8-K: Akebia Therapeutics Terminates Vifor License Agreement, Amends Loan Facility

Akebia Therapeutics has terminated its license agreement with CSL Vifor for Vafseo and amended its loan agreement with Kreos Capital, effective July 10, 2024.

Summary

• Akebia Therapeutics has terminated its license agreement with CSL Vifor for the sale of Vafseo in the U.S. effective immediately on July 10, 2024.
• The termination agreement includes Akebia repaying a $40 million working capital fund to CSL Vifor through tiered royalty payments starting July 1, 2025, and continuing until May 31, 2028, or until the $40 million is repaid.
• These royalty payments will range from 8% to 14% of Akebia's net sales of Vafseo in the specified territory.
• The agreement also includes minimum true-up milestones of $10 million, $20 million, and $40 million on May 31, 2026, May 31, 2027, and May 31, 2028, respectively.
• Akebia will also pay CSL Vifor tiered royalty payments on net sales of Vafseo, starting with a high single-digit percentage up to $450 million and decreasing to a mid-single digit percentage above $450 million.
• These settlement royalty payments will continue until the expiration of the last valid patent or regulatory exclusivity for Vafseo.
• Akebia has the option to buy down the settlement royalty payments starting July 1, 2027, by making a one-time payment, after which they will pay a mid-single digit percentage on sales up to $450 million.
• In connection with the termination, Akebia amended its loan agreement with Kreos Capital, which includes certain covenants related to the termination agreement.
• The original loan agreement provided for a senior secured term loan facility of up to $55 million.

Sentiment

Score: 4

Explanation: The termination of the license agreement and the associated financial obligations are likely to be viewed negatively by investors. While the company regains control of Vafseo sales, it also assumes significant financial burdens and risks.

Positives

• Akebia regains full control over the sales of Vafseo in the specified territory.
• The royalty buy-down option provides a potential future cost saving opportunity for Akebia.
• The termination agreement settles all disputes and claims arising from the previous license agreement.

Negatives

• Akebia is now responsible for repaying the $40 million working capital fund through royalty payments.
• Akebia will be subject to ongoing tiered royalty payments on Vafseo sales to CSL Vifor.
• The termination of the license agreement may indicate a change in strategy or challenges in the previous partnership.

Risks

• Akebia's ability to generate sufficient sales of Vafseo to meet the minimum royalty true-up milestones is a risk.
• The ongoing royalty payments to CSL Vifor could impact Akebia's profitability.
• The termination of the license agreement could lead to increased competition or challenges in the market.

Future Outlook

Akebia will now be responsible for the sales and marketing of Vafseo in the specified territory and will need to manage the repayment of the working capital fund and ongoing royalty payments to CSL Vifor. The company has the option to buy down the settlement royalty payments starting July 1, 2027.

Management Comments

• The company and CSL Vifor agreed to terminate the License Agreement for business reasons.

Industry Context

The termination of the license agreement and the subsequent assumption of sales responsibilities by Akebia is a significant shift in the commercialization strategy for Vafseo. This could be due to a variety of factors, including changes in market conditions, strategic priorities, or disagreements between the parties. It is not uncommon for pharmaceutical companies to adjust their partnerships and commercialization strategies as products mature.

Comparison to Industry Standards

• License agreements in the pharmaceutical industry often include royalty structures similar to those outlined in the termination agreement, with tiered rates based on sales volume.
• The use of a working capital fund and subsequent repayment through royalties is a common mechanism in such agreements.
• The royalty buy-down option is a less common but not unheard of feature, providing flexibility for the licensee.
• The termination of a license agreement is not unusual, and companies often renegotiate or terminate agreements based on changing business needs or performance.
• Comparable companies such as FibroGen, which also develops treatments for anemia, have similar licensing and royalty agreements, although the specific terms vary based on the product and market.

Stakeholder Impact

• Shareholders may be concerned about the increased financial obligations and risks associated with the termination of the license agreement.
• Employees may experience changes in their roles and responsibilities as Akebia takes over sales and marketing of Vafseo.
• Customers may experience changes in the way they purchase Vafseo.
• Suppliers may be impacted by changes in Akebia's purchasing patterns.
• Creditors may be impacted by the amended loan agreement with Kreos Capital.

Next Steps

• Akebia will begin direct sales of Vafseo in the specified territory.
• Akebia will start making WCF Royalty Payments to CSL Vifor on July 1, 2025.
• Akebia will need to manage the minimum true-up milestones for the WCF Royalty Payments.
• Akebia will need to monitor sales to determine the appropriate time to exercise the Royalty Buy-Down Option starting July 1, 2027.
• Akebia will file the Termination Agreement and the Amendment to the Loan Agreement as exhibits to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

Key Dates

Keywords

Akebia Therapeutics, Vafseo, CSL Vifor, License Agreement, Termination Agreement, Royalty Payments, Loan Agreement, Kreos Capital, Working Capital Fund, Settlement Royalty