases of clinical trials, and an approved BLA before marketing161 - The FDA has various expedited programs to facilitate development of drugs for serious conditions, including Fast Track, Breakthrough Therapy, accelerated approval, and priority review, which can offer benefits like more frequent FDA interaction and faster review times180181182183 - EFX is considered a combination product (biologic and device), which requires coordinated review by different FDA centers and compliance with both cGMP for biologics and Quality System Regulation (QSR) for devices197198199 - Operations are also subject to healthcare laws like the Anti-Kickback Statute and False Claims Act, as well as data privacy regulations such as HIPAA in the U.S. and GDPR in Europe, which impose stringent requirements and penalties for non-compliance200201249 Risk Factors The company faces significant risks from EFX's sole product dependence, clinical development uncertainties, third-party manufacturing, intense competition, regulatory hurdles, and substantial capital needs - The company is heavily dependent on the success of EFX, its only product candidate; any failure in its development, approval, or commercialization would significantly harm the business299 - Clinical development is fraught with risks, including difficulties in patient enrollment for MASH trials, potential for trial delays or failures, and substantial competition for recruiting patients265266273 - Manufacturing of EFX is complex and relies on third-party contractors, creating risks related to production difficulties, supply chain disruptions, and compliance with cGMP standards285293 - The company has a history of significant financial losses ($151.8 million in 2023) and expects to incur losses for the foreseeable future, requiring substantial additional capital that may not be available on acceptable terms436442 - The regulatory approval process is lengthy, costly, and unpredictable, with no guarantee of obtaining approval for EFX, and even if approved, it will be subject to extensive ongoing regulatory scrutiny372386 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None502 Cybersecurity The company's cybersecurity risk management, supported by third parties and overseen by the Audit Committee, has identified no material incidents to date - The company's cybersecurity risk management program is supported by third parties and overseen by the Audit Committee of the Board of Directors503505 - The Chief Operating Officer, supported by the Senior Director of IT, is responsible for assessing and managing cybersecurity risk505 - The company has not identified any cybersecurity incidents or threats that have had or are reasonably likely to have a material effect on the business506 Properties The company leases 6,647 square feet of office space in South San Francisco for its headquarters, sufficient until July 2027 - The company leases 6,647 square feet of office space in South San Francisco, California, which serves as its corporate headquarters507 Legal Proceedings As of December 31, 2023, Akero Therapeutics was not a party to any legal proceedings expected to have a material adverse impact - As of December 31, 2023, the company was not party to any legal proceedings expected to have a material adverse impact508 Mine Safety Disclosures This item is not applicable to the company - Not applicable509 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Akero's common stock trades on Nasdaq under "AKRO" since June 2019, with no cash dividends paid, and a performance graph is included - The company's common stock began trading on the Nasdaq Global Select Market under the symbol "AKRO" on June 20, 2019510 - The company has never paid cash dividends and does not intend to in the foreseeable future, retaining all funds for business development513 Cumulative Total Shareholder Return Comparison | Company/Index | 6/20/2019 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/31/2022 | 12/31/2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Akero Therapeutics, Inc. | $100.00 | $138.72 | $161.25 | $132.19 | $342.50 | $145.94 | | Nasdaq Composite Index | $100.00 | $111.44 | $160.08 | $194.32 | $130.00 | $186.45 | | Nasdaq Biotechnology Index | $100.00 | $110.89 | $139.37 | $138.49 | $123.38 | $127.99 | Reserved This item is not applicable - Not applicable522 Management's Discussion and Analysis of Financial Condition and Results of Operations Akero reported a $151.8 million net loss in 2023, driven by increased R&D for EFX Phase 3, with $569.3 million cash expected to fund operations into 2026 Results of Operations (Years ended Dec 31, in thousands) | (in thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Research and development | $141,798 | $85,284 | $81,759 | | General and administrative | $31,072 | $29,872 | $19,127 | | Total operating expenses | $172,870 | $115,156 | $100,886 | | Loss from operations | ($172,870) | ($115,156) | ($100,886) | | Net loss | ($151,759) | ($112,033) | ($100,777) | - The $56.5 million increase in R&D expenses in 2023 was primarily due to a $27.9 million increase in CRO expenses for clinical trials, an $18.3 million increase in manufacturing expenses for EFX, and a $7.5 million milestone payment to Amgen542 - As of December 31, 2023, the company had $569.3 million in cash, cash equivalents, and marketable securities, which is expected to fund operations into 2026531 Cash Flow Summary (Years ended Dec 31, in thousands) | (in thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($145,367) | ($92,517) | ($79,681) | | Net cash (used in) provided by investing activities | ($223,623) | ($63,825) | $42,280 | | Net cash provided by financing activities | $353,316 | $255,632 | $602 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on its $569.3 million investment portfolio and term loan, with foreign currency and inflation risks currently not material - The company is exposed to interest rate risk on its $569.3 million portfolio of cash, cash equivalents, and marketable securities, as well as its variable interest rate term loan582584 - Foreign currency risk exists due to some transactions in Euros and British Pounds, but a hypothetical 10% change in exchange rates is not expected to have a material impact585 - Inflation has not had a material effect to date, but rising rates could negatively impact future costs for clinical trials, manufacturing, and labor586 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021-2023, including an unqualified opinion from Deloitte & Touche LLP - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and the company's internal control over financial reporting592593 Consolidated Balance Sheet Highlights (as of Dec 31, 2023, in thousands) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $580,271 | | Cash, cash equivalents, & marketable securities | $569,373 | | Total Liabilities | $44,965 | | Loan payable, noncurrent | $24,964 | | Total Stockholders' Equity | $535,306 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2023, in thousands) | Account | Amount (in thousands) | | :--- | :--- | | Total operating expenses | $172,870 | | Loss from operations | ($172,870) | | Net loss | ($151,759) | | Net loss per share | ($2.89) | - The critical audit matter identified by the auditor relates to the estimation of accrued and prepaid research and development expenses for services performed by CROs and CMOs597599 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None752 Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified opinion from Deloitte & Touche LLP - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023753 - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023756 - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023761 - There were no changes in internal control over financial reporting during the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal controls758 Other Information The company amended its loan agreement to $150.0 million on February 28, 2024, and the COO adopted a Rule 10b5-1 trading plan in Q4 2023 - On February 28, 2024, the company amended its loan agreement with Hercules Capital, Inc. to increase total available borrowings to $150.0 million768 - On December 27, 2023, Jonathan Young, Chief Operating Officer, adopted a Rule 10b5-1 trading plan for the sale of up to 30,000 securities771 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable772 PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement, and a Code of Business Conduct is available - The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual meeting of shareholders773 - The company has adopted a Code of Business Conduct and Ethics, which is available on its website774 Executive Compensation The information required for this item concerning executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual meeting of shareholders776 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item concerning security ownership is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual meeting of shareholders777 Certain Relationships and Related Transactions, and Director Independence The information required for this item concerning certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual meeting of shareholders778 Principal Accounting Fees and Services The information required for this item concerning principal accounting fees and services is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2024 annual meeting of shareholders779 PART IV Exhibits, Financial Statement Schedules This section lists consolidated financial statements, confirms no schedules, and provides an index of all required exhibits filed with the Form 10-K - This section lists the consolidated financial statements, confirms no schedules are submitted, and provides an index of all required exhibits filed with the report780 Form 10-K Summary The company has elected not to include a summary of the Form 10-K - The Company has elected not to include summary information780