Akebia Therapeutics, Inc. (AKBA) Earnings Call Transcript & Summary

All right. Welcome, everyone. Welcome to the last day of JPMorgan Healthcare Conference in 2024. My name is Cindy Xu, I'm an associate with the JPMorgan Healthcare Investment Banking team. It's my great pleasure today to introduce John Butler, the CEO of Akebia Therapeutics.

Cindy, thank you. Thank you very much. Thanks for the invitation to present today. I am fighting my voice a little bit after 3-plus days of -- kind of nonstop meetings, but it's quite heartening to have all of the investor community so interested in hearing the Akebia story. So we'll get through the next 40 minutes or so. But I just want to remind everyone, I'm going to be making forward-looking statements, so please refer to our SEC filings for more information. So I really am excited to talk to you about Akebia today and where we are. And I'm really proud to be here to represent the employees of Akebia, the Akebia team who has put the company in such a really positive spot right now. It says here we're built on a foundation of scientific expertise, financial discipline and operational effectiveness. What that really means is we're built on an amazing team of people who are incredibly committed to our mission and the patients that we serve. And we have really fought incredibly hard over the last couple of years to put the company in the position that we're in today, and it's really quite exciting to be on the verge of bringing our second product out to market today. So -- the presentation today will really focus on 3 areas. First is Auryxia, our commercial product that we preannounced -- have done between $170 million and $171 million of revenue last year and we expect to grow in 2024. I think most people are excited to hear about vadadustat, our HIF-PHI for the anemia of chronic kidney disease for patients on dialysis. March 27, just about 77 days away who's counting, is our PDUFA date in the U.S. And this is a $1 billion-plus opportunity, and we'll talk a lot about that today. I'm also incredibly pleased to be able to introduce 2 new programs from our own internal discovery efforts. As I said, we are built on a foundation of scientific expertise and with very modest investments, have done some great science in the HIF biology and look forward to talking about those 2 programs during this presentation. Let's start with Auryxia. Our product for hyperphosphatemia for patients on dialysis, that's been generating a consistent revenue and that revenue is what funds innovation for Akebia. Since we acquired the product in 2019, we've generated over $725 million in revenue, about $170 million to $171 million last year, and we think that number will grow in 2024. Now LOE for Auryxia is in March of 2025. But the unique place we're in is that the TDAPA period, the phosphate binders will be entering the dialysis bundle in January of 2025. With that, creates opportunity for Auryxia in '25 and '26. As dialysis providers think about how to incorporate phosphate binders into the bundle into their day-to-day operations, they're really looking for ways to incorporate Auryxia and other, particularly branded products during that TDAPA period. So -- we think this is going to be great tailwinds for the product here next year in '25 -- '24 and into 2025. Most importantly, probably, is the approval that we expect for vadadustat in March of this year, physicians -- now Auryxia is a 9-year-old product. You're not -- physicians aren't begging to see sales reps. But with a new product approval and a real desire to learn about vadadustat, we think they'll have the opportunity to sell Auryxia even more aggressively. And that's one of the great things about the second product coming to market, this wonderful overlap with the commercial organization that we have in place today for Auryxia. So this has been an incredibly important product for us. It has kept the company funded and allowed us to move forward with the things we're going to talk about today. But I really think people are excited about the opportunity for vadadustat, our oral HIF-PHI to treat anemia of chronic kidney disease. We truly are unlocking the power of the HIF pathway with vadadustat. It is just -- it's so important even talking about the Phase III study and how we've moved the product forward, that this truly is a different way to manage anemia than physicians have been doing for the past 20-plus years with ESAs. And it is incredibly important to remind physicians of that fact. And even back as far as 10 years ago, when we did the IPO for Akebia, we used to talk about this differential pathway. And we kind of stopped talking about that as you move through clinical development. But as we're talking to physicians now and talking about the opportunity for vadadustat in the market, they want to hear about that more physiologic way to manage anemia. So we've even tried out graphs that we haven't used in years, but that didn't really tell the story. When you give someone an ESA, you're giving this super physiologic dose of this hormone. You're seeing the spike in EPO levels that comes down over time. And that constant spike and drop makes it more complicated to manage anemia. And with vadadustat oral drug once a day, you see this very modest increase in hemoglobin level -- sorry, in EPO levels. It gets into the cell, it stabilizes HIF, you see a modest increase in hemoglobin -- in EPO, then it gets out of the cell, it drops back down to baseline again. I think it's almost immeasurable the increase in EPO. Yet you see this steady increase in hemoglobin. And you can control hemoglobin in a much more predictable manner. Today, physicians spend a tremendous amount of time adjusting their dose of ESAs to keep people from having excursions, to keep hemoglobins from going too high, too fast. And even with that, when you look at our clinical studies, we had many fewer dose adjustments, yet fewer excursions above 12. So it will be much easier for physicians to manage hemoglobin in their patients, and that's something they're looking for. There's a clear clinical differentiation for vadadustat in the market and that really is what we have to look for, first and foremost, is to drive that demand from the physician. And of course, vadadustat's a once-a-day oral product that provides that convenient oral dosing for patients as well. So there is a clear clinical rationale. But of course, we're in dialysis, which is a unique market. And we get a lot of questions about, well, this TDAPA reimbursement and this is complicated. We try to make this as simple as possible, the way for you to understand how vadadustat will be adopted in the marketplace. There's about 550,000 dialysis patients. About 90% of them are treated for anemia. So about 0.5 million patients -- dialysis patients in the U.S. are treated for their anemia. All of those patients can access vadadustat from the day that we introduce the product. Because dialysis patients are reimbursed under a bundled system, whether they're a commercial patient, a Medicare patient or a Medicaid patient and about 85% of patients are Medicare, all of them can access the product. That's unique. It's not like other products where you have to do Part D contracts and you start measuring how much access you have. They can get it from day 1. TDAPA was put in place by CMS. It's a special reimbursement system because CMS said, we need a mechanism for dialysis providers and physicians to be able to try innovative products more easily. So it's there to incent a product like vadadustat's use. And what it means is for that 36% to 40% of patients, so a couple of hundred thousand patients in the U.S. who are getting our fee-for-service Medicare patients, they have an extra payment. You will have vadadustat paid for outside of the bundle. They'll still get their bundled payment but vadadustat will be paid for separately. That creates an enhanced access for those patients and makes it much easier for dialysis providers and physicians to try the product. And the expectation there is with that TDAPA for that very significant number of patients, we have the opportunity to drive adoption of vadadustat even more quickly. So to be very clear, our expectation is that we're driving the product to become a new standard of care for patients on dialysis. But I get the question frequently, where will physicians adopt it? How will they think about using the product. And so we want to outline just a few areas where we will begin -- we believe we'll begin to grow utilization of the product. The home dialysis population is very straightforward. These are patients that don't necessarily want to come into the unit for an ESA injection every other week or every month, a once-a-day oral product makes a lot of sense. About 80,000 home dialysis patients today and that's the fastest-growing segment of the dialysis market. There's a desire to make that about 25% of the dialysis market. So over 100,000 patients ultimately, we expect to be on home dialysis. The group in the middle here, I think, are the most interesting. There's about 150,000 patients who are on the higher doses of ESAs are -- on high doses are not well -- their hemoglobin is not well controlled. If you think about it, the patients who are on the highest doses of ESAs are obviously costing the dialysis providers the most money. And yet the bundled payment is fixed. So these are patients when you think about the opportunity that TDAPA presents where you can be paid for vadadustat outside of the bundled payment and bill for it separately, this is a group of patients that make sense economically. But more importantly, this is a group of patients that make sense clinically as well. And what we've seen is very well known is as doses of ESAs rise, MACE risk also increases. In our clinical trials with vadadustat, as you increase the dose, you don't see a change in the risk of MACE. So there's a strong clinical rationale to try the product in this 150,000-plus group of patients, and there's obviously a strong business rationale for the dialysis providers as well. And it's important to remember that every year on dialysis, there's about 100,000 or more patients who are new to dialysis. So ultimately, you have to start having the product adopted into that incident patient population as well. But we see clear areas where we can drive adoption and differentiate vadadustat in the market. So what do we have to do to be ready for launch? A lot of companies standing up here about to launch a product need to invest significant amounts of money to be ready to launch. We already have those elements in place. Because we have Auryxia in place, we have a commercial organization in place. We're going to modestly increase that commercial organization. But as we look at the prescriber base for vadadustat versus Auryxia, there's about a 96% overlap between them. So having that group of sales reps in the field, they're in place already and can start to drive. As I keep -- as you hear me talk, you understand that dialysis is such a unique market opportunity. So really understanding the dialysis market is critical. And as I look at the Akebia team from the board to management to the field force, we have incredible expertise within the dialysis space, incredible relationships within the dialysis space, and we understand how to approach the dialysis market. And I think that really differentiates us in the marketplace. Our partner, Vifor also has those relationships. And has a relationship with Fresenius Medical Care and some of the small and medium providers. That gives us a unique access to up to 60% of the dialysis market. And from a supply chain perspective, we have product on the shelf. One of the most -- the places where folks spend the most money is building their inventory. We have product [ throughout ] that we were already launched with 2 years ago. We've extended the dating at very stable product and we're able to use that product for launch. So we can be ready to launch with a very modest increase in investment to make that launch a success. So the other thing to point out is we've talked about this uniqueness of TDAPA, but our PDUFA date is March 27. Basically, once you have approval, you submit -- we file for this TDAPA reimbursement. It takes 6 months for CMS to grant TDAPA. Now if you have an approval with dialysis in it, you are eligible for TDAPA. So there's no question as to whether we'll be granted that reimbursement. It just takes 6 months for that to happen. We'll spend those 6 months very, very -- will be very busy for those 6 months, working on contracting with the dialysis providers, driving the demand. It's actually quite unique to have a sales force with an approved product where they can talk about the product. Physicians will want to talk to them. They'll talk about the product. And -- but it will be 6 months, they'll just drive that demand. Our medical team will work on protocols with the dialysis providers and help drive demand from that perspective as well. So when you think about having an approval in March, you won't think about significant revenue until we have that TDAPA designation. And then we're thinking about how to continue to grow the product beyond. And the first place we want to grow is to provide more flexibility for prescribers and how they use the product. Today, it's a once-a-day oral product. It provides the opportunity for dialysis providers to take anemia management out of the dialysis center completely, get the patient the product at home and let them dose once a day. They also may want to have the opportunity to deliver the product in the dialysis center when a patient is dialyzed. So with that in mind, we ran a trial to look at an alternate dosing regimen of 3 times weekly dosing. So the patient gets the product when they're in the dialysis chair. This ensures their compliance and the dialysis providers potentially want to have that kind of control. This was a study that was incredibly well done and demonstrated that vadadustat can be used extraordinarily well on a 3 times weekly basis. You can see the graph on the left demonstrates that. And this data that was presented at the ASN meeting this past October. At a dose of -- certainly the dose of 450 -- well, 900 milligrams 3 times a week, the patient did very well. Very few needs to rescue the patient for -- with an ESA zero transfusions, the drug works extraordinarily well. That graph on the right demonstrates that. And it kind of tells the story of the ESAs and what I was talking about before. You see that the normal increase in an ESA dose would be about 25%. But frequently, they have to use 50% or even 100% increase in dose to get the kind of response they want from Mircera. I think this points to the fact that vadadustat will be seen as easier to use, easier to manage the patient and maintain their hemoglobin. And so after we have approval of the once-a-day dose, we'll go back and engage with the FDA on the path, share the data and engage on the path to have the 3 times weekly dose added to the label. In the meantime, we'll publish this data and physicians will be aware of it and, of course, able to use the product that they choose to. Another area of upside for us, of course, is the international market. And the product has been approved in Europe. As a matter of fact, we've been approved in 36 countries around the globe. We're looking forward to #37 being the U.S., our partner Medice in Europe, is just getting ready to launch, and we'll be launching in the first half of this year. The product was approved last year. They've been working on the health economic work that needs to be done in advance of pricing discussions in Europe, and expect to launch in the first half of this year. It's about 325,000 dialysis patients across Europe. Certainly not the same opportunity as we have in the U.S., but significant upside for us as a company as well. And we're really excited about Medice as a partner, small German company, with a real focus in dialysis, they understand the market extraordinarily well, and they're really committed to vadadustat. I just want to remind everyone the product is available in Japan as well through our partner, Mitsubishi Tanabe Pharma. And while we did a royalty deal and sold the royalty off a couple of years ago for our Asia Pacific business, I do want to take a moment to thank our partner, Mitsubishi Tanabe. The Japanese commercial experience is an incredibly important part of the resubmission of our NDA. They worked very hard with our team to put that data together. And we think it's going to make all the difference in the review of the NDA in the U.S. And I think it's important to point out that the product has been available in Japan for over 3 years now. And the products also approved, not just for the dialysis patient population, but also for the non-dialysis patient population as well. As a matter of fact, more of the use is in non-dialysis than it is in dialysis. And that's because that -- there remains a significant need for non-dialysis patients to access anemia treatment and a once-a-day oral product can make all the difference for those patients. So we continue to see non-dialysis as an opportunity to grow the market for vadadustat. Every time we talk to a physician or KOL, they talk about the desire to use the product in non-dialysis. And even as we got the CRL from FDA in 2022, part of that letter talked about reengaging with them for a subpopulation where the benefit risk was positive. And there's no clearer area than when you think about patients who are transitioning to dialysis. Folks with GFRs of 15 or below where our clinical data on MACE showed no increase in risk. But more importantly, today, in those patients with a hemoglobin below 9, 73% of those patients still don't receive an ESA pre-hemodialysis. And there's a significant consequence to that lack of treatment. If you look at the graph on the left, it shows that these patients who aren't treated have a significantly higher risk of all-cause mortality than patients who have -- who are treated with an ESA. And that risk doesn't go away when they're treated on dialysis. Even a year later, they still have a higher risk of all-cause mortality. Managing these patients before they get to dialysis, so they're well controlled is incredibly important. And that's a significant market. We think it doubles the market opportunity for vadadustat. And this is where physicians are still clamoring to use the product. So our expectation is that, first and foremost, we're going to engage with the European regulators on a path forward for non-dialysis. We had a very productive discussion with them during the initial review. We'll go in with our partner, Medice and talk about that path. After approval of vadadustat in the U.S. later this year, we'll also engage with the FDA on the path forward. We do expect that there'll be a clinical program that's going to be necessary, but we think that it can be manageable and incredibly important to live to our mission of serving these patients. Of course, as soon as we have the product approved, the questions I'll get is what's next. And we really wanted to introduce what's next today because we're excited about the possibility the HIF pathway can provide for patients. We think HIF is -- HIF stabilization is particularly interesting in acute care indications because the HIF pathway really is quite a complex pathway and affects multiple areas. And our clinical and our discovery team really focused on these acute indications where there's a high unmet need and we think we can have a significant impact. And we have 2 compounds today that we're introducing to you for preclinical development. The first is AKB-9090. And the first indication we're planning there is acute kidney injury, AKI, high unmet need, following potentially with acute respiratory distress syndrome. And then I'll also talk about a second compound that we just nominated last month, AKB-10108 for retinopathy of prematurity and potentially bronchopulmonary dysplasia in neonatal ICU care. And again, both significant opportunities. AKI, everyone knows, I mean, this is a huge unmet need, very common occurrence. HIF stabilization acts in multiple ways to potentially lessen the renal ischemia perfusion injury (sic) [ renal ischemia-reperfusion injury ] in this disease area. We've got multiple animal models that we've tested, AKB-9090 and have been very, very pleased with the results that we've seen. We're currently working on the IND-enabling toxicology work, and we plan to start a Phase I for AKB-9090 in 2025. Stay tuned. Now we've talked about acute respiratory distress syndrome in the past. This is an area that -- remember, we did a study with vadadustat in COVID-related ARDS. And we were quite intrigued by the results that we had there. We had a plan to start a larger study with -- in partnership with UT Health, University of Texas Health in the second half of last year. We made the decision, particularly with 9090 moving forward and the desire to continue to have the financial discipline that we feel we need, to wait to start that trial. Now we plan -- we think that there's a clear indication for how HIF stabilization can impact ARDS, and it's a huge market opportunity. We're going to start a Phase II trial with UT Health in the second half of this year, really looking at validating the therapeutic approach for HIF in ARDS. If we see the kind of data we expect to see with vadadustat, we'll accelerate the 9090 program with ARDS as a second indication. And now the retinopathy of prematurity indication. This is an indication I'm incredibly excited about. Obviously, this is very early stage. But ROP is the leading cause of blindness in preterm babies. There's about 100,000 cases in the world each year. And it's very simple. Your retina begins to develop at week 24. When a baby is born prematurely around week 24, 25, 26, they're put in a high-oxygen environment, and the retina believes it's time to stop growing. You take them out of the high-oxygen environment and you get this hyper growth, this neo-vascularization. And this is what leads to vision impairment or blindness. And the case for HIF stabilization is very straightforward. Basically, you're saying that stabilizing hypoxia-inducible factor, you're basically making the retina belief that you're still in utero and it will continue to grow normally. That's what you're trying to accomplish. So as I said, we've just nominated this compound. This is an incredibly exciting opportunity to prevent blindness in these preterm babies. As I say, a picture is really worth a thousand words. This is a picture from a rat study that we did. And we've done studies in mice and rats. I think the team feels that the rat model is a little more indicative of a human disease. And you see the vehicle control on the left here, you see that neo-vascularization, that overgrowth of the vasculature that leads to that blindness. On the right, AKB-10108, you see a very clear retina and the ability for that to grow normally. And as you see in the words on the slide, we've seen very significant success in these animal models for AKB-10108. We will be moving that product forward as we move through 2024. And we're incredibly excited about what that can bring. So built a really interesting HIF pipeline following beyond vadadustat in the launch in the U.S., and we're excited to talk to you more about that in the future. But at the end of the day, I started talking about our financial discipline. And we wouldn't be at the point we are today with all of these exciting things happening in Akebia without that discipline. First and foremost, we have Auryxia to thank for our ability to support innovation. And we expect that revenue to continue to fund the company. Since we received the CRL in March of '22, we have brought our operating expenses down every quarter just about. You can see the progression we've made there. Incredible work from everyone at Akebia to make that happen. We will be investing appropriately in the launch this year, but still won't step up our operating expense profile in 2024. And then we've done other things like renegotiated our $35 million of Pharmakon debt so that we're not paying that off until later -- starting to pay that until later this year. So we've really put the company in a strong financial position as well. So as I started, we've built this company on a foundation of scientific expertise, financial discipline and the operational effectiveness of the team to get us to the stage particularly with vadadustat, working through a formal dispute resolution with the FDA and being on the verge of an approval in March of this year, it really is a testament to the hard work of the company, and I couldn't be more proud of them and more honored to be up here representing them. And with that, I'll stop and take questions.

I'm happy to kick off some questions. The first one for vadadustat. You talked about potential label expansion to 3x a week, and you're going to start with Europe and back to U.S. Could you please share -- do you have a time line for the next steps? What's going to happen in 2024, 2025?

Yes. So for 3x a week, first and foremost, we need to get the vadadustat approved with the FDA in March. Once that's completed, we'll engage with them to discuss the 3 times weekly dosing. As I said, our clinical team is working to have data published so that it's available in -- for physicians. But we think it's important to engage with the FDA on what that looks like. And we expect to do that this year in 2024, and we'll understand from them. I mean we think that the FO2CUS study that clearly demonstrates the ability to use the product on a 3x weekly basis, and we hope that's the basis for approval, but we'll engage with the FDA and understand their perspective on that and follow up as soon as we have those conversations.

Okay. And then what about the label expansion to NDD that you mentioned as well?

Yes. So NDD once again, we do expect first to engage with EMA on that. I mean the review with EMA, it was very pragmatic and we actually were hopeful that we would have an NDD label even with the original approval. But they clearly demonstrated or communicated that they were open to having a discussion around that. So I think that there is no question we'll have to do some clinical work in non-dialysis, both for Europe and the U.S., but I think demonstrating that you can manage hemoglobin without this hemoglobin instability that we saw sometimes because of the dosing schedule in our original Phase III and avoid things like transfusions and ESA rescue, I think those are the things that will demonstrate that you can the product successfully in the NDD population without increasing MACE risk. Once we have that conversation with EMA, we'll take that information, go back post-approval in the U.S., and discuss that path forward with FDA as well. As I said, they were -- they welcomed us to come back and talk about subpopulations where the benefit/risk makes sense. And if you look at the slide that I presented on NDD, the fact that not treating these patients, these true pre-dialysis patients, late-stage low GFR, not treating their anemia effectively and allowing them to start dialysis with a deficit versus someone who is treated is truly an unmet need. And I think they'll be -- I hope they'll be very open to finding a path forward for vadadustat in that population.