10-Q
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33

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

OR

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File No. 001-38944

 

 

Akero Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

81-5266573

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

601 Gateway Boulevard, Suite 350

South San Francisco, CA 94080

(650) 487-6488

 

 

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

AKRO

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No

As of October 28, 2022, the registrant had 46,763,186 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


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SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. The principal risks and uncertainties affecting our business includes:

 

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including difficulties in identifying patients with nonalcoholic steatohepatitis (“NASH”), significant competition for recruiting such patients in clinical trials, and restrictions on patients and investigators related to the ongoing coronavirus disease (“COVID-19”) pandemic.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than us.
Failures or delays in the commencement or completion of, or ambiguous or negative results from our planned clinical trials of our product candidates could result in increased costs to us and could delay, prevent, or limit our ability to generate revenue and continue our business.
Clinical development is uncertain and our clinical trials for efruxifermin (“EFX”) and any future product candidates may experience delays, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business.
We rely and will continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval of or commercialize any potential product candidates.
The manufacture of our product candidates is complex and we may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.
We are heavily dependent on the success of EFX, our only product candidate.
If we fail to develop and successfully commercialize other product candidates, our business and future prospects may be harmed and our business will be more vulnerable to any problems that we encounter in developing and commercializing our product candidate.
We may develop EFX, and potentially future product candidates, in combination with other therapies, which exposes us to additional risks.
If we are not successful in discovering, developing, receiving regulatory approval for and commercializing EFX and any future product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.
We may be required to make significant payments under our license agreement for EFX.
The regulatory approval processes of the U.S. Food and Drug Administration (the “FDA”) and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. Our inability to obtain regulatory approval for EFX or any future product candidate would substantially harm our business.
Even if we are able to obtain regulatory approvals for our product candidate or any future product candidates, if they exhibit harmful side effects after approval, our regulatory approvals could be revoked or otherwise negatively impacted, and we could be subject to costly and damaging product liability claims.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which, if violated, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
We have incurred significant losses since our inception and we expect to incur losses for the foreseeable future.
We currently have a limited operating history, have not generated any revenue to date, and may never become profitable.
We will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development and commercialization of our product candidate or develop any future product candidates.
Business interruptions resulting from the ongoing COVID-19 pandemic or similar public health crises, as well as from geopolitical and military conflict such as the ongoing warfare in Ukraine, could cause a disruption of the development of our product candidates and adversely impact our business.

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Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements

6

 

Condensed Consolidated Balance Sheets (Unaudited)

6

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

7

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)

8

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

38

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

89

Item 3.

Defaults Upon Senior Securities

89

Item 4.

Mine Safety Disclosures

89

Item 5.

Other Information

89

Item 6.

Exhibits

90

Signatures

 

91

 

 

3


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

the success, cost and timing of our product development activities and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;
our ability to successfully conduct and complete our ongoing Phase 2b clinical trial of EFX in patients with NASH who have F2 or F3 fibrosis, known as the HARMONY study, including the ability to obtain data and maintain our expected timelines during the ongoing COVID-19 pandemic;
our ability to complete enrollment in our ongoing Phase 2b clinical trial of EFX in patients with NASH who have cirrhosis (F4 fibrosis, compensated), known as the SYMMETRY study, including the ability to obtain data and maintain our expected timelines during the ongoing COVID-19 pandemic;
the timing and outcome of any End-of-Phase 2 meeting with FDA, or similar meetings with other regulatory authorities;
our ability to meet all FDA requirements and the requirements of other regulatory authorities to initiate and complete Phase 3 studies of EFX in a timely manner;
our ability to complete enrollment in an ongoing expansion cohort of the SYMMETRY study, known as Cohort D, which is evaluating EFX in patients who have both Type 2 Diabetes, or T2D, and NASH, and are being treated with GLP-1 therapeutics to manage their T2D;
the potential for COVID-19 or other pandemic, epidemic or outbreak of an infectious disease, to disrupt our business plans, product development activities, ongoing clinical trials, including the timing and enrollment of patients, the health of our employees and the strength of our supply chain;
our ability to advance any product candidate into or successfully complete any clinical trial;
our ability to successfully manufacture our product candidates for future clinical trials or for commercial use, if approved;
the potential for our identified research priorities to advance our technologies;
our ability to obtain and maintain regulatory approval, if obtained, of EFX or any future product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;
the ability to license additional intellectual property relating to any future product candidates and to comply with our existing license agreement;
our ability to commercialize our products in light of the intellectual property rights of others;
the success of competing therapies that are or become available;
our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;
the commercialization of our product candidates, if approved;
our plans to research, develop and commercialize our product candidates;
our ability to attract collaborators with development, regulatory and commercialization expertise;
future agreements with third parties in connection with the commercialization of our product candidates and any other approved product;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
the rate and degree of market acceptance of our product candidates, if approved;

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regulatory developments in the United States and foreign countries;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
our ability to attract and retain key scientific or management personnel;
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
the impact of laws and regulations; and
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates.

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or into which we may enter.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

NOTE REGARDING TRADEMARKS

Akero Therapeutics, Inc. is the owner of the AKERO trademark, as well as certain other trademarks, including design versions of some of these trademarks. The symbols ™ and ® are not used in connection with the presentation of these trademarks in this report and their absence does not indicate a lack of trademark rights. Certain other trademarks used in this report are the property of third-party trademark owners and may be presented with or without trademark references.

All brand names or trademarks appearing in this report are the property of their respective owners. Unless the context requires otherwise, references in this report to “Akero,” the “Company,” “we,” “us” and “our” refer to Akero Therapeutics, Inc. and its subsidiary.

 

 

5


Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Akero Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

374,003

 

 

$

 

150,483

 

Short-term marketable securities

 

 

 

 

 

 

 

37,775

 

Prepaid expenses and other current assets

 

 

 

3,943

 

 

 

 

5,324

 

Total current assets

 

 

 

377,946

 

 

 

 

193,582

 

Property and equipment, net

 

 

 

57

 

 

 

 

90

 

Right of use asset

 

 

 

1,297

 

 

 

 

1,459

 

Other assets, noncurrent

 

 

 

108

 

 

 

 

417

 

Total assets

 

$

 

379,408

 

 

$

 

195,548

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

6,010

 

 

$

 

6,706

 

Accrued expenses and other current liabilities

 

 

 

19,233

 

 

 

 

18,422

 

Total current liabilities

 

 

 

25,243

 

 

 

 

25,128

 

Loan payable, noncurrent

 

 

 

9,447

 

 

 

 

 

Warrant liability

 

 

 

70

 

 

 

 

 

Operating lease liability, noncurrent

 

 

 

1,140

 

 

 

 

1,311

 

Total liabilities

 

 

 

35,900

 

 

 

 

26,439

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 46,657,478 and 34,900,727 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

 

5

 

 

 

 

4

 

Additional paid-in capital

 

 

 

742,781

 

 

 

 

479,436

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

(27

)

Accumulated deficit

 

 

 

(399,278

)

 

 

 

(310,304

)

Total stockholders’ equity

 

 

 

343,508

 

 

 

 

169,109

 

Total liabilities and stockholders’ equity

 

$

 

379,408

 

 

$

 

195,548

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


Table of Contents

Akero Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

 

25,087

 

 

$

 

19,470

 

 

$

 

66,964

 

 

$

 

54,048

 

General and administrative

 

 

 

11,004

 

 

 

 

4,883

 

 

 

 

22,772

 

 

 

 

14,399

 

Total operating expenses

 

 

 

36,091

 

 

 

 

24,353

 

 

 

 

89,736

 

 

 

 

68,447

 

Loss from operations

 

 

 

(36,091

)

 

 

 

(24,353

)

 

 

 

(89,736

)

 

 

 

(68,447

)

Interest expense

 

 

 

(324

)

 

 

 

 

 

 

 

(377

)

 

 

 

 

Other income, net

 

 

 

873

 

 

 

 

23

 

 

 

 

1,139

 

 

 

 

94

 

Net loss

 

 

 

(35,542

)

 

 

 

(24,330

)

 

 

 

(88,974

)

 

 

 

(68,353

)

Net unrealized gain (loss) on short-term marketable securities

 

 

 

3

 

 

 

 

(8

)

 

 

 

27

 

 

 

 

(14

)

Comprehensive loss

 

$

 

(35,539

)

 

$

 

(24,338

)

 

$

 

(88,947

)

 

$

 

(68,367

)

Net loss per common share, basic and diluted

 

$

 

(0.92

)

 

$

 

(0.70

)

 

$

 

(2.45

)

 

$

 

(1.96

)

Weighted-average number of shares used in computing net loss per common share, basic and diluted

 

 

 

38,663,469

 

 

 

 

34,862,116

 

 

 

 

36,364,284

 

 

 

 

34,807,439

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


Table of Contents

Akero Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In-

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity (Deficit)

 

Balances at December 31, 2021

 

 

34,900,727

 

 

$

 

4

 

 

$

 

479,436

 

 

$

 

(27

)

 

$

 

(310,304

)

 

$

 

169,109

 

Exercise of stock options

 

 

122,208

 

 

 

 

 

 

 

 

147

 

 

 

 

 

 

 

 

 

 

 

 

147

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

3,311

 

 

 

 

 

 

 

 

 

 

 

 

3,311

 

Net unrealized loss on short-term marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,029

)

 

 

 

(26,029

)

Balances at March 31, 2022

 

 

35,022,935

 

 

$

 

4

 

 

$

 

482,894

 

 

$

 

(30

)

 

$

 

(336,333

)

 

$

 

146,535

 

Issuance of common stock pursuant to ESPP purchases

 

 

22,139

 

 

 

 

 

 

 

 

178

 

 

 

 

 

 

 

 

 

 

 

 

178

 

Issuance of common stock pursuant to equity investment by Pfizer, net of issuance costs

 

 

2,525,252

 

 

 

 

 

 

 

 

24,647

 

 

 

 

 

 

 

 

 

 

 

 

24,647

 

Vested warrants issued pursuant to loan agreement

 

 

 

 

 

 

 

 

 

 

227

 

 

 

 

 

 

 

 

 

 

 

 

227

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

4,161

 

 

 

 

 

 

 

 

 

 

 

 

4,161

 

Net unrealized gain on short-term marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

27

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,403

)

 

 

 

(27,403

)

Balances at June 30, 2022

 

 

37,570,326

 

 

$

 

4

 

 

$

 

512,107

 

 

$

 

(3

)

 

$

 

(363,736

)

 

$

 

148,372

 

Issuance of common stock upon closing of follow-on public offering, net of issuance costs and underwriting fees of $13,800

 

 

8,846,154

 

 

 

 

1

 

 

 

 

215,835

 

 

 

 

 

 

 

 

 

 

 

 

215,836

 

Exercise of stock options

 

 

240,998

 

 

 

 

 

 

 

 

3,108

 

 

 

 

 

 

 

 

 

 

 

 

3,108

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

11,731

 

 

 

 

 

 

 

 

 

 

 

 

11,731

 

Net unrealized gain on short-term marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,542

)

 

 

 

(35,542

)

Balances at September 30, 2022

 

 

46,657,478

 

 

$

 

5

 

 

$

 

742,781

 

 

$

 

 

 

$

 

(399,278

)

 

$

 

343,508

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

34,741,649

 

 

$

 

4

 

 

$

 

468,238

 

 

$

 

(3

)

 

$

 

(209,527

)

 

$

 

258,712

 

Exercise of stock options

 

 

28,670

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

2,364

 

 

 

 

 

 

 

 

 

 

 

 

2,364

 

Net unrealized gain on short-term marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,090

)

 

 

 

(15,090

)

Balances at March 31, 2021

 

 

34,770,319

 

 

$

 

4

 

 

$

 

470,635

 

 

$

 

(2

)

 

$

 

(224,617

)

 

$

 

246,020

 

Exercise of stock options

 

 

60,333

 

 

 

 

 

 

 

 

393

 

 

 

 

 

 

 

 

 

 

 

 

393

 

Vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock pursuant to ESPP purchases

 

 

10,130

 

 

 

 

 

 

 

 

215

 

 

 

 

 

 

 

 

 

 

 

 

215

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

2,436

 

 

 

 

 

 

 

 

 

 

 

 

2,436

 

Net unrealized loss on short-term marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)