Akebia Therapeutics (NASDAQ:AKBA)

CAPS Rating: 4 out of 5

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64 Outperform
1 Underperform
 

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Top AKBA Bull/Bear Pitches

The best Bull and Bear pitches based on recency and number of recommendations.

zzlangerhans (99.82)
Submitted December 23, 2016

I'm not the kind of narcissistic psychopath who enjoys leading a Twitter stock cult, but if I was my chosen stock would be Akebia. I closed my recent outperform rating at a big loss in order to write an updated pitch, but in real life zzporte… More

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AKBA Summary

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Recent Community Commentary

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Recs

0
Member Avatar adamicius (< 20) Submitted: 3/22/2017 11:08:12 AM : Outperform Start Price: $9.02 AKBA Score: +92.53

speculative medical play. applications of high-altitude simulation to increase red blood cell count in the body.

Recs

0
Member Avatar john603 (72.89) Submitted: 12/23/2016 9:06:29 AM : Outperform Start Price: $10.06 AKBA Score: +67.66

passed trials. good drug hope

Recs

3
Member Avatar zzlangerhans (99.82) Submitted: 12/22/2016 10:03:57 PM : Outperform Start Price: $10.63 AKBA Score: +58.02

I'm not the kind of narcissistic psychopath who enjoys leading a Twitter stock cult, but if I was my chosen stock would be Akebia. I closed my recent outperform rating at a big loss in order to write an updated pitch, but in real life zzporte currently owns 7000 shares cost basis 9.74 and we will likely be adding to that position in the near future.

Akebia's valuation is based on lead drug vadadustat, a HIF prolyl hydroxylase inhibitor being developed as an upgrade from ESA's for the treatment of anemia associated with chronic kidney disease. One thing about the stock is that over the last couple of years, no positive catalyst has been able to create a sustained bump in the share price. The stock has been uninflatable since dropping over 50% in October 2014 due to a three drug-related adverse events, one of which was a death, in a phase IIb trial of vadadustat in anemia of non-dialysis chronic kidney disease. That's understandable, but in September 2015 the company reported there were no drug-related adverse events in a successful phase II trial of vadadustat for dialysis patients. The stock spiked, but soon filled the gap and declined lower than it had been before the positive result. At that time, the bear thesis seemed to be a lack of big pharma partners. Meanwhile, competitor FibroGen's HIF prolyl hydroxylase inhibitor roxadustat was globally partnered with Astellas and Astra Zeneca. Perhaps that's why Fibrogen had a market cap five times the size of Akebia, despite being at approximately the same stage of development.

Just a few months later, in December, Akebia announced partnership with Mitsubishi Tanabe for vadadustat in Japan, India and some smaller Asian countries. Akebia received 40M upfront, 60M for phase III costs, up to 250M in developmental and sales milestones, and tiered double digit royalties. Once again the share price spiked and then retraced to lower levels than previously. What was the bear thesis now? Crickets.

All was quiet until this week when Akebia announced another partnership, this time with Otsuka, for a 50/50 split of the future US revenues and cost of sales for vadadustat. In return, Akebia will receive 125M immediately, 35M in Q1 2017, and 105M contribution to the global development program. There is also a provision for up to 765M in developmental and commercial milestones. Vadadustat remains unpartnered in Europe and all other countries outside of the US and East Asia. One potential overhang for the stock is an IP dispute with FibroGen in the EU, although recent court rulings have been going Akebia's way.

When the share price spiked over 12 from the mid 8's the morning the deal was announced, I foolishly thought this would be the end of Akebia's days in the cold and added shares at 11.5 and then again at 10.5 Shortly after the open, the share price dropped as low as 9.4. Now the share price seems to be fluctuating in the 10's but I wouldn't be surprised to see it below 10 again soon. At 10, Akebia has a market cap of 383M. I haven't done a DCF analysis to calculate what I think the fair value of the stock should be. I think that kind of analysis is fraught with margins for error. However, I'll point out that the difference between a share price of eight and ten is 77M. That means Akebia has added 77M in market cap for a deal that provides guaranteed funding of 265M, 160M of it in upfront cash that will be recognized within three months. It also means that Otsuka values the rights to half the US market at a minimum of 265M, and is still willing to pay half the cost of sales to get the future revenues. Furthermore, if Otsuka is correct about the value of the US market for vadadustat, they are apparently willing to pay another 765M if the drug meets their sales expectations. Meanwhile, Mitsubishi has valued 80-90% of the east Asian market [exclusive of China] at a minimum of 100M and as much as 350M. Akebia has shown a willingness and a capability to partner vadadustat so one can only conclude that negotiations for an EU partnership are ongoing. The company stated as much in a recent e-mail interview with Adam Feuerstein. Speaking of Adam, he's been positive about Akebia since this mailbag in October 2015 https://www.thestreet.com/story/13309166/1/biotech-stock-mailbag-akebia-neuralstem-arrowhead.html . Anyone who trades biotech knows that Adam is a lot more likely to be negative than positive about a small cap biotech stock, and if he's negative then watch out below. Finally, Akebia had 161M in cash at the end of September and has been burning 20-25M per quarter.

So what exactly is the thesis that Akebia should be a sub 400M market cap stock? Admittedly it will be a couple of years before the phase III trials have read out and regulatory submissions are in progress, but the same applies to FibroGen and other potential competitors. There's always the possibility that the drug blows up, but clearly Mitsubishi and Otsuka have vetted it and feel comfortable making large frontended deals for it. Please, if you know what I'm missing here, let me know. In the meantime I'm planning to add again if the stock dips below 10 tomorrow and I look forward to building this position into the most oversized zzporte position since Tekmira.

Leaderboard

Find the members with the highest scoring picks in AKBA.

Score Leader

oscillation

oscillation (80.34) Score: +137.13

The Score Leader is the player with the highest score across all their picks in AKBA.

Top
Pick
Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
Index
Gain
Score Commentary
oscillation 80.34 8/20/2015 Outperform 5Y $6.98 +160.82% +23.69% +137.13 1 Comment
portefeuille 98.74 5/1/2015 Outperform 5Y $7.41 +145.68% +21.97% +123.71 0 Comment
portefeuille6 99.74 5/1/2015 Outperform 5Y $7.43 +145.02% +21.90% +123.12 0 Comment
portefeuille3 98.72 5/1/2015 Outperform 5Y $7.48 +143.38% +21.94% +121.44 0 Comment
usubanas2 64.29 9/8/2015 Outperform 5Y $7.28 +150.07% +30.36% +119.71 0 Comment
usubanas 99.78 9/8/2015 Outperform 5Y $7.28 +150.07% +30.36% +119.71 0 Comment
malcifar 60.65 6/1/2015 Outperform 5Y $7.91 +130.15% +20.52% +109.63 0 Comment
superstar2 99.60 7/6/2016 Outperform 5Y $7.89 +130.74% +21.92% +108.81 0 Comment
gdl777 < 20 5/14/2015 Outperform 3Y $8.02 +127.00% +20.36% +106.64 0 Comment
portefeuille4 99.67 9/2/2016 Outperform 5Y $8.17 +122.83% +17.12% +105.71 0 Comment

Wall Street

See what the Wall Street professionals think, according to their public statements and filings.

Player Name Player
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
S&P
Gain
Score End Date Commentary
TrackCreditSuiss 90.46 4/15/2014 Outperform NS $21.12 -13.80% +39.34% -53.14 0 Comment

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