Akebia Therapeutics Inc

NASDAQ:AKBA

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Thank you. Thank you for standing by. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Akebia Second Quarter 2024 Financial Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Mercedes Carrasco, Senior Director, Investor Relations. Thank you. Please go ahead.

[Mercedes Carrasco, executive]

Thank you, and welcome to Akebia's Second Quarter 2024 Financial Results and Business Updates Conference Call. Please note that a press release was issued earlier today, Thursday, August 8, detailing our first quarter financial -- second 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 be available on our website after we conclude.

Joining me for today's call, we have John Butler, Chief Executive Officer; Nick Grund, Chief Commercial Officer; and Erik Ostrowski, Chief Financial and Business 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 August 8 as well in the Risk Factors and Management Discussion and Analysis section of our most recent annual and quarterly reports filed with the SEC.

With that, I'd like to introduce CEO, John Butler.

[John Butler, executive]

Thanks, Mercedes, and thanks, everyone, for joining us today. Since the Vafseo FDA approval in late March, virtually the entire company has been diligently focused on its commercial launch. And Nick is going to walk you through the details shortly, but the punchline is that, in the 4 weeks since we spoke to you last, we've made significant progress on our key launch initiatives, which are: first, driving prescriber demand; second, contracting effectively with dialysis organizations; and third, advancing plans to generate clinical data that could demonstrate potential additional benefits of Vafseo. As recently announced, we filed our TDAPA application in June and are now about 5 months away from making Vafseo available in the market. Our entire organization is incredibly energized by this upcoming event.

We're encouraged by the strong reception for Vafseo from the medical community. The excitement around Vafseo was evident in 2 physician advisory boards we recently hosted. What's especially interesting is that these are physicians we haven't worked with in the past and are new to the Vafseo story. The overwhelming response was that they're ready for a new choice in anemia management for dialysis patients.

Our Medical Affairs team has been supporting dialysis organizations as they work to put Vafseo clinical protocols in place ahead of TDAPA. Today, we have a full complement of MSLs who are actively engaged in physician education armed with a wealth of clinical data, including the vadadustat Phase III New England Journal publications as well as the additional data we've generated to support health care providers' understanding and utilization of the product.

Similarly, our commercial team has also been making good progress. Our field sales team is connecting with prescribers to drive awareness and demand.

As we expand these discussions, physicians are very consistent in where they expect to use the product initially. The focus is on home patients as well as patients on the highest doses of ESAs. These are the segments where physicians attribute the greatest unmet need, and they total more than 200,000 patients. We believe prescribers will expand utilization of Vafseo beyond these patient groups after gaining experience with the product and seeing the benefits of Vafseo for these initial patients.

We're also very focused on the longer-term growth for Vafseo. Generating new data to potentially expand the benefits of a product is critical. A key component of our strategy is to continue to generate this clinical data in collaboration with dialysis organizations. We're deeply engaged with DOs in study design and believe these studies may meaningfully contribute to continued growth of Vafseo post TDAPA in the dialysis population. We need to continue to generate important clinical data for Vafseo to continue to move towards our goal of becoming a new standard of care. Think of it this way. Today, we're targeting the TDAPA patient population with a premium price. Once TDAPA ends in 2027, we'll have a price consistent with ESAs, but we'll target the entire dialysis market, over 500,000 patients and approximately $1 billion today. New data, along with the positive experience over the TDAPA period, will be central to meeting our goal.

The market for Vafseo in dialysis is significant, but let's also talk about potential expansion. Circling back to physician interest in Vafseo, an unsurprising additional point continues to come up, both in the advisory boards I mentioned earlier and in virtually every conversation we have with prescribers. Physicians see a clear and obvious unmet need in the treatment of anemia in CKD patients not on dialysis. We agree. Accordingly, we've prioritized Vafseo label expansion for nondialysis CKD patients. As we said previously, we expect to provide a more detailed update on this initiative by the end of the year.

Now let me turn it over to Nick to talk about our commercial progress.

[Nicholas Grund, executive]

Thanks, John, and thanks for those joining us on the call today. Our Vafseo launch activities continue to ramp and evolve, and we are making significant progress across all of our key initiatives targeting both the high [Technical Difficulty] as well as the doctors who are directly involved in patient care. The feedback we are getting on Vafseo has been positive, and doctors are enthusiastic about using the drug to help their dialysis patients, especially in patients who receive in-home dialysis, patients on high dose of ESAs or patients not achieving appropriate hemoglobin levels.

We're also making strong advances on the contracting front, where we are discussing our entire product portfolio, which strengthens our dialogue with dialysis organizations. We have had contract conversations with dialysis organizations covering nearly 90% of patient lives with many more to come in the next several months. I can tell you that dialysis organizations are looking for partners, partners who can help maximize the opportunity to incorporate innovative medications into their centers made possible by TDAPA and also navigate the changes that are necessary considering the high likelihood that phosphate binders will be added to the bundle. Akebia has been and will be that partner. Our national accounts team has been busy and, every day, the pace is accelerating.

We have also heard uniformly about the high degree of change associated with binders in the bundle. This change in reimbursement dynamics for phosphate binders could be associated with the change in distribution channels, and, as a result, in the traditional inventory purchasing patterns for this category, including Auryxia. As such, dialysis organizations are reviewing their supply chain logistics to optimize their economics, both ahead of and during the TDAPA period.

We are in the process of evaluating many new supply partners to minimize any disruption. That said, the change in distribution channel is not expected to impact overall demand for phosphate binders or Auryxia market share. And we, therefore, anticipate similar revenue trends in 2024 as compared to last year, though the supply chain could see some fluctuation as these changes roll out.

We have leveraged the Auryxia contracting discussion to simultaneously engage in Vafseo contracting. There is significant value to us as a company to have a portfolio of products promoted in the same space, and it allows for meaningful operational and potential financial benefits to be realized. The Vafseo wholesale acquisition cost of approximately $15,500 per patient per year has been well received by our customers and stakeholders operating in the TDAPA environment who want to use Vafseo. We expect our product supply contracts with dialysis organizations will include an off-invoice discount and a volume-based rebate. We also continue to work towards having all contracts complete by January.

Before I turn it back to John, I wanted to quickly note progress from our international partner, Medice. Vafseo is now available in Germany and Austria, and Medice just recently launched in the Netherlands. It is still early days for the European launch, but we are encouraged by our partner's enthusiasm and execution in their launch.

John?

[John Butler, executive]

Thanks, Nick. And now I'd like to introduce you to Erik Ostrowski, who joined Akebia in June as our Chief Financial Officer and Chief Business Officer. Erik has an impressive track record in corporate finance and financial team leadership. His skill set is highly complementary to our executive leadership team, and he's already adding value to the business. Erik, over to you to talk about our financial position.

[Erik Ostrowski, executive]

Thanks, John. I'm extremely pleased to have joined Akebia and firmly believe this is a transformational time for the company. Now a month into the job, my conviction is strengthened. With the Vafseo product launch and established revenue-generating business in Auryxia in a promising HIF-based pipeline, I believe Akebia is well positioned for growth. And as importantly, I am happy to be working with a dedicated and hard-working team with such strong knowledge of and relationships in the renal space.

Now let's review the quarterly financials. Total revenue was $43.6 million in the second quarter of 2024. Of this amount, $41.2 million was derived from Auryxia net product revenue as compared to $42.2 million of Auryxia net product revenue during the second quarter of 2023. The remainder of our revenues during the quarter were derived from licensings, collaborations and other revenues which totaled $2.4 million as compared to $14.1 million in the second quarter of 2023.

Of note, last year's second quarter license and collaboration revenues included a onetime $10 million upfront payment related to our Medice license agreement.

Cost of goods sold was $17 million in the second quarter of 2024 compared to $17.3 million in the second quarter of 2023. Akebia continues to carry a noncash intangible amortization charge of $9 million per quarter in COGS through the fourth quarter of 2024.

Research and development expenses were $7.6 million in the second quarter of 2024 compared to $20.2 million in the second quarter of 2023. This decrease was driven by the completion of certain clinical trial activities, a reduction in consulting expenses and lower headcount-related costs.

Selling, general and administrative expenses were $26.9 million in the second quarter of 2024 compared to $27 million in the second quarter of 2023.

And lastly, net loss was $8.6 million in the second quarter of 2024 compared to a net loss of $11.2 million in the second quarter of 2023.

Cash and cash equivalents as of June 30, 2024 were $39.5 million, and I'm pleased to say we expect to have at least 2 years of cash runway. Our cash position continues to be supported by revenue from Auryxia and careful expense management.

And with that, we welcome questions.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Julian Harrison with BTIG.

[Julian Harrison, analyst]

Congrats on all the progress. I'm sorry if I missed it, but I just want to confirm that it's still your expectation that you don't need to build out your sales force beyond what you already have for Auryxia and you probably don't need to manufacture additional API to meet initial demand for your Vafseo launch expected January next year?

[John Butler, executive]

So Nick, do you want to talk about the sales force?

[Nicholas Grund, executive]

Absolutely. And so Julian, thanks for the question. Yes, we've had a team in place for the entire year that's already been calling on dialysis organizations and providers. While there may be some small tweaking around the edges, I don't think there's going to be anything that I would regard as significant or material in how we approach the marketplace from an account perspective.

[John Butler, executive]

I think the bigger change that we had was adding to the Medical Affairs group. We had skinnied down that group because Medical Affairs wasn't as impactful on Auryxia, but they're incredibly important for protocol development for the dialysis providers. So we did expand that group. As I said, they're -- it's fully staffed now, and they're out there being very effective with physicians.

And then your second question was around API. And that's correct. We have product in place. Erik, maybe you want to kind of talk to that?

[Erik Ostrowski, executive]

Yes. No, we do. We have projects in place, as this has been discussed on prior calls. We do have some -- it will be effectively 0-cost inventory because it was previously expensed to R&D. So yes, just to reiterate, we're well positioned, from an inventory perspective, for the launch.

[Nicholas Grund, executive]

Yes. Our quality team did a great job of generating data to expand the [ dating ] for the product. So everything we have on the shelf will -- that we had for 2 years ago for the launch we were expecting we can use now. And it's a great place to be.

[John Butler, executive]

Just from the perspective that we don't have significant cash outlay for manufacturing. But of course, you do like to manufacture some product and keep your CDMOs current on the process. But it is helpful from a cash perspective.

[Julian Harrison, analyst]

And then one more, if I may. I mean, it's great to hear that you're already engaging dialysis providers, representing I think you said 90% of the addressable market already. I'm wondering how much of that you expect to be enabled through your recently updated relationship with CSL Vifor.

[Nicholas Grund, executive]

No, it's a great question. Frankly, we were already engaging with them around Auryxia. If you remember, some of the catalyst for Auryxia was the proposed rule that came out around binders in the bundle. That helped dialysis organizations really understand that it was coming, which was a catalyst for their urgency to meet with us earlier in the year. And really, the 90% is, since the Vifor announcement, we've met with providers representing 90%, approximately 90%, of the patients. So the Vifor catalyst becomes additional reasons for them to want to get us back in the room in order to discuss contracting and the process.

[John Butler, executive]

Nick talked about us becoming a partner. I think we've considered ourselves a partner for some time. But when you -- we have to contract directly with the dialysis providers. And now we're doing that on 2 products. And particularly with phosphate binders, where there's going to be a lot of work for them to incorporate those into the -- as you said, they're now purchasing the phosphate binder, managing that with their patients. There's a lot of work in that. And they really want to work with companies as closely as possible on -- who have operational aspects, not just contractual aspects. And that's where -- one of those reasons why it's so powerful to have both products that we're talking to them about. It just increases the partnership between Akebia and dialysis providers on some really core areas of their business.

[Nicholas Grund, executive]

The only thing I'll probably add to that is our history in dialysis allows those conversations to be won with the knowledge of their operational concerns, right? If you go -- if you walk into these conversations without the knowledge of how they think about their business and what's important to them, it does become a conversation that can appear very one-sided and out for Akebia only. And in a partnership, if they don't have an opportunity to be able to use the product successfully, then it's really not a partnership. And so creating that environment is really important.

[John Butler, executive]

Yes. And we've been saying for years how important knowing the dialysis business is. And I mean, I think Erik, here for a month, is learning how different and complicated dialysis can be, and that is a real competitive advantage for us. Thanks for the questions, Julian.

[Operator]

Thank you. And your next question comes from the line of [ Ed ] Arce with H.C. Wainwright.

[Antonio Arce, analyst]

Congrats on the progress towards the launch next year. A couple of questions for me. First, on the WAC price that you announced, I'm wondering if you could give a little details around some of the criteria as you thought through working to optimize the price not only for TDAPA but afterwards. And what sort of key aspects came into that thought process?

Secondly, with Medice, I'm wondering if you can disclose what proportion of the collaborative sales this quarter came from Germany. I think it was Germany and Australia which launched in June, if there were any, and if there's any other further countries that you expect to come online between now and the end of the year.

[John Butler, executive]

Sure. I'll -- Erik, do you want to just handle the second one?

[Erik Ostrowski, executive]

Yes. I mean that's a quick one. Yes, so no revenues from the DC in this quarter. As you pointed out, that was a June launch, so.

[John Butler, executive]

Yes, they just started, so -- and we look forward to seeing that progress. I don't know if we have -- do you know any other countries you're expecting to -- I know there's the --

[Nicholas Grund, executive]

The Netherlands just went --

[John Butler, executive]

The Netherlands just went, the Netherlands for --

[Nicholas Grund, executive]

Some of the other Nordic con- countries will be in the balance of the year.

[John Butler, executive]

Yes. The larger countries is where they have to do the price negotiation, which I think we'll start to see them come online next year.

[Nicholas Grund, executive]

Yes, but the smaller countries like Netherlands and now the Nordic countries will come on sooner, yes.

[John Butler, executive]

Nick, do you want to walk through the thoughts around WAC pricing?

[Nicholas Grund, executive]

Yes. And so really, WAC pricing, a couple of different things is, when we thought about it, is, one, what price would allow for dialysis organizations to be successful during the TDAPA period? And so how do you set up your contract? What is the WAC prices, your reimbursement for the first several quarters of TDAPA, and allowing TDAPA, which really supports innovative products being utilized -- that WAC price and how do we make it at a price that is [ mixed ]? Are dialysis organizations and Akebia successful was a consideration. Two, how do we make sure we manage that price over the TDAPA period so that, post TDAPA, when we talk about ESA [ like ] pricing, we can manage [ like ] pricing to make the product sustainable post TDAPA? Remember, it's a $1 billion market today at ESA pricing. And, therefore, creating that predictability post-TDAPA that the dialysis organizations wanted is critically important. And then lastly, but importantly, the nondialysis population, less than 25% of patients today in the nondialysis space are on an anemia-management product or are being treated for their anemia. And when they enter into dialysis, the outcomes associated with folks that have been treated versus those not is enormous. And so the value of having a product like Vafseo in the non-dialysis space is very, very high. And therefore, making sure we're pricing for that dynamic and that innovative value in that subset of population is important as well.

[John Butler, executive]

Yes. I -- that last point is -- just can't be emphasized enough. And frankly, I mean, I think it really was a challenge balancing what's right for the dialysis market today versus what's possible and the benefit we would bring to the nondialysis patient population. And I hope we struck the balance here.

Particularly, as Nick pointed out, that WAC reimbursement for the first few quarters of TDAPA is critical because there are some real operational costs for the dialysis providers to add a new product, to put protocols in place, storage, et cetera. And they have to see the business rationale for them to do that. Yet, you also want to be very cognizant of the optics around kind of how pricing is viewed. So it's quite the balance we had to strike. We did a lot of -- had a lot of conversations with folks before making that decision.

And as Nick pointed out in his remarks, I think it's -- I think we did hit the right balance for the dialysis population. Folks are reacting quite well and are very willing to contract and put the product as part of their formulary.

[Nicholas Grund, executive]

The only additional context I'll add, Ed, is I've been with a lot of customers over the last month. And as you go through the WAC price and how to understand that, how to operationalize it, what it means in the context of the contract structure that we've talked about, an off-invoice discount and volume-based rebates, which we've talked about, again, as volume goes up, their price goes down, which means their economics improve. They've looked at it and said, huh, that makes a lot of sense, right? And that's what you really want from your customers is -- that makes a lot of sense, that reinforcement that you've done the right thing for them, which is important.

[John Butler, executive]

And it really creates an environment where physicians can try Vafseo, right? I mean, as I said, you can have a great contract in place, but if you don't have physician demand, they're not going to force that. Our sales force is driving that demand. And we know that, if physicians have access and are able to use it, which we create through the contracting, that physicians will like using the product, they'll see the benefits of using the product and they'll expand their use of the product. And that's what positions us well. Even though, post TDAPA, we're going to have to take this price cut, if you will, we're now going to be targeting the entire dialysis market and people will be open to that. And that's a $1 billion market today. So that's a significant opportunity. And then hopefully, as shortly as possible thereafter, we introduce the product into the nondialysis market with a label in nondialysis. And then you'll start to have patients starting dialysis on Vafseo. So it -- this is how you become standard of care. It's a process. The first step in dialysis is you've got to have that contract in place that allows physicians to access the product. And that WAC pricing decision was very, very central to that, to making that possible.

[Operator]

Thank you. There are no questions. I will now turn the conference back over to John Butler, CEO, for closing remarks.

[John Butler, executive]

Thanks, Andrea. We remain extremely energized by our contracting process and the upcoming Vafseo market availability, which is now only a few months away. We're on target with all of our internal time lines and believe we will have all the pieces in place for a successful launch. I really look forward to seeing many of you at the fall investor conferences and hopefully at the ASN Kidney Week in October. Thanks, everyone. Enjoy the rest of your summer.

[Operator]

Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.