Q3 2022 Akebia Therapeutics Inc Earnings Call
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Good day, and thank you for standing by.
Welcome to the <unk> third quarter 2022 financial results Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your first speaker today, Mercedes Carrasco Senior director of corporate Communications. Please go ahead.
Thank you. Thank you and welcome to <unk> third quarter 2022 financial results and business update conference call. Please note that our press release was issued earlier today Thursday November 3rd detailing our third quarter financial results and that release is available on the investors section.
On 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 Dave Spellman, <unk> Chief Financial Officer.
Before we begin I would like to remind everyone that this call includes forward looking statements. Each forward looking statements on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements.
Additionally, information describing these risks is included in the financial results press release that we issued on November <unk> as well 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 these statements.
That I would like to introduce our CEO John Butler.
Thanks, Mercedes and thank you all for joining us this afternoon.
Since our last update our team has been laser focused on work that aligns to TBS three strategic pillars.
First we're working to drive Auryxia revenue, while managing costs in this quarter. We were pleased to again report an increase in net revenue for Auryxia over the third quarter of 2021.
Secondly, we continue to support that as you start globally.
I'll provide more color on the regulatory review processes for a better <unk> as a treatment for anemia due to <unk>.
Our third pillar is to thoughtfully invest in our pipeline.
I'm pleased with the progress we've made with respect to our pipeline, particularly as it pertains to our work in the area of his space science, but today I'll just say a few words about our next steps in continuing to explore value <unk> as a treatment for acute respiratory distress syndrome.
We recognize that we won't have the opportunity to invest in that pipeline and build that long term value unless we continue to drive financial stability today.
Now Dave will share more specific details about the financial results, but there are two important headlines in Q3.
First as I previously noted we continue to see a year over year increase in Auryxia net product revenue, which is driven by an increase in net price per pill.
Second our team has and is continuing to work to bring down operating costs. We reported a decrease in operating expenses compared to Q2, 'twenty two as well as versus the prior year quarter.
Driving auryxia revenue and managing expenses positions <unk> to make strategic decisions about our future.
As we think about potential catalysts to add value. Our most immediate is clearly you've added new staff.
New timeline for an MAA, we're targeting a potential approval by the end of next quarter.
We're eager to bring that adduced at the patients impacted by anemia due to chronic kidney disease.
While our team is leading the regulatory process, we do not expect to commercialize rather do sat in Europe without a partner.
Our process for identifying a partner for Europe is well underway.
In the U S. We recently submitted a formal dispute resolution request referred to as an FTE RR with the FDA to appeal the issuance of the Crlf of that adduced at in March of 2022.
FTIR focuses on the favorable balance of the benefits and risks of that is used that for the treatment of anemia due to C. K D in adult patients on dialysis.
We've always believed that <unk> that delivered a favorable balance of benefits and risks as a treatment for anaemia due to C. K D and continue to believe in the unmet need <unk>.
Clinicians often publicly discuss the unmet need as we heard again late last month during a cardiovascular and renal drug Advisory Committee meeting.
And Moreover, patients continue to share their experiences related to the burden of the disease.
As we reported last quarter, we completed the end of review conference, which was beneficial to refine the issues for the dispute.
Again, both the and the review conference and the FDR narrowed on the dialysis patient population and the FTIR focuses on the benefits and risks of that or do that in light of safety concerns expressed by the FDA in the sea RL related to the right of adjudicated thromboembolic events driven by.
Vascular access thrombosis prevent adduced that compared to the active comparator and the risk of drug induced liver injuries.
Based on the typical FTIR process Akiba expects to receive response to its submission from the FDA by the end of this year and of course will share that outcome with you.
It will be important for our long term planning to have clarity on a potential path towards approval for <unk> in the U S.
In the meantime, we continued to explore other potential opportunities for the product that we believe could bring significant value.
Recall in our last update we reported data related to that or do that as a treatment for a R. D S.
<unk> is the condition with few therapeutic options approved for intervention in a mortality rate for serious <unk> that can be over 40%. According to multiple studies.
We were encouraged by the data from a phase two investigators sponsored clinical study evaluating that would use that for the prevention and treatment of <unk> and subjects with COVID-19 and hypoxemia.
Since that time, we've continued discussions on the design and timing of starting a follow on placebo controlled study abroad Args's population.
We are working closely with Yuichi health Houston and the team that conducted the phase two study and incorporating FDA feedback on a protocol into the design.
As I've said, our financial stability as critical as we invest thoughtfully in our pipeline to that and I would like to compliment our team for their ongoing resilience. The team is committed to the three pillars that will drive our future. They are working to delivered near term value through a <unk> as well as create long term value opportunities for it.
<unk>.
And with that I'll turn to Dave to provide more details on our financial picture.
Thank you John and good afternoon, everyone.
Our cash management objectives remain clear manage the company with existing cash resources and ongoing cash from operations.
We've continued a concerted effort to maximize net product revenue reduce operating expenses and strengthen our balance sheet.
Before I dive into the financials I wanted to address are are NASDAQ listing status, while John mentioned that we continue to identify ways to add long term value. We are working through various options to manage our NASDAQ listing we have applied to transfer the list of our common stock to the NASDAQ capital market and as usual will provide material updates.
Available.
Beginning with a <unk> product revenue, we reported $42.2 million in the third quarter of 2022 compared to $36 $8 million in the third quarter of 2021, $14 90 per cent increase.
Total revenue was $49 million in the third quarter of 2022 compared to $48.8 million in the third quarter of 2021.
Our commercial payer strategy continues to deliver top line <unk> growth.
While year on year net product revenues up we did report a 3.3% decrease in that product revenue from the second quarter of 2022, driven by lower inventories at our distribution partners as well as a continued contraction in the binder market.
To expand on that point I will note that the phosphate binder market has declined 15% since the start of COVID-19, including nearly 6% from Q3 2021 Q3 of 2022.
Further you likely have heard from the earnings cause of the country's biggest dialysis providers at the.
The overall dialysis market is challenging right now with the Covid impact and staff and challenges, having a real impact on their operations.
It is still a very real challenge to everyone in the dialysis community.
We have factor this into our long term forecasts and we are onshore when the binder market will recover or even begin to grow again.
But again because of the contracted.
Because of the contracted and payer strategies previously executed we still believe net product revenues will continue to grow through elderly.
But how some headwinds with these real market related challenges.
As such we remain in a position to affirm our 2022 net product guidance of auryxia of $170 million to $175 million.
Cost of goods sold was 37 $9 million in the third quarter of 2022 compared to $15.9 million in the third quarter of 2021 the.
The increase compared to the prior year period was primarily due to a $13.2 million non-cash charge related to an increase in the liability for excess purchase commitments during the third quarter of 2022.
$6 million non-cash benefit related to a decrease in the liability for access purchase commitments in the third quarter of 2021, which did not reoccur.
License collaboration and other revenue was $6 $7 million for the third quarter of 2022 compared to $12 million for the third quarter of 2021. The decrease was primarily related to a reduction in the revenue from the termination of the U S and international collaboration agreements between the television and Otsuka in the second quarter of 2022.
Which was a one time event.
Just as we are committed to driving Auryxia revenue or cross functional teams have worked to reduce spending, particularly in the areas of SG&A expenses.
Our team is committed to running the company with the cash we have on hand, plus plus future cash flows from Auryxia sales.
In the event that we do not obtain any valid as that approvals you should see the downward trend in operating expenses continue.
Research and development expenses or 2007 $4 million in the third quarter of 2022 compared to $45 million in the third quarter of 2021.
The decrease compared to prior year period was primarily due to decrease headcount related costs and the reduction in force.
As well as decrease clinical trial costs.
<unk> general and administrative expenses were $39 million in the third quarter of 2022 compared to $46 $4 million in the third quarter of 2021 the.
Decreased compared to prior year period was primarily due to decreased head count related costs as a as a result in the reduction in force lower one time legal costs and lower marketing expenses.
Last quarter, we reported or restructure that agreement with Pharmacon.
Which is delivering real savings on the interest expense line inclusive of our first principal repayment our debt outstanding with Pharmacon is approximately $67 million at the end of the quarter.
Cash and cash equivalents as of September 30th 2022, or $144 $8 million.
We believe cash resources will be sufficient to fund our current operating plan for at least the next 12 months.
Our operating plan includes assumptions pertaining to revenue growth and cost avoidance measures and the reduction of overhead costs, resulting from the plan amendment of contractual agreements with with certain supply partners and the reduction of operating expenses.
We have not factor and upside related to the potential regulatory approval of that or do that or our ability to generate additional value from vantages stab through partnerships and other transactions.
Such potential catalyst could further extend our cash runway.
With that we will open the line for questions operator.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need a quest star one one on your telephone and with your your name to be announced please stand by while we compile acuity roster.
Our first question comes from the line of Alison Russell.
P S.
<unk> excuse me from PSE forgive me your.
Your lines open.
Hi, guys.
Thanks for that Okay and for taking my questions.
So the first thing.
I mean like if you have that that now my ear to the restructuring can you just help us understand the library and also the timing for a recent cashwell positivity.
That asshat.
And just kinda remind that's what gives you confidence.
I'll have a significant post alley revenue tail and kind of related to that how do you see the.
Commercial opportunity evolving.
Fingers are attitude to find all and then I have a follow up on that.
Great. Okay. Thanks, so much for further questions.
So auryxia again.
They've kind of mentioned that the thing that's that's really been surprising has been the binder market hasn't rebounded and you look you listen to it was.
The big dialysis providers calls and.
I've been kind of waiting for you know, we're all out of Covid right and we're just not in the dialysis population you look at <unk> data and you see.
This this unbelievable, 40% mortality rate for dialysis patients and so the dialysis community is still dealing with COVID-19 on a regular basis. So that's the wild card here.
Since 1991 or whenever I've been in the business.
The binder market's grown every quarter. So we've got that as a backdrop, we're not sure when it when it comes back.
But as Dave Dave referenced the key driver for us even with that backdrop is that we have been able to adjust our contracting strategy moving forward.
And that's allowed us to even more flat.
Sort of volume market has allowed us to continue to see growth and we think that will allow us to continue to see growth through.
<unk>.
And so we're not.
As we think about growing the product we're not we're being more cautious about what you can do from a volume perspective, just because we don't really know when the market is going to.
To rebound yet we still can drive.
Revenue increases because of the strategy that we've put in place so.
That.
That certainly gives us confidence.
<unk> we.
We really.
Believe that there is an opportunity beyond.
Beyond exclusivity just using sevelamer is kind of the perfect comp where there was.
Loss of excellence exclusivity before a number of years post because of the kinds of volumes that generic manufacturers have to produce.
In the market there.
There is an opportunity for continued volume growth now it will be.
A declining revenue, but you know the way you think of people always talk about about.
Revenue cliffs after Ella we say this is more of a revenue slope.
Declining slope overtime now the other wildcard you references the.
The adding of the binders to the bundle.
CMS put out a final rule again, confirming that there'll be a TDAP a period of at least two years for.
For the binders going into the bundle so that would start in January of 25, or even recall Eloise is March of 25. So you have the opportunity to contract directly.
And more volume we have patients who were on free goods now they all would be part of of paying patients. So so there are a number of opportunities still clearly seeing how that's going to play out over the next couple of believers.
But we think it's a significant opportunity for us beyond just loss of exclusivity.
I think that was that.
That covered was there anything else in there I think I got him I think is Allie said, she was talking about our ability to drive cash flow.
<unk> I think it really alley is just continued operating expense discipline and really focus on what can actually.
Continued to drive revenue and again as John said the contracting strategy.
Is a big part of it and from an investment perspective, that's more a <unk>.
Allocation of.
Manage markets team time, and so as we focus to spend.
Where of where we are in the life cycle. So the spend has reduced over the last couple of years.
And we will continue to it will continue to do so.
Excellent. Thanks, and then this.
This is my second question is I Iraqis at I guess now that you have.
At the meeting minutes in hand and.
And that that dispute resolution request.
Okay. It does seem to have a very narrow focus based on what you've described today could you kind of expand on unlucky you confidence that this process.
<unk>, Yeah, I can prove all.
Off of population are there any <unk>.
<unk> a drug that I've had a successful FTR outcome that that you look to as an analogue for back and then could you also just walk us through the kittens have updates.
Our milestones that that we can expect from the appeal process.
So at the end of the year and then after you received the response.
From the agency at your Act like what what comes next.
Yeah. Thanks for the question I have to say this is the first time I'm going through a formal dispute resolution myself. So I'm learning as as we go as well, but we have great support.
From folks who has been through it many times before and I think each.
Each dispute is unique in that kind of the things that you are dealing with are at very specific to the CRM and that's where we're focused.
We said from from the beginning that the dialysis data, we think clearly demonstrates that.
The product can be used safely I think the concerns.
That had been expressed in the CRM can be labelled around and we think being able to to have that conversation in this <unk>.
Process will be helpful. As I said you had the end of review conference that help narrow the.
Focus for the formal dispute resolution as well and now it's really focused on those two issues I mentioned thromboembolic events, driven by dialysis access thrombosis and.
The potential for daily Dioscin drug induced liver injury. So it's a very very focused.
F D R R.
And again, we feel strongly about the data and.
So we we certainly won't predict where.
Where the FDA will come down, but we are looking forward to going through the process.
As we said during the NDA process, we don't kind of we have constant contact.
With the agency. So we don't give play by play it. So I think you'll hear when we have a formal response from the agency, which again based on the timing should be by the end of the year you know of course, it's the holidays so that might.
Leap from a calendar perspective into the first.
A bit of January but.
Formally we expect to hear by the end of the year.
Got it thank you.
Thanks Alley.
And Sally.
Thank you.
Our next questions from the line of <unk> from H CW. Your line is open.
Hello, everyone does establish ZIP asking a couple of questions for thank.
Thank you for taking my questions.
Perhaps first question just following up on the F D R a process.
You are <unk>.
<unk> and the press release.
A response is expected by year at 2022.
Can you clarify what type of response should we expect that would it be a written response or with a b.
<unk> schedule at that time.
But yet you do expect it to be a formal.
Britain response.
Not that there won't be lots of potentially lots of other less formal communication during the process I think but.
Once we get a written response like you get a CRM, you'll get a response to that.
To that formal dispute resolution documents. So that's what we expect by the year end.
[noise] got it.
Perhaps.
That could be better.
In the us.
We saw some benefits and.
The first study.
What are your initial thoughts on the next study.
Specify their primary endpoint or other.
Points and also will this program going forward partner refer you to your health.
So who still working on what the.
And points of the next study will be I think that the endpoints.
The scale.
Scale that was used in the the.
COVID-19 study is was a very.
Solid endpoint and may well be what we we use going forward, but that's.
That is still under discussion I think what's important is that it will be in a broader.
Population.
The Covid population, we had in the study that UT perform then they performed a great study and executed a great study for us.
Was in our younger patient population elastic pay per patient population when you look at.
The.
The broader <unk> population.
Use me driven more by exact pneumonia and sepsis you see in this much higher mortality rate and we really think that and that's that scale you potentially can see that that treatment effect.
Come through so.
To be determined Brazil still working on that but.
But that's where we think it will probably go in that direction.
Oh, and so we're looking at performing the study.
With with you to help that has not been formally decided either they did such a great job in the first study but.
I wouldn't say that product has partnered with U T health, but we certainly would look forward to working with them on this next trial.
Potential.
Okay. Thank you so much for the clarification.
Look effortless kinda questions looking forward to a place on the F. B R.
Thanks, Simon says are we.
Thank you.
I would now like to turn it back to John for closing remarks.
Thanks, Chris and thank you all again for joining us this afternoon.
In the past a lot has changed for Akiba since April , but I believe we've been thoughtful and deliberate and our efforts to stabilize from a financial standpoint.
And in our work to plan for the future of a <unk>.
As we near the close of 2022, we anticipate that will have more clarity on regulatory processes and other initiatives that could enable us to potentially add long term value to the company. We look forward to providing updates as we can.
Everyone.
Thank you for participation in today's confidence. This does conclude the program you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial 911.
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The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Yeah.
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Okay.
Mmm.
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