Q2 2022 Akebia Therapeutics Inc Earnings Call

August 4, 2022

Hello, and welcome to the H E. B S second quarter 2022 financial results all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the scacchi filled with ICR.

Unknown Speaker: Hello and welcome to the Akebia second quarter 2022 financial results.

Unknown Speaker: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

Unknown Speaker: After today's presentation, there will be an opportunity to ask questions. To ask your question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

Ask your question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mercedes Kerr SK Senior director of corporate Communications. Please go ahead.

Unknown Speaker: Please note this event is being recorded.

Unknown Speaker: I would now like to turn the conference over to Mercedes Carrasco,

Mercedes Carrasco: Senior Director of Corporate Communications.

Thank you and welcome to <unk> second quarter 2022 financial results and business update conference call. Please note that our press release was issued earlier today Thursday August 4th detailing our second quarter financial results and that release is available on our investors section of our website.

Mercedes Carrasco: Please go ahead.

For your convenience a replay of today's call will also be available on our website. Shortly after we conclude joining me for today's call. We have John Butler, Chief Executive Officer, Steve Burke, Chief Medical Officer, and Dave Spellman, <unk>, Chief Financial Officer before.

Mercedes Carrasco: Mercedes Carrasco, Senior Director of Corporate Communications Thank you and welcome to Akebia's

Before we begin 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.

<unk> that we issued on August 4th 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 to the original date of this call and except as required by law, we do not undertake any obligation to update or revise these statements with that I'd like to introduce our CEO John Butler.

Mercedes Carrasco: second quarter 2022 financial results and business updates conference call.

Mercedes Carrasco: Please note that a press release was issued earlier today, Thursday, August 4th, detailing our second quarter financial results and that release is available on our investor section of our website.

Thanks, Mercedes and thank you all for joining us.

Our team has spent the quarter working to make notable progress to align with our refined strategic focus and reshape at UBS.

Mercedes Carrasco: For your convenience, a replay of today's call will also be available on our website shortly after we conclude.

As you all know in May we outlined the strategic pillars for <unk> in the wake of the unexpected CRM for about <unk> <unk> from the FDA.

Mercedes Carrasco: Joining me for today's call, we have John Butler, Chief Executive Officer, Steve Burke, Chief Medical Officer, and Dave Spellman, Chief, Financial Officer.

We are working to first drive Auryxia revenue and identify cash management opportunities with the objective to enable at TBS to manage the company with existing cash resources and ongoing cash from operations.

Mercedes Carrasco: Before we begin, I'd like to remind everyone that this call includes forward-looking statements.

Support our partners selling in seeking approval for <unk> globally.

This includes potential EMEA approval and European launch through a new partner as.

As well as evaluate the path for a potential U S approval and third thoughtfully invest in our pipeline of internal assets and SaaS other strategic growth opportunities.

Mercedes Carrasco: 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.

Now, let's begin with Auryxia, our existing commercial products.

Today, we are reporting 32% revenue growth for Auryxia over the same quarter last year, and a 5% increase over the first quarter of 2022.

We believe the progress on Auryxia revenue growth is critical for our success moving forward.

Despite challenges in the dialysis centers, our commercial team has delivered increased net revenue again this quarter. We've increased our 2022 auryxia revenue guidance to $170 million to $175 million raising both the top and bottom end of our guidance range by $5 million.

In addition to revenue growth, we've taken significant steps towards reducing our cost structure.

Mercedes Carrasco: Additional information describing these risks is included in the financial results press release that we issued on August 4th, 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.

Equally pleased and impressed with how our team has responded to that challenge.

Mercedes Carrasco: The forward-looking statements on this call speak only to the original date of this call and, except as required by law, we do not undertake any obligation to update

Mercedes Carrasco: or revise these statements.

Working efficiently and prioritizing the most critical business initiatives that we believe will drive value.

Mercedes Carrasco: With that, I'd like to introduce our CEO, John Butler.

John Butler: Thanks, Mercedes, and thank you all for joining us.

John Butler: Our team has spent the quarter working

John Butler: to make notable progress to align with our refined strategic focus and reshape Akebia.

Dave will talk through specific cost management processes and savings that we've realized in Q2.

John Butler: As you all know, in May, we outlined the strategic pillars for Akebia in the wake of the unexpected, CRL for Vatadustat from the FDA. We are working to, first, drive Erixia revenue and identify cash management opportunities with the objective to enable Akebia to manage the company with existing cash resources and ongoing cash from operations.

Now shifting to our second pillar advancement about a new stack globally.

John Butler: Second, support our partners selling and seeking approval for Vatadustat globally. This includes potential EMA approval and European launch through a new partner, as well as evaluate the path for potential U.S. approval.

We continue to believe in the potential about <unk> as an oral treatment for patients with anemia due to chronic kidney disease.

We're pleased to have successfully regained the rights to that a new stat from otsuka in the United States, Europe , China, Russia, Canada, Australia, the middle East and certain other territories.

That a dose that is currently under review by the EMA.

From day, one of the EMA process, we worked very closely with our former partner on the initial marketing authorization application or MAA.

And we are well positioned to assume full responsibility for the MAA.

Review is proceeding.

On the expected timeline with a potential approval early next year.

To note that as you said is also under review in the United Kingdom, Switzerland, and Australia through the access consortia.

Our team is working through the review processes in these markets and we're excited about the value of a potential approval of <unk> in these markets could bring to a TBA as well as to the patients who were impacted by a new buy anemia due to chronic kidney disease.

While our team is executing the regulatory process, we do not believe we would commercialize that or do you start in Europe without a partner.

And we've begun a process for identifying a partner for Europe .

In the U S last quarter, we noted that we would engage with the FDA to determine a path for potential approval for <unk>.

We completed the end of review conference with the agency the first step in the process.

We felt it was a constructive dialogue we have not yet received minutes from the meeting so we will not be discussing any detail from the meeting at this time.

John Butler: And third, thoughtfully invest in our pipeline of internal assets and assess other strategic growth opportunities.

Now onto our third pillar earlier today, we shared data from a phase two investigator sponsored clinical study evaluating <unk> for the prevention and treatment of <unk> in subjects with COVID-19 and hypoxemia.

John Butler: Now, let's begin with Erixia, our existing commercial product. Today, we're reporting 32% revenue growth for Erixia over the same quarter last year and a 5% increase over the, first quarter of 2022. We believe the progress on Erixia revenue growth is critical for our success moving forward. Despite challenges in the dialysis centers, our commercial team has delivered increased net revenue again this quarter.

We're extremely pleased with the study UT health Houston ran and thank them for their leadership.

We also want to thank the patients who participated in this study as well as their families.

Well that are just that did not meet the primary endpoint in this study we're still very excited about the data and believe that <unk> has the potential to impact <unk> broadly a condition with few therapeutic options approved for intervention.

To design, our development plan, we plan to spend more time analyzing the full dataset.

Also consult additional experts and ultimately speak to the FDA.

But today, we believe that <unk> as a potential treatment for <unk>.

Might be an important addition to our pipeline.

Now of course, this could be even more valuable now that we've re secured full rights to that of <unk> in the U S and Europe .

And with that let me pass it over to Steve to provide more details on the study.

Thanks, John .

In 2020, we made the decision to support the study as we believe stabilizing here with vantage is that could lessen the severity of lung injury in patients with COVID-19.

In animal models of acute lung injury, knocking out are inhibiting <unk>.

Versus lung injury, and Conversely, stabilizing yes.

With prolyl hydroxylase inhibitors like <unk> lessens, the severity of lung injury.

I'm thinking with shared by the team at UT Health, Houston, including Dr. Kroeger L. Chegg head of Anesthesiology, who has published extensively on acute lung injury models.

Hit stabilization.

Dr <unk> and Dr. Ben Bob Rowe head of emergency medicine assembled an expert and committed team across five hospitals in Houston and <unk>.

With this study under an investigator IND after extensive consultation with FDA.

<unk> was a phase II randomized double blind placebo controlled trial.

The trial measured the proportion of patients who had scores of six seven or eight.

On the National Institute of allergy, and infectious disease, ordinal scale or NII AIB OS at day, seven and day 2014 with day 14 being the primary endpoint.

Yeah.

Fixed is defined as requiring noninvasive ventilation or high flow oxygen devices.

Devon is a requirement for invasive mechanical ventilation or ecmo.

His death.

As outlined in our press release at day, 14, and proportion of subjects with a score of six 7% or eight were 13, 3% <unk> versus 16, 9% for placebo with a relative risk of <unk> 79, and 94% probability that the outages that with <unk>.

Periods of placebo.

In a pre specified analysis at day seven.

Proportion of subjects with a score of six seven or eight or 25, 4% for Gotta do staff.

Versus 29, 7% for placebo with.

With the relative risk of eight six and 97% probability that <unk> was superior to placebo.

This means that the trial failed to meet its primary superiority threshold of greater than 95% profitability.

However, a smaller proportion of subjects in Nevada, just that group had a score of six seven or eight.

Demonstrating 94% probability of a benefit of <unk> 14.

And 90%.

7% probability of benefit in page seven.

These data are encouraging, particularly for <unk> more broadly since the mechanisms underlying the benefit are not specific to COVID-19.

We believe that <unk> has the potential to prevent the worsening of the Rds due to diverse insults and are interested in further exploring that and do staff in the acute care setting.

We're working closely with UT health Houston to publish the data.

We will work to determine next steps for this exciting program.

And now I'll hand, it over to Dave for a financial overview.

Thank you, Steve and good afternoon, everyone.

John Butler: We've increased our 2022 Erixia revenue guidance to $170 to $175 million, raising both the top and bottom end of the guidance range by $5 million.

The backbone of our long term plan is the continued growth of Auryxia.

As John mentioned, our team demonstrated again this quarter that we are focused on increasing net product revenue from auryxia.

John Butler: In addition to revenue growth, we've taken significant steps towards reducing our cost, structure.

Our expense management can be seen this quarter with a significant decrease in operating expenses, even before we realize the full savings of our restructuring, which we believe will continue to impact our operating expenses this year.

Decreased costs significantly versus the first quarter across almost all areas of our business. It is a major focus of the team.

John Butler: I'm equally pleased and impressed with how our team has responded to that challenge.

As our revenues grow at our expense base is covered we will in a measured way reinvest in our pipeline.

John Butler: We're working efficiently and prioritizing the most critical business initiatives that, we believe will drive value.

Pipeline prioritization and specific allocations of funds into our operating plan will come over the coming months and quarters.

Subsequent to the quarter and then we collected the $55 million cash settlement from our former partner Otsuka, which was paid following the termination of the collaboration agreements.

Preceded to use $25 million of those funds to pay down a portion of our debt with pharmacology, which we expect will save us over 30% of our expected interest expense over the terminal loan.

John Butler: Dave will talk through specific cost management processes and savings that we've realized, in Q2.

John Butler: Now shifting to our second pillar, advancement of Vatadustat globally, we continue to believe in the potential of Vatadustat as an oral treatment for patients with anemia due to

I will now turn to some important selected financial results for the quarter beginning with revenue.

John Butler: chronic kidney disease.

John Butler: We're pleased to have successfully regained the rights to Vatadustat from Otsuka in the, United States, Europe, China, Russia, Canada, Australia, the Middle East, and certain other territories. Vatadustat is currently under review by the EMA.

John Butler: From day one of the EMA process, we worked very closely with our former partner on the, initial marketing authorization application, or MAA, and we're well positioned to assume full responsibility for the MAA.

John Butler: The review is proceeding on the expected timeline with a potential approval early next year. To note, Vatadustat is also under review in the United Kingdom, Switzerland, and Australia, through the Access Consortium. Our team is working through the review processes in these markets, and we're excited about, the value of potential approval of Vatadustat in these markets could bring to the patients who are impacted by anemia due to chronic kidney disease.

John Butler: While our team is executing the regulatory process, we do not believe we would commercialize, Vatadustat in Europe without a partner.

Total revenue was $126 8 million for the second quarter of 2022 compared to $52 9 million for the second quarter of 2021.

John Butler: To that end, we've begun a process for identifying a partner for Europe.

John Butler: In the U.S., last quarter, we noted that we would engage with the FDA to determine, a path for potential approval for Vatadustat. We completed the end-of-review conference with the agency, the first step in the process. We felt it was a constructive dialogue.

John Butler: We've not yet received minutes from the meeting, so we will not be discussing any detail from, the meeting at this time.

John Butler: Now, on to our third pillar.

John Butler: Earlier today, we shared data from a phase two investigator-sponsored clinical study, evaluating Vatadustat for the prevention and treatment of ARDS in subjects with COVID-19 and hypoxemia.

John Butler: We're extremely pleased with the study UTHealth used in Iran and thank them for their leadership.

John Butler: We also want to thank the patients who participated in the study, as well as their families.

John Butler: While Vatadustat did not meet the primary endpoint in the study, we're still very excited, about the data and believe that Vatadustat has the potential to impact ARDS broadly, a condition with few therapeutic options approved for intervention.

As John mentioned, we're pleased to report revenue growth for Auryxia, where net product revenue was $43 7 million for the second quarter of 2022, compared with $33 million for Q2 2021 of.

John Butler: To design our development plan, we plan to spend more time analyzing the full data set, also consult additional experts, and ultimately speak to the FDA.

John Butler: But today, we believe Vatadustat as a potential treatment for ARDS might be an important addition, to our pipeline. Now, of course, this could be even more valuable now that we've re-secured full rights to Vatadustat, in the U.S. and Europe.

John Butler: And with that, let me pass it over to Steve to provide more details on the study.

Steve Burke: Thanks, John.

Steve Burke: In 2020, we made the decision to support the study as we believed stabilizing HIF with Vatadustat could lessen the severity of lung injury in patients with COVID-19. In animal models of acute lung injury, knocking out or inhibiting HIF worsens lung injury, and conversely, stabilizing HIF with prolohydroxylase inhibitors like Vatadustat lessens the severity of lung injury. That thinking was shared by the team at UTHealth Houston, including Dr. Holger Elchig, Head, of Anesthesiology, who's published extensively on acute lung injury models and HIF stabilization.

Steve Burke: Dr. Elchig and Dr. Ben Bobrow, Head of Emergency Medicine, assembled an expert and committed, team across five hospitals in Houston and conducted the study under an investigator, IND after extensive consultation with FDA. VSTAT was a Phase II randomized double-blind placebo-controlled trial. The trial measured the proportion of patients who had scores of 6, 7, or 8 on the National, Institute of Allergy and Infectious Disease Ordinal Scale, or NIAID-OS, at day 7 and day, 14. Day 14 being the primary endpoint. 6 is defined as requiring non-invasive ventilation or high-flow oxygen devices.

Steve Burke: 7 is a requirement for invasive mechanical ventilation, or ECMO, and 8 is death. As outlined in our press release, at day 14, the proportion of subjects with a score of, 6, 7, or 8 were 13.3% for vatidustat versus 16.9% for placebo, with a relative risk of, 0.79 and 94% probability that vatidustat was superior to placebo. In a pre-specified analysis at day 7, the proportion of subjects with a score of 6, 7, or 8 were 25.4% for vatidustat versus 29.7% for placebo, with a relative risk of, 0.86 and 97% probability that vatidustat was superior to placebo.

32, 4% increase compared to Q1 2022, Auryxia net product revenue increased by five 4%.

License collaboration and other revenue was $73 5 million for the second quarter of 2022 compared to $20 million for Q2 2021.

Steve Burke: This means that the trial failed to meet its primary superiority threshold of greater than, 95% probability.

Steve Burke: However, a smaller proportion of subjects in the vatidustat group had a score of 6, 7, or 8, demonstrating 94% probability of benefit at day 14 and 97% probability of benefit at day 7.

Steve Burke: These data are encouraging, particularly for ARDS more broadly, since the mechanisms underlying, the benefit are not specific to COVID-19.

Steve Burke: We believe vatidustat has the potential to prevent the worsening of ARDS due to diverse, insults and are interested in further exploring vatidustat in this acute care setting.

The increase in revenue reflects the payment of $55 million that otsuka paid to <unk> in July under the terms of our termination and settlement agreement.

Steve Burke: We're working closely with UTHealth Houston to publish the data, and we will work to determine, next steps for this exciting program.

Steve Burke: And now I'll hand it over to Dave for a financial overview.

Additionally, the company recognized $15 5 billion related to previously deferred revenue and $9 $6 million noncash consideration related to the obligations to complete certain clinical activities.

Regarding expenses.

Cost of goods sold was $18 6 million for the second quarter of 2022 compared to $52 5 million in Q2 of 2021.

The decrease compared to the prior year was primarily due to a $33 million noncash charge related to an increase to the liability for excess purchase commitments during Q2 2021.

Research and development expenses were $26 million for the second quarter of 2022 compared to $37 2 million.

The second quarter of 2021, the decrease was primarily due to lower headcount related costs as a result of the reduction enforce and decreased cost of clinical studies.

Selling general and administrative expenses were $32 $8 million for the second quarter of 2022 compared to $41 7 million for the second quarter of 2021.

The decrease was primarily due to decreased head count related costs related to the reduction in force and lower marketing expense as a result of discontinuing launch preparations.

Dave Spellman: Thank you, Steve.

In connection with our previously announced workforce reductions this quarter includes a $14 5 million restructuring charge.

Dave Spellman: And good afternoon, everyone.

Merrily related to onetime termination benefits and contractual termination benefits.

Dave Spellman: The backbone of our long-term plan is the continued growth of Erixia. As John, mentioned, our team demonstrated again this quarter that we are focused on increasing net product revenue from Erixia.

Regarding our cash position, we ended the second quarter with $143 $9 million, which does not include the approximate $55 million cash that was collected from otsuka in July and does not reflect the TBA is approximately $25 million repaid repayment made to pharma Collyn last month.

Given our cash position if a Brexit revenues continue to grow and we are successful in implementing our cost reduction measures. We believe our existing cash resources as well as cash from operations. We will fund the company's current operating plan for the next several years.

Dave Spellman: Our expense management can be seen this quarter with a significant decrease in operating expenses, even before we realize the full savings of our restructuring, which we believe will continue to impact our operating expenses this year. We decreased cost significantly versus the first quarter across almost all areas of our business.

To summarize we believe the progress we've made is significant and we continue to implement our plan.

As our team prepares for a potential European approval, the potential revenues through royalties or other partner and the value. We may realize would be an upside to the plan articulated today.

Alexia revenues continue to grow and we have several exciting opportunities to build on and we look forward to sharing more in the quarters to come.

With that we'll open the line for questions operator.

Okay.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pose a moment to assemble our roster.

Okay.

Your first question comes from Allison backfill from Piper Sandler. Please go ahead.

Hi, good afternoon, everyone. Thanks for taking my question and.

Congrats on all the progress this quarter.

I guess two questions from me the first one is on Auryxia.

Just based on the trends you're seeing in your expense reduction measures could you just help us understand all access pass.

Cash flow positivity between our next aloe or I guess, even beyond <unk>.

Garrett.

Chocolate market goes at a similar pace to off Sevelamer and then just thinking about future trends I guess should we expect that price per pill.

Ah Cowen John .

This year.

Steve.

Micro market. So is it your sense that that volume growth could be a driver for 2023 and thereafter.

So then my second question just on FDA interactions on value stack I know, we're waiting for minutes could.

Could you just clarify how the outcome of that meeting will.

It will be communicated is that something we should look for on your Q3 call where can we get an update.

On the outcome of that meeting and your anticipated next steps before the Q3 earnings. Thanks.

Hello, Thanks, very much for your questions I think I got them.

If we missed anything just let us know, but I'll start with the second one first on the FDA.

Again as in the past, we said, we don't give I'm not going to give a play by play on FDA interactions and I think that's the way, we'll we will we'll handle this as well of course, if something material comes from.

For many interaction, we'll we'll disclose that as appropriate otherwise.

Give updates as the process moves forward as appropriate.

And so on on Auryxia.

So as as we've pointed out we were happy with the.

The growth in the revenue that we're seeing for Auryxia now, particularly as you think about Q2 versus Q2.

That growth is largely driven by price.

Again, as we've talked about in the past the phosphate binder market has continued to contract which.

Very much driven by by Covid, which is still impacting the dialysis population.

Keep expecting to see more of a rebound, but then you also were dealing with the staffing issues at the dialysis centers, which I think is contributing to some of the the.

The challenges in dialysis, but given the contracting strategy that we've talked about over the last.

A couple of quarters I guess.

That strategy really is paying off on the price side. So we expect to see.

That continue as we as we've guided this year and we'll see how the binder market continues to develop as we think about that path to profitability, we're not thinking about dramatic increases in volume.

For the product to get there, we do think that there's opportunity to grow on the volume side.

But that's not.

What kind of putting unrealistic targets, we think within our.

Within our guidance and again I mean.

Given those dynamics of the binder market, we continue to just encourage some level of caution.

We're all continuing to look at how that's going to progress.

But ultimately the path to profitability is certainly driven by continuing to deliver on the top line, but I think Dave pointed out. This is the first quarter, where we're really looking to we really started working on decreasing our operating expenses and I think the team did a phenomenal job of really delivering on that but our expectation is that.

There is room still to continue down that path and I think when you combine those.

The continued revenue development on the topline and continued.

Control of our expenses really thoughtful reinvestment in the pipeline.

That's what allows us to deliver the cash guidance, we talked about today on a debut of anything to add.

No I think that.

Hello there.

And as we've talked about before OE, even now we've talked about low <unk>.

But we do believe there's opportunities for auryxia beyond low when you look at that.

Sevelamer as a.

As a comp.

Given the nature of the phosphate binder market and we're all looking at how.

How the 2025 inclusion of the binders within the bundle, which CMS did clarify in their proposed rule a couple of weeks ago.

We think that creates opportunity for us as well, but we'll see how that how that develops in the final rule et cetera, but.

Hello, This is <unk>.

Meaningful, but we do think that there's opportunities for <unk> beyond.

Okay.

Excellent. Thank you.

Thanks Ali.

Thank you once again, if you wish to ask a question. Please press Star then one.

Once again to any further questions to Richardson.

Thank you there are no further questions at this time I would like to turn the conference back over to CEO , John Butler for any closing remarks.

Dave Spellman: It is a major focus of the team.

Thanks, Harmony and thanks, everyone for joining us today on our second quarter was marked by what I believe to be a quick and impactful progress to reset and align with our new strategic pillars again I'm extremely appreciative of the work our team has done to drive revenue and reduce operating costs.

Dave Spellman: As our revenues grow and our expense base is, covered, we will, in a measured way, reinvest in our pipeline.

Dave Spellman: That pipeline prioritization and specific allocations of funds into our operating plan will come over the coming months and quarters.

Dave Spellman: Subsequent to the quarter ending, we collected the $55 million cash settlement from our former partner, Otsuka, which was paid following the termination of the collaboration, agreements. We proceeded to use $25 million of those funds to pay down a portion of our debt with Pharmacon, which we expect will save us over 30% of our expected interest expense over the term of the loan.

Dave Spellman: I will now turn to some important selected financial results for the quarter, beginning with revenue. Total revenue was $126.8 million for the second quarter of 2022, compared to $52.9 million for the second quarter of 2021.

Dave Spellman: As John mentioned, we're pleased to report revenue growth for Erixia, where net product revenue was $43.7 million for the second quarter of 2022, compared with $33 million for Q2 2021, a 32.4% increase. Compared to Q1 2022, Erixia net product revenue increased by 5.4%.

Dave Spellman: Licensed collaboration and other revenue was $73.5 million for the second quarter of 2022, compared to $20 million for Q2 2021. The increase in revenue reflects the payment of $55 million that Otsuka, paid to Akibia in July, under the terms of our termination and settlement agreement.

Dave Spellman: In addition, the company recognized $15.5 million related to previously deferred revenue, and $9.6 million of non-cash consideration related to Otsuka's obligations to complete certain clinical activities.

Dave Spellman: Regarding expenses, cost of goods sold was $18.6 million for the second quarter, of 2022, compared to $52.5 million in Q2 of 2021. The decrease compared to the prior year was primarily due to a $30.3 million non-cash charge, related to an increase to the liability for excess purchase commitments during Q2 2021.

Dave Spellman: Research and development expenses were $26 million for the second, quarter of 2022, compared to $37.2 million for the second quarter of 2021. The decrease was primarily due to lower headcount related costs, as a result of the reduction in force and decreased costs of clinical studies.

Dave Spellman: Selling, general, and administrative expenses were $32.8 million for the second quarter of 2022, compared to $41.7 million for the second quarter of 2021. The decrease was primarily due to decreased headcount related costs, related to the reduction in force, and lower marketing expense, as a result of discontinuing launch preparation.

That work is critical as we make thoughtful decisions about how to move the company forward and deliver value.

Dave Spellman: In connection with our previously announced workforce reductions, this quarter includes, a $14.5 million restructuring charge, primarily related to one-time termination benefits and contractual termination benefits.

Dave Spellman: Regarding our cash position, we ended the second quarter with $143.9 million, which, does not include the approximate $55 million cash that was collected from Otuka in July and does not reflect Akebia's approximately $25 million repayment made to Pharmacon last month. Given our cash position, if Erixia revenues continue to grow and we are successful in, implementing our cost reduction measures, we believe our existing cash resources, as well as cash from operations, will fund the company's current operating plan for the next several years.

While much has changed since April our commitment to patients remains that's why I'm, especially excited about opportunities in the quarters ahead, including the potential approval provided do stat.

Dave Spellman: To summarize, we believe the progress we've made is significant and we continue to implement, our plan. As our team prepares for a potential European approval, the potential revenues through royalties, or other partnering value we may realize would be an upside to the plan articulated today.

Dave Spellman: Erixia revenues continue to grow and we have several exciting opportunities to build on.

Europe , and we look forward to continuing to update you in the future.

Dave Spellman: We look forward to sharing more in the quarters to come.

Unknown Speaker: With that, we'll open the line for questions.

Thank you.

Okay.

Unknown Speaker: Operator?

Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Yes.

Okay.

Yes.

Yeah.

Yes.

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Unknown Speaker: Thank you.

Unknown Speaker: We will now begin the question and answer session.

Unknown Speaker: To ask your question, you may press star, then one on your telephone keypad.

Right.

Unknown Speaker: If you are using a speakerphone, please pick up your handset before pressing the keys.

Unknown Speaker: To withdraw your question, please press star, then two.

Unknown Speaker: At this time, we'll pause a moment to assemble our roster.

Unknown Speaker: Your first question comes from Alison Bratzel from Piper Samba.

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Yes.

Yeah.

Yes.

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Allison Bratzel: Please go ahead.

Yes.

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Allison Bratzel: Hi.

Allison Bratzel: Good afternoon, everyone.

Allison Bratzel: Thanks for taking my question and congrats on all the progress this quarter.

Allison Bratzel: I guess two questions from me.

Yes.

Allison Bratzel: The first one is on Erixia.

Allison Bratzel: Just based on the trends you're seeing and your expense reduction measures, could you, just help us understand Erixia's path to cash flow positivity between now and its LOE, or, I guess even beyond its LOE, if genericization of the market goes at a similar pace to Sovellamer?

Yes.

Allison Bratzel: And then just thinking about future trends, I guess, should we expect that improved price, per pill will be much of a tailwind beyond this year?

Allison Bratzel: You had mentioned stabilization of the phosphate binder market.

Allison Bratzel: So is it your sense that volume growth could be a driver for 2023 and thereafter?

Allison Bratzel: So then my second question, just on FDA interactions on Vatadustat, I know we're waiting for minutes.

John Butler: I think I've got them.

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Allison Bratzel: Could you just clarify how the outcome of the meeting will be communicated?

John Butler: If we miss anything, just let us know.

Allison Bratzel: Is that something we should look for on your Q3 call, or can we get an update on the outcome, of that meeting and your anticipated next steps before Q3 earnings?

John Butler: But I'll start with the second one first, on the FDA.

Allison Bratzel: Thanks.

John Butler: Again, as in the past, we said we're not going to give play-by-play on FDA interactions, and I think that's the way we'll handle this as well.

John Butler: Haley, thanks very much for your questions.

John Butler: Of course, if something material comes from any interaction, we'll disclose that as appropriate.

John Butler: Otherwise, we'll kind of give updates as the process moves forward as appropriate.

John Butler: So, on Erixia.

John Butler: So, you know, as we've pointed out, we're happy with the growth in the revenue, that we're seeing for Erixia now, particularly as we think about Q2 versus Q2. That growth is largely driven by price.

John Butler: Again, you know, as we've talked about in the past, the phosphate binder market, you know, has continued to contract, which, you know, very much driven by COVID, which is still impacting the dialysis population.

John Butler: You know, keep expecting to see more of a rebound, but then you also are dealing with these staffing issues at the dialysis centers, you know, which I think is contributing to some of the challenges in dialysis.

Yes.

John Butler: But given the contracting strategy that we've talked about, you know, over the last couple of quarters, I guess, that strategy really is paying off on the price side.

John Butler: So, you know, we expect to see, you know, that continue as we've guided this year.

Yes.

John Butler: And, you know, we'll see how the binder market continues to develop.

John Butler: You know, as we think about that path to profitability, we're not thinking about dramatic increases in volume for the product to get there. We do think that there's opportunity to grow on the volume side, but that's not, you know, we're not kind of putting unrealistic targets, we think, within our, you know, within our guidance.

John Butler: And again, I mean, given those dynamics of the binder market, you know, we continue to just encourage, you know, some level of caution and, you know, we're all continuing to look at how that's going to progress.

John Butler: But ultimately, the path to profitability is certainly driven by continuing to deliver on the top line.

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John Butler: But I think Dave pointed out, you know, this is the first quarter where we're really looking to, we really started working on decreasing our operating expenses. And I think the team did a phenomenal job of really delivering on that.

John Butler: But our expectation is that there is room still to continue down that path.

John Butler: And I think when you combine those, the continued revenue development on the top line and continued control of our expenses, really thoughtful reinvestment in the pipeline, that's what allows us to deliver the cash guidance we talked about today.

John Butler: Dave, do you have anything to add to that?

Dave Spellman: No, I think that you hit on it.

Yes.

Dave Spellman: And, you know, as we've talked about before, Allie, even, you know, we've talked about, LOE.

Dave Spellman: But, you know, we do believe there's opportunities for Erixia beyond LOE when you look at the Sovelimer as a comp, you know, given the nature of the phosphate binder market.

Okay.

Dave Spellman: And we're all looking at how, you know, how the 2025 inclusion of the binders within the bundle, which CMS, you know, did clarify in their proposed rule a couple of weeks ago.

Dave Spellman: We think that creates opportunity for us as well.

Dave Spellman: But we'll see how that how that develops in the final rule, et cetera.

Dave Spellman: But, you know, LOE is meaningful, but, you know, we do think that there's opportunities, for Erixia beyond.

Yeah.

John Butler: Excellent, thank you.

Okay.

John Butler: Thanks, Ali.

John Butler: Thank you.

Okay.

Unknown Speaker: Once again, if you wish to ask a question, please press star, then one.

Yes.

Unknown Speaker: We'll pause again for any further questions to register.

Unknown Speaker: Thank you.

Unknown Speaker: There are no further questions at this time.

John Butler: I would like to turn the conference back over to your CEO, John Butler, for any closing remarks.

John Butler: Thanks, Harmony.

John Butler: And thanks, everyone, for joining us today.

John Butler: Our second quarter was marked by what I believe to be a quick and impactful progress to reset and align with our new strategic pillars.

John Butler: Again, I'm extremely appreciative of the work our team has done to drive revenue and reduce operating costs.

Okay.

John Butler: That work is critical as we make thoughtful decisions about how to move the company forward and deliver value.

John Butler: While much has changed since April, our commitment to patience remains.

John Butler: That's why I'm especially excited about opportunities in the quarters ahead, including the potential approval for Vatadustat in Europe.

John Butler: And we look forward to continuing to update you in the future.

John Butler: Thank you.

Unknown Speaker: Thank you.

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Unknown Speaker: A.D.O.S.

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Q2 2022 Akebia Therapeutics Inc Earnings Call

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