Akebia Therapeutics, Inc. (NASDAQ:AKBA) Q1 2024 Earnings Call Transcript May 9, 2024

Akebia Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.08775, expectations were $-0.09. AKBA isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, and welcome to the Akebia's First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Senior Director, Investor Relations Mercedes Carrasco.

Mercedes Carrasco: Thank you and welcome to Akebia's first quarter 2024 financial results and business update conference call. Please note that a press release was issued earlier today, Thursday, May 9th, detailing our first quarter financial results, and that release is available on the Investors section of our website. For your convenience, a replay of today's call will also be available on our website after we conclude. Joining me for today's call, we have John Butler, Chief Executive Officer and Principal Financial Officer; and Nick Grund, Chief Commercial Officer. I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements.

Additional information describing these risks is included in the financial results press release that we issued on May 9th as well as in the risk factors and management discussion and analysis section of our most recent annual and quarterly reports filed with the SEC. The forward-looking statements on this call speak only as of the original date of this call, and except as required by law. We do not undertake any obligation to update or revise any of these statements. With that, I'd like to introduce our CEO, John Butler.

John Butler: Thanks Mercedes and thanks everyone for joining us today. This is our first quarterly call since the approval of Vafseo in late March. Though only about six weeks ago, I'm extremely encouraged by our early progress. I'm excited by the reaction of the dialysis market, prescribers, dialysis providers and patient groups, as well as the excitement from the folks at Akebia to get this product into the hands of patients. We celebrated the milestone and win for the kidney community for a moment, then immediately kicked into high gear to initiate our launch. On our Vafseo approval call, I outlined three things we have to execute effectively to drive a successful launch and ensure long-term growth of Vafseo in dialysis. First, drive demand from prescribers.

Second, contract effectively with dialysis providers; and third, demonstrate potential additional benefits of Vafseo for dialysis patients and the folks who serve them. Nick will go into more detail, but I'll share that our commercial and medical affairs teams have already engaged with thousands of physicians. I'm extremely encouraged by the physician's interest and enthusiasm, particularly when I speak to investigators who have experience using the product. We believe the Vafseo label supports widespread adoption and that's how we're presenting the product to the market. We've developed our launch strategy and tactics that best position Vafseo to potentially become a new oral standard-of-care for dialysis patients with anemia due to chronic kidney disease.

As I speak to potential Vafseo prescribers, besides describing their clear interest in using the product for their dialysis patients, they asked me to please not give up on working towards an approval for non-dialysis patients. We will not give up on this patient population. The FDA in the vadadustat CRL suggested we return and discuss appropriate subpopulations where the benefit risk is positive. Now, this may include conducting a new clinical trial to supplement the data we already have in the patient population we plan to discuss. One potential subgroup we're exploring are CKD patients with anemia not on dialysis with a GFR below 15. We believe these patients would benefit from treatment with Vafseo. Over 70% of these patients are not treated today and they routinely have a higher mortality rate than patients who had their anemia controlled before dialysis, and they continue to have a higher mortality rate 12 months after starting dialysis.

A once-a-day oral option may be ideal for this patient population. We plan to engage the FDA this year to discuss a path forward for these patients. And it's critical that we take this population into account as we determine our WACC pricing for Vafseo. We are carefully considering pricing and will announce the WACC by next month. So now let me ask Nick to give us more detail on launch execution.

Nicholas Grund: Thanks John, and good morning to those of you joining us on the call. I'm pleased to report that the experienced Akebia commercial and medical affairs organizations have been extremely active in the field, engaging with prescribers to build demand for Vafseo and with dialysis prescribers to effectively contract as we prepare for product availability and TDAPA reimbursement in January. It is apparent that excitement and advocacy around the HIF class is strong. A clear unmet medical need exists, with nephrologists reporting that one-third of the dialysis patients with anemia due to CKD have hemoglobin levels that are below the target range. This is despite the availability of ESAs. Further, Akebia’s sponsored market research found 85% of physicians are familiar with the HIF class and of those who are extremely familiar, 85% have a very positive impression.

This is despite the low early adoption of the other approved HIF. I believe this is a very solid foundation to build upon with strong differentiating messages specific to Vafseo. Additional research suggests that nephrologists envision broad utilization of a HIF product, with over 75% of nephrologists stating that they are comfortable prescribing a HIF in any dialysis setting. In fact, research suggests a HIF will be the preferred treatment versus ESAs for almost one-third of nephrologists. These metrics are very encouraging. Even prior to approval, we had started to ramp up for launch. The first step was the expansion of our field based medical and commercial teams, which grew -- we grew 55% from 2023. We are excited to have expanded the teams now so that we have an eight-month runway to continue to build advocacy and demand for Vafseo.

In the first six weeks since approval, Akebia's key account managers have been actively engaging with approximately 4,500 calls to our key target prescribers with many of those calls, including Vafseo messaging. John will talk more about this later, but I will quickly note that the Vafseo approval has facilitated improved access to Auryxia prescribers. The efforts in the field team have been further supported by digital tactics. Vafseo messages appeared in almost 26,000 times in paid search, and we have had over 240,000 targeted brand impressions. We are also proud to have had sponsorship presence in three key meetings since approval. The American Nephrology Nurses Association, the Renal Physicians Association, and the Renal Healthcare Association meetings, which allow for scientific exchange sessions and in-depth discussions with key customers.

In parallel, Akebia's medical affairs team continues to work with our Publication Steering Committee to ensure timely and continued publication of relevant vadadustat data for clinical and scientific community. To date, the primary results for both INNO2VATE and PRO2TECT global Phase III clinical programs have been published in the New England Journal of Medicine in two separate manuscripts. Data on several additional important analysis and subgroups have been published, including peritoneal dialysis subgroup, erythropoietic effects of vadadustat, overall adverse event profile of vadadustat from the pooled Phase III clinical program, et cetera. These publications were helpful in driving the high degree of HIF awareness that we are reporting from the field.

As of the first quarter, the medical affairs team continues to publish key data and analysis at scientific meetings such as the 2024 Annual Dialysis Conference where the cardiovascular safety of vadadustat in patients new to dialysis with CKD related anemia and the safety and efficacy of vadadustat in the treatment of anemia patients with CKD in the U.S. region were presented. Beyond driving prescriber awareness advocacy and demand, contracting with dialysis organizations is critical. Through that process, we will finalize our WACC price. As a reminder, we anticipate pricing Vafseo at a premium. As you likely know, medications for dialysis patients are contracted through dialysis organizations and those contracts include both an off invoice discount and a volume based discount opportunity, meaning that when volume goes up, net price will come down.

Engagement with dialysis organizations has been productive. Commercial discussions have been initiated with large dialysis organizations and ongoing contract development meetings are planned. Auryxia and the high likelihood phosphate binders will be in the bundle has allowed for us to begin dialogue with dialysis organization, where we aligned around contract structure and critical components of implementation applicable across the portfolio. With both products available, we have a unique offering to help patients in dialysis organizations achieve their goals. I look forward to updating you as we finalize these agreements over the next several months. Turning now to TDAPA. We will submit our application by June and as a reminder that the application is only accepted once a quarter.

After a six-month TDAPA application process anticipated to be completed in January 2025, we expect the product would be reimbursed and widely available and accessible to patients with rapid adoption. As you can see, our entire organization is working on every aspect of reaching our prospective prescribers, securing access for patients through key channels, and laying groundwork for future growth, our partners are hard at work, too. MEDICE plans to launch Vafseo in Germany and Austria as early as June 1st. They also have launches planned in Netherlands, Switzerland, Sweden, Norway and Finland by end of year. While we reiterate that a U.S. launch of Vafseo represents the primary commercial opportunity for Akebia and the potential to target an approximately $1 billion U.S. market.

We're also pleased that patients through Europe will soon have access to the product. Now let me pass it to John to cover additional opportunities and next steps.

John Butler: Thanks Nick. Nick covered prescriber demand and the contracting progress. The third strategic imperative is to continue to collaborate on clinical studies to fill gaps in our data, potentially to expand our label and separately to allow large dialysis providers to gain experience utilizing Vafseo in their own patients. We're in discussions with key investigators and dialysis providers on a collaborative study that we believe will generate significant data. We hope that these data will lead to valuable publications to support further physician education, as well as provide doctors with increased comfort in utilizing Vafseo, potentially enabling continued growth in utilization even after TDAPA concludes. Again, we believe the Vafseo label supports widespread adoption in dialysis patients.

Our team has been working diligently to prepare the groundwork for potential Vafseo label expansion to permit for more flexible utilization of the product in both new to dialysis patients and in alternative dosing regimens. As I mentioned earlier, we also believe Vafseo could benefit CKD patients who are not on dialysis, and we plan to explore label expansion to those patients as well. This is the most significant potential value driver for Akebia after the launch in dialysis. Now, I'll switch gears to our financial results. But before I review the financials, I'll mention that we have an active search for CFO that's going well. I'd like to thank our finance team and our Chief Accounting Officer, Richard Malabre, for the effort and attention they've put in since our year-end close to ensure the quarter close process was seamless, while I serve as.

As we've previously reported, I can reiterate that we are well financed to execute on our Vafseo launch. We also previously strengthened our balance sheet with proceeds from our At The market, or ATM, sales agreement. Our cash and cash equivalents as of March 31, 2024 were approximately $42 million. In addition, in Q2, we drew down the additional $8 million available to us upon approval of Vafseo under the BlackRock debt facility. We expect that our cash on hand, as well as revenue generated by Auryxia and now Vafseo, starting in January, will fund planned operations for at least two years. We've kept tight control of our spending in the first quarter and are managing the business for stable year-over-year spending in 2024. The team is demonstrating good financial discipline, while investing appropriately for a successful launch.

You'll notice we also announced that we amended our working capital agreement with Vifor to simplify the payback as a royalty. This does not fundamentally change the timing of the payback of that cash, but it greatly simplifies the operational aspects of managing our supply chain. Total revenues were $32.6 million for the first quarter of 2024, compared to $40 million for the first quarter of '23. Net product revenues were $31 million for the first quarter of '24, compared to $34.7 million for the first quarter of '23. The decrease versus last year is largely a volume decrease as a result of our contracting strategy as we exited the final large Part D payer contract. We remain confident that we can achieve net product revenue growth in '24 versus '23.

We believe our Auryxia outreach is actually enhanced by the Vafseo launch as prescribers are eager to discuss a new product, and recall that there's a 96% overlap between Auryxia and Vafseo target prescribers. Also, CMS has released guidance on incorporating phosphate binders into the dialysis bundle. Dialysis organizations are now contracting with an eye towards the binders going into the bundle in '25 as Nick mentioned. One other note on Auryxia. In April, Akebia's licensee Averoa submitted a marketing authorization application to the European Medicines Agency for ferric citrate coordination complex and if approved, Averoa will make the product available to patients throughout the EU. I want to congratulate Averoa on the submission and will be available to support launch efforts in the coming years.

Cost of goods sold were $11.6 million for the first quarter of '24, compared to $20.2 million for the first quarter of '23. Akebia continues to carry a non-cash intangible amortization charge of $9 million per quarter through the fourth quarter of this year. Research and development expenses were $9.7 million for the first quarter of '24, compared to $19.7 million for the first quarter of '23. Now, we will continue to progress a number of new programs in '24, including the collaborative study I mentioned earlier, as well as preclinical development of HIF based molecules in our pipeline, but we do not expect a step up over '23 expenses. SG&A expenses were $25.4 million for the first quarter of '24, compared to $25.1 million for the first quarter of '23.

Again, we're tightly controlling spend and do not expect a significant uptick as we launch Vafseo. Net loss was $18 million for the first quarter of '24, compared to a net loss of $26.9 million for the first quarter of 2023. Before opening the line for questions, I know that Ali Bratzel from Piper could not make the call this morning, but she sent Mercedes a couple of questions and maybe we can start with those. Mercedes?

Mercedes Carrasco: Sure. Thanks John. The first question. Please walk us through the Vifor license agreement and amendment and how we should think about modeling the impact.

John Butler: Sure. So just to remind everyone, back in 2022, as part of an amendment to the Vifor agreement, Vifor provided $40 million of working capital or a working capital fund to finance the product purchases for Vafseo in advance of launch. And in the agreement, we had basically a payback that would go on over time, where ultimately the $40 million would be returned to them. It was a very complicated. As POs are approved, more money is added or money is refunded, and POs have to be agreed upon. And it really complicated the management of our supply chain. But it was wonderful to have that $40 million in cash to help finance the purchases of our product. So we really wanted to look to simplify that arrangement. Previously, the way we would model it out is that $40 million would be a hit to our cost of goods over time.

And as I said, that would decrease over the life of the product, ultimately being paid back fully. So we really tried to model that as closely as we could in a royalty relationship. So, basically, there will be no payments, no royalty payments till July 1 of next year. And then it's an 8% royalty for the first or for under $100 million in revenue. And the dollars over 100 million is a 14% revenue over time. And then there's three makeup periods. At the end of '26, '27, and '28. That's $10 million if they haven't received that in royalty, $20 million, and then $40 million at the end of '28. So that will come in now would be in your models as a royalty obligation. And again, as I said, it really is somewhat quite close to the way we expected that money to be paid back over time previously.

Mercedes Carrasco: Thank you. Next, you've indicated cash and cash resources to fund operations for at least two years. What are the underlying assumptions to that projection?

John Butler: Yeah. So it's very simple, actually. We have -- we finished our ATM back in the first quarter. Then we drew the $8 million on the BlackRock node. And that's kind of current cash. And we think about current cash, plus sales of Auryxia and Vafseo, and that, again, will last us at least 24 months. As we think about Auryxia, we recognize that there is LOE in March of next year. But with the phosphate binders going into the bundle, we do think there's an opportunity for the product to not have the kind of patent cliff you usually prescribe to a small molecule. But I think we've been appropriately cautious in our cash planning around the way that revenues will progress for Auryxia. We think that there's real opportunity for the product, but we wanted to be cautious as we planned.

And then on the Vafseo launch, obviously, we're looking at sales starting in the first quarter of next year. And during that TDAPA period, we've talked about the opportunity for rapid adoption. Again, I think even if we are more conservative in our launch projections, we're very comfortable with the cash projection of at least 24 months of cash runway. Of course, if that launch goes even better, that's an even longer runway. Okay. So now, Andrew, maybe we can open the line for questions.

Operator: Absolutely. [Operator Instructions] And our first question comes from the line of Ed Arce with H.C. Wainwright.

See also

10 Cathie Wood Stocks Insiders are Selling and

15 Cheapest European Countries to Visit in 2024.

To continue reading the Q&A session, please click here.