Following the FDA’s stinging FDA rejection of their partnered anemia drug, Otsuka Pharmaceutical has given notice that it is ending its alliance with Akebia Therapeutics, and the Japanese drugmaker wants to exit the deal as soon as possible.
The agreement inked in 2016 gives either company the right to terminate the pact if the other party breached its obligations. That termination must be preceded by a 12-month written notice. Despite the FDA rejection of the partnered drug, vadadustat, it is still under regulatory review in Europe. Nonetheless, Otsuka last Thursday gave its one-year notice to scrap the alliance entirely, according to an Akebia regulatory filing. Otsuka is alleging material breaches under the agreement that it contends could lead to an end of the agreement as early as mid-June, making the correspondence essentially a one-month notice. An earlier end to the alliance could spare Otsuka from hundreds of millions of dollars in payments for a drug that it now wants to wash its hands of.
The two companies developed the drug, vadadustat, as a treatment for anemia caused by chronic kidney disease. This anemia can be treated with older medicines administered as injections. Vadadustat is small molecule formulated as a pill that’s intended to be more convenient for patients. In late March, the FDA rejected the drug, flagging cardiovascular risks, plus a risk of blood clots and liver damage in those who are receiving dialysis. To address those issues, the FDA said Akebia would need to conduct another clinical trial.
Otsuka paid Cambridge, Massachusetts-based Akebia $125 million up front in 2016 to begin the partnership on vadadustat. The deal put Akebia in line for up to $65 million in regulatory milestone payments and up to $575 million in commercial milestone payments. In 2017, the partners expanded their agreement to cover development and commercialization of vadadustat globally in countries that include Europe, Russia, China among other markets. While Akebia led the Phase 3 testing of the drug, Otsuka filed the marketing authorization application with the European Medicines Agency last year, and the amended agreement makes it responsible for funding much of the global development of drug.
Akebia and Otsuka have been sharing in the development costs of the drug, per the terms of the original agreement. Those costs have been going up. In its 2021 annual report, Akebia said that due to global development costs exceeding a certain threshold in the second quarter of 2019, it required Otsuka to increase its share of financing those costs. Instead of funding 52.5% of those costs, Akebia put Otsuka on the hook for 80%. That funding will be credited against the future payments due to Akebia, but it’s money that’s coming out of Otsuka’s pockets now.
Rather than waiting for the European regulatory decision on vadadustat, Otsuka is seeking a speedy end to its Akebia alliance. According to the Akebia regulatory filing, Otsuka is alleging material breaches by Akebia under the U.S. portion of the agreement, which it claims enables it to end the agreement by June 12. Those breaches are not specified, but the agreement states that following the written notice, the breaching party has an unspecified period of time to cure the breach.
Akebia plans to contest Otsuka’s move, saying in its regulatory filing that it “disagrees with, and intends to dispute, Otsuka’s allegations of material breach and does not believe that Otsuka has a right to terminate the Otsuka U.S. Agreement for material breach, and accordingly believes that the termination of the Otsuka U.S. Agreement should not be effective prior to the U.S. Termination Effective Date.” The dispute could be headed to arbitration. Under the terms of the agreement, as long as Akebia provides notice that it disputes the basis for the termination, then the agreement continues until an arbitrator decides.
Managing Otsuka’s move to terminate the vadadustat alliance is just one of Akebia’s headaches. Shortly after the FDA’s rejection of the anemia drug, Akebia announced it was laying off about 42% of its staff across all areas of the company. The biotech’s flagging stock price poses another problem. On May 12, the same day that Otsuka provided its termination notice, Akebia received a letter from the Nasdaq notifying the company that it in danger of delisting, the company said in the regulatory filing. Akebia’s stock price plummeted following the FDA rejection. A stock that trades below $1 for more than 30 consecutive business days fails to meet the exchange’s minimum bid price requirement. Nasdaq has given Akebia until Nov. 8 to regain compliance with listing requirements. Akebia’s stock price opened Monday at 35 cents per share.
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