Akebia Therapeutics Q2 2024 Earnings Call Transcript

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August 8, 2024

There are 7 speakers on the call.

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.

Operator

After the speakers' remarks, there will be a question and answer I would now like to turn the call over to Mercedes Carrasco, Senior Director, Investor Relations. Thank you. Please go ahead.

Speaker 1

Thank you, and welcome to Akebia's Q2 2024 Financial Results and Business Update Conference Call. Please note that a press release was issued earlier today, Thursday, August 8, detailing our Q2 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 Eric Ostrowski, Chief Financial and Business Officer. I'd like to remind everyone that this call includes forward looking statements.

Speaker 1

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.

Speaker 2

Thanks, Mercedes, and thanks everyone for joining us today. Since the VASIO FDA approval in late March, virtually the entire company has been diligently focused on its commercial launch. Nick is going to walk you through the details shortly, but the punch line 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 VAPZIO. As recently announced, we filed our TDAPA application in June and are now about 5 months away from making VASIO available in the market. Our entire organization is incredibly energized by this upcoming event.

Speaker 2

We're encouraged by the strong reception for VAPZIO from the medical community. The excitement around VAPZIO 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 Vapacio 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 VASIO clinical protocols in place ahead of TDAPA.

Speaker 2

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 3 New England Journal publications as well as the additional data we've generated to support healthcare 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.

Speaker 2

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 Apsio beyond these patient groups after gaining experience with the product and seeing the benefits of VASIO for these initial patients. We're also very focused on the longer term growth for VASIO. Generating new data to potentially expand the benefits of the product is critical. A key component of our strategy is to continue to generate this clinical data in collaboration with dialysis organizations.

Speaker 2

We're deeply engaged with DOs in study design and believe these studies may meaningfully contribute to continued growth of VASSIO post TDAPA in the dialysis population. We need to continue to generate important clinical data for VASIO 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 market over 500,000 patients and approximately $1,000,000,000 today.

Speaker 2

New data along with the positive experience over the Tdapa period will be central to meeting our goal. The market for VASIO and dialysis is significant, but let's also talk about potential expansion. Circling back to physician interest in VASIO, an Physicians see a clear 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 VASIO label expansion for non dialysis CKD patients.

Speaker 2

As we've 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.

Speaker 3

Thanks, John, and thanks for those joining us on the call today. Our VASIO launch activities continue to ramp and evolve, and we are making significant progress across all of our key initiatives targeting both the high vision makers as well as the doctors who are directly involved in patient care. The feedback we are getting on VASIO 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 EUSAs 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.

Speaker 3

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 a change in distribution channels.

Speaker 3

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 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.

Speaker 3

We have leveraged Auryxia contracting discussion to simultaneously engage in Vatsio 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 VASIO 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 VASIO. 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.

Speaker 3

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

Speaker 2

And now I'd like to introduce you to Eric Ostrowski, who joined Akebia in June as our Chief Financial Officer and Chief Business Officer. Eric 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. Eric, over to you to talk about our financial position.

Speaker 4

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 VASIO product launch and established revenue generating business in Auryxia and 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 hardworking team with such strong knowledge of and relationships in the renal space.

Speaker 4

Now let's review the quarterly financials. Total revenue was $43,600,000 in the Q2 of 2024. Of this amount, dollars 41,200,000 was derived from Auryxia net product revenue as compared to $42,200,000 of Auryxia net product revenue during the second quarter of 2023. The remainder of our revenues during the quarter were derived from license, collaboration and other revenues, which totaled $2,400,000 as compared to $14,100,000 in the Q2 of 2023. Of note, last year's Q2 licensing collaboration revenues included a one time $10,000,000 upfront payment related to our Medici license agreement.

Speaker 4

Cost of goods sold was $17,000,000 in the Q2 of 20 24 compared to $17,300,000 in the Q2 of 2023. Tevia continues to carry a non cash intangible amortization charge of $9,000,000 per quarter in COGS through the Q4 of 2024. Research and development expenses were $7,600,000 in the Q2 of 2024 compared to $20,200,000 in the Q2 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 $26,900,000 in the Q2 of 2024 compared to $27,000,000 in the Q2 of 2023.

Speaker 4

And lastly, net loss was $8,600,000 in the second quarter of 2024 compared to a net loss of $11,200,000 in the Q2 of 2023. Cash and cash equivalents as of June 30, 2024 were $39,500,000 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. And your first question comes from the line of Julian Harrison with BTIG. Thank you. Please go ahead.

Speaker 5

Thank you for taking my question and congrats on all the progress. I'm sorry if I missed it, but 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 VAP SCIO launch expected January next year?

Speaker 2

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

Speaker 3

Absolutely. And so Julien, 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.

Speaker 2

I think the bigger change that we had was adding to the medical affairs group. We had skinny 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.

Speaker 2

We have product in place. And Eric maybe you want to kind of

Speaker 4

talk to that? Yes. No, we do. We have projects in place. As has been discussed on prior calls, we do have some it will be effectively 0 cost inventory because it was previously expensed to R and D.

Speaker 4

So yes, just to reiterate, we're well positioned from an inventory perspective for the launch. Yes.

Speaker 2

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 in just from the perspective that you 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.

Speaker 5

Okay, great. Thank you. 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 v4?

Speaker 3

Yes. No, it's a great question. It's frankly, we were already engaging with them around Auryxia. If you remember, some of the catalysts 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.

Speaker 3

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.

Speaker 2

I mean, Nick talked about us becoming a partner. I think we've considered ourselves a partner for some time. But when you 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 you said, they are now purchasing the phosphate binder, I mean, managing that with their patients, a lot of work in that. And they really want to work with companies as closely as possible on a lot of operational aspects, not just contractual aspects. And that's where it's one of those reasons why it's so powerful to have both products that we're talking to them about.

Speaker 2

It just increases the partnership between Akebia and dialysis providers on some really core areas of their business.

Speaker 3

The only thing I'll probably add to that is our history in dialysis allows those conversations to be one with a knowledge of their operational concerns, right. If you don't 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. Yes.

Speaker 2

And we've been saying for years how important knowing the dialysis business is. And I mean, I think Eric 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 question, Julian.

Operator

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

Operator

Please go ahead.

Speaker 6

Hi, good morning. Thanks for taking my questions and congrats on the progress towards the launch next year. Couple of questions for me. First on the WACC price that you announced, 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?

Speaker 6

Secondly, with Medici, 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? Thanks so much.

Speaker 2

So Eric, do you want to just handle the second one?

Speaker 4

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.

Speaker 2

Yes, they just started. So we look forward to seeing that progress. I don't know if we have Nick, do you know any other countries you're expecting to

Speaker 3

I know there's Netherlands just went. Netherlands just went. There are others for Some of the other Nordic countries will be in the balance of the year.

Speaker 2

Yes. I mean 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. But the smaller countries like Netherlands and now the Nordic countries will come on sooner. Nick, you want to walk through the thoughts around WACC pricing?

Speaker 3

Yes. And so really WACC pricing, couple of different things is when we thought about it is 1, what price would allow for dialysis organizations to be successful during the TAPA period. And so how do you set up your contract? What is the WACC prices, your reimbursement for the 1st several quarters of TDAPA and allowing TDAPA, which really supports innovative products being utilized, that WACC price and how do we make it a price that makes our dialysis organizations and Akebia successful was a consideration. 2, how do we make sure we manage that price over the TAPA period, so that post TAPA when we talk about ESA like pricing, we can manage ES like pricing to make the product sustainable post TDAPA.

Speaker 3

Remember, it's a $1,000,000,000 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 non dialysis population. Less than 25% of patients today in the non dialysis space are on an anemia management product 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 Vazio in the non dialysis space is very, very high.

Speaker 3

And therefore, making sure we're pricing for that dynamic and that innovative value in that subset of population is important as well.

Speaker 2

Yes. 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 non dialysis patient population. I hope we struck the balance here. Particularly as Nick pointed out that WACC reimbursement for the 1st few quarters of TDAPA is critical because there's some real operational costs for the dialysis providers to add a new product to put protocols in place, storage, etcetera.

Speaker 2

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 and had a lot of conversations with folks before making that decision. And as Nick pointed out in his remarks, I think we did hit the right balance for the dialysis population.

Speaker 2

Folks are reacting quite well and are very willing to contract and put the product as part

Speaker 3

of their formulary. 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 WACC 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, 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.

Speaker 2

And it really creates an environment where physicians can try VAPS it, right. I mean, as he 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.

Speaker 2

We're now going to be targeting the entire dialysis market and people will be open to that. And that's a $1,000,000,000 market today. So that's a significant opportunity. And then hopefully as shortly as possible thereafter, we introduce the product into the non dialysis market with a label on non dialysis and then you'll start to have patients starting dialysis on VASIO. So this is how you become standard of care.

Speaker 2

It's a process. First step in dialysis is you've got to have that contract input in place that allows physicians to access the product and that WACC pricing decision was very, very central to that to making that possible.

Speaker 6

Very helpful. Thanks so much.

Speaker 4

Thanks, Ed.

Operator

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

Speaker 2

Thanks, Andrea. We remain extremely energized by our contracting process and the upcoming VASIO market availability, which is now only a few months away. We're on target with all of our internal timelines 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.

Speaker 2

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.

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Key Takeaways

  • Since FDA approval of VASIO in late March, Akebia has focused on driving prescriber demand, contracting with dialysis organizations and advancing clinical protocols, with the TDAPA application filed in June and market availability expected in January 2025.
  • Akebia has engaged dialysis providers representing approximately 90% of patient lives, leveraging combined contracting for VASIO and Auryxia to streamline operations and complete agreements by January.
  • VASIO’s wholesale acquisition cost is set at approximately $15,500 per patient per year, with off-invoice discounts and volume-based rebates to support providers during TDAPA and sustainable ESA-like pricing afterward.
  • The company is collaborating with dialysis organizations to generate additional clinical data to support label expansion—including non-dialysis CKD patients—and plans to share a detailed update by year-end.
  • In Q2 2024, total revenue was $43.6 million (including $41.2 million from Auryxia), net loss improved to $8.6 million, and the cash position of $39.5 million provides at least a two-year runway.
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Earnings Conference Call
Akebia Therapeutics Q2 2024
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