Friday, December 2, 2016

Akebia Therapeutics (AKBA) ‘Buy’ Rating Reiterated with Higher Stock Price Target of $18

Akebia Therapeutics, Inc. (NASDAQ: AKBA), a biopharma company that focuses on the development of innovative treatments for chronic kidney disease-related anemia, is maintaining its ‘Buy’ rating, with a recommended stock price target of $18 compared to the current $8.90, according to an Aegis Capital Corp. report ( released on November 15. The rating and suggested stock price were based on discounted cash flow analysis and the estimated 2016-2022 EBITDA, with a discount rate of eight percent, the report said.

The analysis also assumed a 60 percent probability of clinical success for Akebia’s lead product candidate Vadadustat, currently in development as an oral treatment for anemia in patients with chronic kidney disease. The treatment was developed based on hypoxia inducible factor (HIF) and more specifically based on a novel action mechanism called HIF Prolyl-hydroxylase inhibition. It was designed to help regulate hemoglobin levels by activating red blood cell production in a way that mimics the human body’s natural adjustments when exposed to the lower oxygen levels of higher altitudes.

Vadadustat is currently in phase III trials, after encouraging results were reported during phase II testing. The first trial is called PRO2ECT and is focused on non-dialysis dependent chronic kidney disease patients, with 3,100 patients expected to enroll by the second half of 2017. The second phase III trial is called INNO2VATE and targets dialysis-dependent chronic kidney disease patients, with 2,600 patients to enroll by the first half of 2018. Both trials have been vetted and approved by the Food and Drug Administration (FDA).

According to Aegis Capital, Akebia’s current cash and cash equivalents of $163 million, as reported by the company in its Q32016 results, should be sufficient to fund operations through the second quarter of 2017. The estimate did not include cash from the company’s Asian distributor, Mitsubishi Tanabe Pharma Corporation (OTC: MTZPY), or possible contributions from a potential EU partner. The valuation was based solely on estimated Vadadustat sales of approximately $515 million by 2022, the report said. As for Akebia’s Q32016 results, the analysis underlines that they were in line with estimates, with a $0.96 loss per share amounting to $36.3 million.

Akebia entered a partnership agreement with Japan’s Mitsubishi Tanabe Pharma Corporation in December 2015, under which the latter was provided with exclusive Vadadustat development and commercialization rights in Japan and Asia. In exchange, Akebia is receiving funding for phase III trials of the therapy, being eligible to receive up to $350 million. So far, the Japanese company paid a $100 million milestone. According to Aegis Capital, Akebia is looking for a similar agreement with an EU corporation, and it is very likely for a European partnership to become reality in early 2017.

Reiterating a ‘Buy’ rating with a stock price target of $18, Aegis Capital analysts also outlined the risks of which potential Akebia investors should be aware. The report identified a series of typical risks associated with investments into healthcare companies such as regulatory, R&D and manufacturing risks, as well as specific risks derived from investing in Akebia, such as intense competition, pricing and reimbursement pressure, potential multiple binary events, the fact that the company has no history of profitability and that more funds might be required to actually develop and commercialize its therapies successfully.

For more information, visit the company’s website at

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