Akebia, Trading M&A For an IPO, Follows Fast in Anemia Drug Race

6/9/14Follow @benthefidler

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being run side by side in Cincinnati, and both by Gardner. This wasn’t the case for very long, though. Investors in either company were getting, as Butler says, “half a CEO.” They shopped Akebia, but didn’t strike a deal. Even though Butler says there was interest, investors decided “they weren’t getting the value they wanted.”

Instead, another path opened up—a route to the public markets. Akebia raised a $41 million Series C in June 2013 and Novo A/S came aboard as an investor, joining Novartis Bioventures, Kearny Venture Partners, and others. Butler—who had been talking to Akebia for a few years about a board seat—joined it the following month, and quickly became the CEO (Gardner now leads Aerpio). Investors were adamant that if Akebia were to build itself independently, it had to move to one of the biotech hotspots, namely Boston or San Francisco. Butler, who was already in Boston, happily obliged. Akebia’s headquarters are now in Cambridge, though it does still have some employees in the Cincinnati area.

The move “was kind of going down without me, but let’s just say I accelerated the process,” he says.

Akebia then hustled towards an IPO. There was some talk of delaying the roadshow even by a week, but the board and bankers voted that down. The timing proved critical. On March 20, Akebia priced 5,882,323 shares at $17 apiece, the top of its range. It sold about 1 million more shares than it thought it would, and netted about $107 million after deductions, some $30 million more than it first sought.

The very same day, Congress sent a letter to Gilead Sciences challenging the pricing of its hepatitis C drug sofosbuvir (Sovaldi), triggering a big sell-off of biotech stocks. IPO successes in the sector have been few and far between since, with several companies having to cut smaller deals to get their offerings done.

“It was us and Versartis [which priced at the top of its range on the same day],” Butler says. “After that it’s been a very significant slope.”

Now Akebia’s under a whole different kind of pressure—producing good data and hitting milestones. It’s enrolled 209 patients in a Phase 2b study of AKB-6548 in patients with chronic kidney disease, which results expected in the fourth quarter of this year. If that trial is successful, Akebia will then go back to Wall Street and raise more cash for a big Phase 3 trial of about 2,000 patients. The specific medical goal in the trial is gradually increasing hemoglobin levels without increasing the risk of any significant cardiac events (compared to a placebo), according to Butler. The company is gearing up a mid-stage trial for the dialysis patients as well.

At the same time, Akebia needs to stand out from the competition. Astellas and FibroGen are already running a Phase 3 study of FG-4592 in Europe, and another is coming with AstraZeneca in the U.S. And GSK’s prospect recently completed a Phase 2a trial (Bayer’s is in Phase 2 testing as well). Butler says that while each of the drugs work via the same type of mechanism—stabilizing HIF—there are subtle differences in chemistry. As a result, each drug affects certain proteins in the HIF pathway (HIF1 and HIF2) by different degrees. Butler says these variations will translate into differences in the side effects the drugs cause—meaning, the winner should be easy to spot. Akebia, of course, thinks it’s got the best of the bunch. But it’ll have to prove it to win over doctors who will use the drugs.

“It’s not going to be like statins, where they’re all kind of the same,” Butler says. “There are going to be some pretty profound differences between the drugs.”

So what are Akebia’s chances? Nomura Securities analyst Ian Somaiya is bullish, favoring Akebia’s drug over FibroGen’s in a recent report. Somaiya cited “tighter distribution in the body” for AKB-6548 that could lead to “potentially better efficacy,” and noted that cholesterol-lowering effects seen in patients taking FibroGen’s drug “may portend systemic safety concerns.” (Nomura, it should be noted, was one of the underwriters in Akebia’s IPO).

Certainly, Wall Street shares that enthusiasm. Like the entire biotech sector, Akebia’s stock price took a hit after Congress’ letter to Gilead, dropping from $26.60 on March 20 to $18.96 by March 26. But since then, the stock has climbed back over $26, recouping almost all of the losses. That’s a better performance than the overall biotech sector. The Nasdaq Biotechnology Index (NASDAQ: IBB), for instance, was still down by more than 6 percent on June 4, compared to March 19.

There’s still a long road ahead for the company, of course. But so far, the choice to go it alone instead of finding a buyer has been a good one.

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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