AKBA - Akebia Therapeutics: Waiting For Round 2

2023-11-03 17:52:59 ET

Summary

• The NDA for Vafseo has a PDUFA action date in March 2024.
• Post-marketing safety data in the resubmission likely leads to an FDA nod.
• The company is cash poor.

My initial coverage of Akebia Therapeutics, Inc. ( AKBA ), now a microcap (~$160 million) biopharmaceutical company, predicted Q2 estimate misses , which came to pass. Despite a short and surprising 34% post-earnings rally, AKBA prices have shed 50% since the article's publication. On October 25, the Food and Drug Administration (FDA) accepted Akebia's new drug application ('NDA') resubmission for Vafseo (vadadustat), a hypoxia-inducible factor prolyl hydroxylase inhibitor (HIF-PHI), as a treatment of anemia due to chronic kidney disease (CKD) for dialysis-dependent patients. The Agency set a target Prescription Drug User Fee Act (PDUFA) decision date of March 27, 2024 . This 6-month review could be a consolidation period for the stock.

HIF-PHI Landscape

In March 2022, Akebia received a complete response letter ('CRL') from the FDA rejecting the vadadustat NDA in light of safety concerns such as thromboembolic events and the risk of drug-induced liver injury ('DILI'). The resubmission includes post-marketing safety data from Japan, where there's been no reports of DILI in the more than 3 years Vafseo has been sold in that country. Akebia's first US product was the CKD phosphate binder Auryxia, which has an anticipated loss of exclusivity in March 2025. Vadadustat is also approved as Vafseo in 35 countries, including all 27 European Union member states, the United Kingdom, Japan, and most recently, Australia .

Akebia is partnered with Mitsubishi Chemical Group Corporation's ( MTLHY ) Tanabe Pharma subsidiary in Japan and MEDICE Arzneimittel Pütter for Europe and Australia. In the US, Akebia exclusively licensed Vifor Pharma to sell vadadustat solely to Fresenius Medical Care AG & Co. KGaA ( FMS ) and certain other providers, which make up 60% of the dialysis market .

GSK plc's ( GSK ) Jesduvroq (daprodustat) became the US first-mover after FDA approval on February 2023. GSK also markets the drug as Duvroq in Japan since June 2020, and claims Duvroq is Japan's market leading HIF-PHI, but has given up everywhere else. Meanwhile, Astellas Pharma Inc.'s ( ALPMY ) Evrenzo (roxadustat) rules Europe since being launched in December 2021, such as it is. Using a ¥137/$1 exchange rate, Evrenzo generated a lackluster $7-7.5 million sales in the fiscal first quarter 2023 ended June 30. Of that, only $1.9-2.4 million came from Europe. Sales estimates have been going steeply downhill .

Financials and Risks

Auryxia net product revenue was $42.2 million for Q2 2023. License, collaboration, and other revenue was $14.1 million, which included Medice's one-time $10 million upfront payment. These were much less than in 2022 due to continuing impact of the partnership termination with Otsuka Holdings Co., Ltd. ( OTSKY ) after the CRL. Q1 Research and development expenses of $20.2 million and selling, general and administrative expenses of $27 million were lower than in 2022 due to the workforce reduction in response to the CRL. Included in the Australian announcement was a lowered revenue guidance of $170-$175 million for Auryxia in 2023, down from $175-$180 million just a month earlier at the Q2 call. Investors should consider that Auryxia's share of the phosphate binder market will continue to erode.

Akebia's net loss was $11.2 million, leaving cash and equivalents as of June 30 at $53.6 million. The company still believes that its resources will be sufficient to fund operations for at least the next twelve months. It is difficult to see how. Without the milestone, net loss would've been $21 million, or about 3 quarters runway. Given the competition's experience, even if the FDA authorized Vafseo, the drug won't generate much help for several years, if ever. Coupled with lower Auryxia revenues, dilution seems likely in 2024.

To conclude, Akebia longs have a concrete catalyst date and with the Agency's previous remarks about the manageability of DILI, approval in my opinion is more probable than not. However, there is little between now and March. Usually, a company's sole revenue earner at the end of its life cycle, a second potential product competing with Big Pharma, mounting losses and limited cash are considered alarming risks. In my opinion, a much better investment in the CKD space is Ardelyx, Inc. ( ARDX ), which scored its second drug approval on October 18 . XPHOZAH is expected to launch in November in the same dialysis market ( 550,000 patients ) but with no competition as the only non-phosphate binder agent for hyperphosphatemia. Entry here is still attractive, as the stock trades only 14% above the pre-approval closing price.

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