AKBA - NASDAQ

Good day and thank you for standing by. Welcome to the Akebia Second Quarter 2025 Financial Results. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker, Mercedes Carrasco, Senior Director of Investor Relations. Please go ahead.

Thank you and welcome to Akebia's Second Quarter 2025 Financial Results and Business Update Conference Call. Please note that a press release was issued earlier today, Thursday, August 7, detailing our second quarter 2025 financial results and that release is available on the Investors section of 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; Nick Grund, Chief Commercial Officer; and Erik Ostrowski, Chief Financial and Chief Business Officer. I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information describing these risks is included in the financial results press release that we issued on August 7 as well as in the Risk Factors and Management Discussion and Analysis section of our most recent annual and quarterly report filed with the SEC. With that, I'd like to introduce our CEO, John Butler.

Thanks, Mercedes, and thanks to everyone for joining us this morning. Since Vafseo vadadustat's approval and even prior, I've spoken about our goal to make Vafseo the standard of care for patients with anemia due to chronic kidney disease. From my perspective, this endeavor has 3 parts. First, successfully launch Vafseo in dialysis during the TDAPA period. Second, continue growth in dialysis post TDAPA potentially supported by the data creating additional areas of differentiation. And third, approval and launch of Vafseo to treat anemia of CKD in patients who are not on dialysis. That's the journey we're on and I'm proud to report the progress we've made in each area during the second quarter and to date in Q3. I continue to be incredibly pleased with the progress of our launch. We generated over $13 million in Vafseo revenue in Q2 with approximately $12 million in demand sales, a 55% increase over Q1. In Q2, U.S. Renal Care continued to represent the vast majority of our revenue and we appreciate their [ foresight ] partnership and ongoing commitment to delivering innovative therapies to patients. But we have to broaden that access to achieve our goals. While we're pleased with the first 2 quarters of launch, we really only had access to about 40,000 dialysis patients during those months through USRC and other smaller dialysis organizations that operationalize the protocol to easily enable prescribing. In Q2, we had expected to have broader access at the other 2 midsized dialysis providers, DCI and IRC, the fourth and fifth largest dialysis providers. Today, I'm pleased to report that both are now completing their processes to make Vafseo available. As of September, we expect the physicians of these dialysis organizations will be able to write a prescription for Vafseo without restriction, bringing the total patients with access to over 75,000. We believe this will enable a significant step-up in growth. Even more significant from a volume and patient access perspective, DaVita, one of the largest dialysis providers, is completing preparations for its operational pilot for Vafseo. They've placed an initial order and expect patients to receive the drug starting in the middle of August. Upon the successful completion of the pilot, we expect to increase patient access by more than sixfold from 40,000 patients in Q1 and Q2 to at least 275,000 patients later in Q4. Nick will give you more color on all of this launch progress and metrics. The second focus to drive Vafseo to become standard of care is to enhance the environment for growth post TDAPA. I'm very pleased to report the VOICE trial being conducted in collaboration with USRC has been fully enrolled as of late June. Over 2,100 patients enrolled in only 7 months. I believe this clearly speaks to investigators' interest in the potential benefits Vafseo may bring their patients and a desire to prove that dosing when administered during dialysis may be beneficial as well. The timing of enrollment completion is important as it means the study will complete in late 2026 with data available in early '27 shortly after the end of TDAPA. VOICE is an outcomes trial looking at all-cause mortality and all-cause hospitalization. While its primary endpoint is noninferiority, it's powered to demonstrate potential superiority for vadadustat for all-cause hospitalization. We believe any data demonstrating a positive clinical outcome will be critical in establishing Vafseo as the standard of care. We're also pleased to have initiated VOCAL, a study looking at dosing of Vafseo 3 times a week being performed in 18 DaVita dialysis facilities. This study will enroll about 350 patients. An important and exciting substudy will look at characteristics of red blood cells in patients treated with Vafseo. Our previous studies have shown that other HIF PHIs can improve the lifespan of a red blood cell. I believe showing a potential positive impact on red blood cell characteristics; size, lifespan, oxygen carrying capacity; with Vafseo in a dialysis population can demonstrate the tangible differences, a more physiologic approach to treating anemia, can yield. The third area of focus is securing an indication for nondialysis patients in the Vafseo label. Recall that while the Stage IV and V nondialysis population with anemia is roughly the same size as dialysis, about 550,000 patients, it doesn't have the same pricing complexity that dialysis has in a post-TDAPA setting making it potentially 4x to 5x larger than the $1 billion addressable market size of the dialysis market. We've continued to work to move this initiative forward. We completed a Type B meeting with the FDA in May. The meeting addressed a single focused written question to the agency related to the comparator arm for the VALOR trial in MDD CKD. Based on FDA written feedback, we're now planning for an active ESA comparator. We believe this design will simplify the pooling of data with our prior Phase III U.S. PROTECT program. We recently submitted a Type C meeting request to further discuss the study design, statistical analysis and pooling strategy and we're working to initiate VALOR by the end of the year. The team at Akebia believes strongly that patients not on dialysis would benefit from access to Vafseo and we're working hard toward our goal to gain alignment with the FDA and be in a position to enroll the trial quickly. With the launch of Vafseo and continued strong performance of Auryxia, we had over $60 million in net product revenue in Q2, the highest level in the history of the company. In a moment, Erik will talk to you about our strong second quarter financial results and solid financial position. But first, let me turn it over to Nick to give more color on the Vafseo launch and what we're learning in the field.

Thanks, John. Good morning, folks. As we work to build a new standard of care in treating CKD anemia in dialysis patients, we are taking a comprehensive and long-term view on how to establish a successful brand in a large category. To this end, we are rapidly advancing efforts across multiple work streams; which include building patient access, broadening physician prescribing and continuing physician education. We are making great progress on all fronts. Let me begin with some updates on prescription volumes. During the launch we are focusing on breadth, the number of physicians prescribing; and depth, the amount they are prescribing. We are very pleased to have 725 prescribers write within quarter 2, up from approximately 640 in the first quarter. The prescribers are now writing an average of 13.3 prescriptions each, which is also an increase from the 12 prescriptions we reported in the first quarter. The breadth and depth of prescriptions are growing, but there is still more to do. I also want to touch on refills and average doses of Vafseo over time. Refills represented greater than 80% of prescriptions in quarter 2 and the average dose of those refills is up 28% from the starting dose. We believe this reflects that physicians are getting comfortable treating patients at an optimal therapeutic dose and as a result, each of our prescriptions becomes more valuable. Upon market availability, we had expected the frequency and intensity of dialysis patient care would have resulted in a higher than typical adherence rate for Vafseo. As we have now been out in the field since January, we have observed adherence rates consistent with the industry at 70% to 80%. As we saw in our clinical trials, some patients, especially those on higher doses of ESAs, experienced a hemoglobin drop on transitioning to 300-milligram starting dose of Vafseo. This is a departure from the experience with today's standard of care and anemia managers are conditioned to react as quickly as possible to a hemoglobin drop. In some cases, anemia managers did not detect a titrate for the protocol and patients were moved back to their prior ESAs. I am proud of how quickly the Akebia team and our partners reacted to improve adherence. We quickly revamped and highlighted our messaging focusing on dosing and titration, we worked with existing customers to adjust protocols and we educated dialysis organizations who are developing protocols to consider this in their protocol design. We believe our messages on improving adherence are getting out there and taking effect. Our focus ahead is to accelerate growth by increasing utilization and additional deals by enabling nephrologists with access to write prescriptions. I would like to spend a minute providing more detail on our progress. As we have discussed previously, we have commercial contracts in place with all key dialysis organizations and group purchasing organizations covering nearly 100% of dialysis patients. That was step one. We are also supporting dialysis organizations in the creation and operationalization of Vafseo treatment protocols. I will refer to this as prescribing access. As John mentioned, we have prescribing access to over 40,000 dialysis patients in the first half of the year resulting in most of our orders since launch coming from USRC. Within the next month, we will have prescribing access to over 75,000 dialysis patients, an increase of over 85% which includes DCI, IRC and many independent and small dialysis organizations. Momentum around protocol development and implementation is picking up further in the third quarter as DaVita physicians will begin prescribing Vafseo as part of its operational pattern at more than 100 dialysis clinics. With large complex systems, it always makes sense to do a test run to ensure a smooth rollout. That's exactly what DaVita is doing. Activity around the pilot has already begun as DaVita notified the selected pilot sites, ordered product in July to support early pilot prescribing and began training their staff. The pilot is expected to conclude within approximately 3 months, which we believe will increase total prescribing access for Vafseo to over 275,000 dialysis patients and enable the opportunity for a significant uptick in ordering in the fourth quarter of the year within DaVita. One additional important note on patient access. In discussions with dialysis organizations with protocols in place and a review of claims data, we've confirmed that a significant number of Medicare Advantage plans are covering Vafseo. As a reminder, patients covered by Medicare fee-for-service represent 35% to 40% of dialysis patients and Medicare Advantage another 35% to 40% of patients. Therefore, depending on the dialysis organization, the addressable patient population for Vafseo could be double and potentially up to 80% of all dialysis patients having reimbursement for Vafseo. Looking at the totality of our efforts, we're happy with the progress on growing breadth and depth of prescribing, increasing patient access and physician education. We have increased demand 55% quarter-over-quarter. We expect to meaningfully increase prescribing access from approximately 40,000 patients to over 75,000 patients in the third quarter. And we are on track to access DaVita, which we expect to lead to prescribing access to over 275,000 dialysis patients in quarter 4. We're still in the early stages of our goal to build a new standard of care, but we believe we are on track to make our goal a reality. Let me now turn it over to Erik.

Thanks, Nick. We're happy to report another strong quarter driven by the top line performance of both Vafseo and Auryxia. I will now provide an overview of our results as compared to the second quarter of last year. Total revenues, which are comprised primarily of net product revenues and also include license collaboration and other revenues, were $62.5 million this quarter as compared to $43.6 million in Q2 of last year representing an increase of $18.9 million. Of these amounts, net product revenues increased to $60.5 million this quarter from $41.2 million in Q2 of last year. This was driven by sales of Vafseo which, as mentioned, were $13.3 million in the quarter as well as by an increase in Auryxia sales, which were $47.2 million this quarter as compared to $41.2 million in Q2 of last year. As a reminder, Auryxia lost IP exclusivity in March and there is an authorized generic for Auryxia on the market though no generics have been approved by the FDA at this time. We are pleased with this quarter's strong Auryxia results though caution future Auryxia sales levels are challenging to predict due to the uncertainty around the timing of potential additional generic competition. Cost of goods sold decreased to $9.9 million this quarter as compared to $17 million in Q2 of last year. The key driver of this COGs reduction is that we are no longer reporting a $9 million quarterly noncash amortization charge related to the acquired development product rights for Auryxia, which is now fully emphasized. Also of note, Vafseo sales in the quarter were derived from prelaunch inventory, which does not include the full cost of manufacturing as a portion of those inventory-related costs were previously expensed to R&D prior to Vafseo's FDA approval. R&D expenses increased to $11 million this quarter from $7.6 million in Q2 of last year driven by increased clinical trial activities related to Vafseo as well as our other programs. SG&A expenses decreased slightly to $26.6 million this quarter from $26.9 million in Q2 last year. Turning to the bottom line. We generated $247,000 of net income this quarter as compared to a net loss of $8.6 million in Q2 of last year. This quarter's net income was driven by the increase in revenues, which was partially offset by $5.4 million of interest expense related to the Vifor settlement royalty liability as well as $7 million in noncash expense related to the change in fair value of our warrant liability, which was driven by the increase in our stock price in Q2 over the prior quarter. We ended Q2 with $137.3 million in cash and cash equivalents. We believe our existing cash resources and the cash we expect to generate for product, royalty, supply and license revenues are sufficient to fund our current operating plan to profitability, including to pursue label expansion for Vafseo and advance our other pipeline programs. In closing, our Q2 financials reflect increased uptake of Vafseo, continued resilience of the Auryxia revenue stream and careful attention to operating expenses, which resulted in our strengthened financial position. As John and Nick mentioned, the team is dedicating significant energy towards continuing to expand both the breadth and depth of Vafseo utilization and we look forward to discussing the results of these efforts on our next earnings call. With that, we welcome questions.

[Operator Instructions] Our first question will come from the line of Roger Song from Jefferies.

Congrats for the quarter. You gave us a lot of good numbers here. Just want to get a sense of some of the key metrics here. So first is the patient segment. So in terms of the home use and high ESA, what do you see this quarter and how this changed over last quarter? And then also how do you forward looking when you have more larger DO coming online, including DaVita in 4Q, you see the patient segment will change? Similarly for the payer, you say the Medicare Advantage seems to be a significant amount of the patient. Can you quantify compared to the fee-for-service? And I have a follow-up.

Nick, I think that's for you.

Yes. So when we think about the patient segmentation, it's a great question, and where USRC who is a vast majority of our prescriptions, their protocol is broad. They're allowing PD use for both in-center patients and home patients. And we see usage that is very much similar to the market segmentation between PD and home patients being about 12% of the total scripts and the remainder being for in-center patients. The second part of that is how do we see that moving forward when we add on DaVita and others in the third and fourth quarter. When we look at all of the protocols that they're putting in place, whether it be IRC, ECI or DaVita; they're all broad protocols that allow for both in-center and home use. When physicians think about patients top of mind that will benefit from Vafseo, they go to 2 important segments first. They go to the home patient where it makes really, really good sense to use an oral therapy for those patients to avoid injections as well as consistent visits to the dialysis unit and they also think about higher dose ESA patients who have a higher increased mortality and cardiovascular risk associated with this higher dose of ESA. And so we expect to have continued broad uses. It may tip a little bit higher towards the PD section or the home section, but expect consistency moving forward given those broad protocols. The second part of your question was on market access and Medicare Advantage. To date, we're seeing about 20% of total prescriptions being filled in the Medicare Advantage segment of the population where 80% is Medicare fee-for-service. But as we look going forward, in our discussions with again IRC and BCI, and DaVita; they have all indicated to have significant Medicare Advantage contracts already in place that will support Vafseo through additional TDAPA coverage. And so that's a great sign. That means that those populations are growing over our initial expectations of fee-for-service and they're growing at a faster rate. We always thought they would add Medicare Advantage plans over time. It's happened much earlier than we could have anticipated. I think even with U.S. Renal where they started with mostly a focus on fee-for-service, as that Medicare Advantage coverage has grown, they've kind of pushed those patient needs out to the dialysis centers as well, right? So there's still growth to be had clearly within U.S. Renal. That's correct. When I think about U.S. Renal, over 80% of U.S. Renal care physicians are writing, which is an important metric especially when new coverage becomes available. When that new coverage becomes available, those physicians have the opportunity to treat Vafseo to a broader population that is in need of Vafseo that previously didn't have coverage. So we're looking forward to continued access increases and look forward to driving deeper penetration within all accounts.

Excellent. Just a quick one. And then what's the current average dose strength for your prescription because you see a higher dose level in the recent trend.

Nick, I think that's you again.

Yes. And so as I referred to in my script, we're seeing refill scripts being at about a 28% increase over the 300-milligram starting dose, which is great. We saw in our [ INNOVATE ] clinical trial that folks got to approximately an average of 420 milligrams per script and so that would be, call it a 40% increase. We're at 25% increase or 28% increase to date. So we see as people progress through their prescriptions from first prescription to second prescription, third prescription; those doses continue to titrate up. As you recall, our label has people titrating up at 150 milligrams after 4 weeks and every 4 weeks thereafter. Therefore, it's going to take the second or third refill to get them to the appropriate dose in some cases.

And I think when you mentioned the adherence changes, I mean what some providers are doing is actually allowing titration at week 2, which we saw in the modified trial as well. So I mean the 1 thing to be aware of as you bring on new dialysis providers and they bring on more new patients and we see the step-up in patients, you may actually see a bit of a step down in dose because you have more patients at that starting dose. That's exactly what we would hope to see. But as they stay on the drug, they'll titrate to that average dose. And that's obviously, as you can see, an important component of our growth in the quarter.

Our next question comes from the line of Julian Harrison from BTIG.

Congrats on the quarter. On the operationalized protocol you're expecting from DaVita, is that expected to be implemented in early or late fourth quarter? Are you able to provide any granularity there? And when we start to think about the other large dialysis organization of comparable size to DaVita, should we also expect that corresponding protocol to be preceded by a pilot study as well?

Yes. Great question, Julian. So the DaVita operational pilot is they are preparing for it now and they've ordered the product, they're training at the sites. And we expect in the next couple of weeks, I think the 18th of the month is when they expect to go live with it and that pilot will last 3 months. So up to 3 months, obviously it could go sooner. But I think the expectation should be around the middle of November is when they basically open that up to the entire DaVita network. And as you mentioned the other large providers Fresenius of course. We continue to talk to Fresenius, present them clinical data, et cetera. We have not been able to progress yet. I think as DaVita comes on and all of these other providers come on, it becomes more and more difficult for them to keep access from their physicians and patients for this innovative product. My expectation, Nick can correct me if I'm wrong, is they would probably do a similar kind of operational pilot before they get broad access.

Excellent. That's very helpful. And then a follow-up, if I may. On nondialysis-dependent CKD, it sounds like you're very close to finalizing the Phase III trial design for VALOR. Are you able to give us an approximate sense for how soon this label expansion opportunity could come online for Vafseo? What does the timeline look like after that study starts around year-end?

So the timeline is going to be driven significantly by how quickly we can enroll the study, right? I mean it's an outcome study. We still expect -- again all of these details are somewhat to be determined. But the numbers we've been giving in the past about a 1,500-patient trial now with an active comparator versus Vafseo vadadustat and doing it strictly in the U.S. with U.S. patients. So we can do that pooling of VALOR with the U.S. PROTECT data to enhance the comfort that there isn't an increased MACE risk, which of course we didn't see in the U.S. patients with PROTECT. It's really all about how quickly we can enroll and getting a sense of that before we know what the final protocol looks like. I mean this is one of the activities that we're doing to prepare is working on feasibility. How many sites, how many patients per site and that will help us to better inform you; but I don't want to get ahead of that data yet. But obviously our goal would be to enroll as quickly as possible.

Our next question will come from the line of Mazi Alimohamed from Leerink Partners.

This is Mazi on for Roanna Ruiz. So Auryxia revenues actually grew year from year. So I guess 1 question is with the only 1 authorized generic currently in the market, what's your outlook for competitive dynamics over the remainder of 2025? And I guess how are you thinking about positioning for additional generic entrants in the future?

Thanks for the question. Nick, maybe you can kind of talk about the market dynamics and why we're seeing that growth.

Yes. The market dynamics, it's great news for Auryxia. It's really built on the back of Auryxia is a 10-year-old product and physicians are very comfortable with the clinical profile and the benefits of Auryxia as we've been kind of working with physicians for the last 10 years. When we think about Auryxia prebundle, the market or the access for Auryxia was actually extremely limited in prior years. Physicians often had to do a prior auth. In some cases, they had to do a medical exception and they didn't want to really do the work consistently for their patients. Now that the bundle has been implemented, access for Auryxia is actually at one of its greatest points in its history. And so the physicians who are very comfortable using the product to understand its benefits and patients are taking the opportunity with that increased access to put more patients on Auryxia, which is great news for Auryxia. And so when we think about that trend continuing maybe for the AG pieces, I'll pass it over to Erik or back to John to go into that piece.

Well, I mean I think, as you said, we have 1 AG on the market. We know exactly how much product we're supplying to Viatris and how long that supply agreement really only goes through this year. So we really need to see what happens with FDA. We've always had to be very careful about how we think about the long term with Auryxia because ultimately we believe that the product will be approved. We've been saying for years that the slope of that curve post generic availability isn't necessarily that patent cliff that you always see. If you use Sevelamer as an example, it took years before the generics took the lion's share of the market because of the volume that you have to manufacture here. But we look at it in a very conservative way. And maybe I'll pass that to Erik to talk about it more.

Yes. No, I totally agree with John. From an internal perspective due to the reasons we alluded to in the script as well in my comments, new generic competition could come up at any time. So we budget conservatively and the longer we go without that incremental generic competition is really just upside to our [ internal ].

Yes. And when we talk about our kind of the cash runway, et cetera, of being able to finance our pipeline, it's using a very conservative view of where Auryxia lands over time. But we're 4 months post when we had originally planned to have generics available. So we're pleased every day to continue to be able to deliver the product to patients.

I'm showing no further questions at this time. I would now like to turn it back over to John Butler for closing remarks.

Thanks, Victor, and thanks, everyone, for joining us this morning. We're focused on our goal of making Vafseo standard of care for treating anemia due to CKD. We're making important progress across all components of that strategy. Our launch is accelerating. We're executing the studies in dialysis patients to continue to build evidence of potential benefits and we're planning to initiate our MDD study VALOR this year. Our revenue performance and cash balance allow us to execute the strategy and advance our early pipeline from a position of financial strength. We look forward to continuing to update you on our progress. Have a great day.