akca-10q_20190630.htm

 

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 June 30, 2019

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 number 001-38137

 

 

Akcea Therapeutics, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

47-2608175

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

22 Boston Wharf Road, 9th Floor, Boston, MA 02210

(Address of principal executive offices, including zip code)

617-207-0202

(Registrant’s telephone number, including area code)

 

 

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

 

AKCA

 

The Nasdaq Stock Market, LLC

 

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 12(b)-2 of the Securities Exchange Act of 1934). Yes No

 

The number of shares of common stock outstanding as of August 1, 2019 was 93,032,386.

 

 

 

 


 

AKCEA THERAPEUTICS, INC.

FORM 10-Q

INDEX

 

PART I

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited):

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018

 

5

 

 

 

 

 

Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2019 and 2018

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

 

8

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

10

 

 

 

 

Item 2.

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

 

30

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

41

 

 

 

 

Item 4.

Controls and Procedures

 

41

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

43

 

 

 

 

Item 1A

Risk Factors

 

43

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

72

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

72

 

 

 

 

Item 4.

Mine Safety Disclosures

 

72

 

 

 

 

Item 5.

Other Information

 

72

 

 

 

 

Item 6.

Exhibits

 

73

 

 

 

 

Signatures

 

74

 

TRADEMARKS

"Akcea," the Akcea logo, and other trademarks or service marks of Akcea Therapeutics, Inc. appearing in this Report are the property of Akcea Therapeutics, Inc. This Report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Report may appear without the ® or TM symbols.

 

2


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

150,234

 

 

$

86,454

 

Short-term investments

 

 

145,374

 

 

 

166,155

 

Accounts receivable

 

 

9,193

 

 

 

4,597

 

Receivable from Ionis Pharmaceuticals, Inc.

 

 

7,911

 

 

 

 

Inventories

 

 

8,286

 

 

 

85

 

Other current assets

 

 

6,713

 

 

 

9,944

 

Total current assets

 

 

327,711

 

 

 

267,235

 

Property, plant and equipment, net

 

 

5,443

 

 

 

5,696

 

Operating lease right-of-use assets

 

 

11,534

 

 

 

 

Intangible assets, net

 

 

86,006

 

 

 

88,914

 

Deposits and other assets

 

 

3,426

 

 

 

3,416

 

Total assets

 

$

434,120

 

 

$

365,261

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,936

 

 

$

12,068

 

Payable to Ionis Pharmaceuticals, Inc.

 

 

 

 

 

18,901

 

Accrued compensation

 

 

7,521

 

 

 

8,583

 

Accrued liabilities

 

 

17,569

 

 

 

14,787

 

Current portion of deferred revenue

 

 

15,830

 

 

 

25,354

 

Other current liabilities

 

 

1,713

 

 

 

968

 

Total current liabilities

 

 

50,569

 

 

 

80,661

 

Long-term portion of lease liabilities

 

 

14,909

 

 

 

4,442

 

Long-term portion of deferred revenue

 

 

 

 

 

3,434

 

Total liabilities

 

 

65,478

 

 

 

88,537

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 125,000,000 shares authorized at June 30,

   2019 and December 31, 2018; 92,921,173 and 89,345,978 shares issued and

   outstanding at June 30, 2019 and December 31, 2018, respectively.

 

 

93

 

 

 

89

 

Additional paid-in capital

 

 

900,837

 

 

 

799,001

 

Accumulated other comprehensive loss

 

 

(110

)

 

 

(324

)

Accumulated deficit

 

 

(532,178

)

 

 

(522,042

)

Total stockholders’ equity

 

 

368,642

 

 

 

276,724

 

Total liabilities and stockholders’ equity

 

$

434,120

 

 

$

365,261

 

 

See accompanying notes.

3


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$

9,865

 

 

$

 

 

$

16,619

 

 

$

 

Licensing revenue

 

 

6,036

 

 

 

 

 

 

6,036

 

 

 

 

Research and development and license revenue under

   collaborative agreement

 

 

10,722

 

 

 

18,321

 

 

 

167,784

 

 

 

35,429

 

Total revenue

 

 

26,623

 

 

 

18,321

 

 

 

190,439

 

 

 

35,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales - product

 

 

4,364

 

 

 

 

 

 

5,405

 

 

 

 

Cost of sales - intangible asset amortization

 

 

1,419

 

 

 

 

 

 

2,822

 

 

 

 

Research and development

 

 

20,271

 

 

 

39,457

 

 

 

119,890

 

 

 

67,427

 

Selling, general and administrative

 

 

50,740

 

 

 

42,287

 

 

 

95,342

 

 

 

61,752

 

Net loss share from commercial activities under arrangement

   with Ionis Pharmaceuticals, Inc.

 

 

(11,465

)

 

 

 

 

 

(20,521

)

 

 

 

Total expenses

 

 

65,329

 

 

 

81,744

 

 

 

202,938

 

 

 

129,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(38,706

)

 

 

(63,423

)

 

 

(12,499

)

 

 

(93,750

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

1,571

 

 

 

1,546

 

 

 

2,795

 

 

 

2,414

 

Other income (expense)

 

 

(28

)

 

 

45

 

 

 

(140

)

 

 

(123

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income tax expense

 

 

(37,163

)

 

 

(61,832

)

 

 

(9,844

)

 

 

(91,459

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(160

)

 

 

(214

)

 

 

(292

)

 

 

(214

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(37,323

)

 

$

(62,046

)

 

$

(10,136

)

 

$

(91,673

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock owned by Ionis, basic and

   diluted

 

$

(0.40

)

 

$

(0.72

)

 

$

(0.06

)

 

$

(1.19

)

Weighted-average shares of common stock outstanding owned by

   Ionis, basic and diluted

 

 

70,221,338

 

 

 

60,832,494

 

 

 

69,406,181

 

 

 

53,182,685

 

Net loss per share of common stock owned by others, basic and

   diluted

 

$

(0.40

)

 

$

(0.85

)

 

$

(0.26

)

 

$

(1.33

)

Weighted-average shares of common stock outstanding owned by

   others, basic and diluted

 

 

22,573,900

 

 

 

21,492,157

 

 

 

22,351,368

 

 

 

21,332,650

 

 

See accompanying notes.

4


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(37,323

)

 

$

(62,046

)

 

$

(10,136

)

 

$

(91,673

)

Unrealized gains on debt securities, net of tax

 

 

10

 

 

 

151

 

 

222

 

 

 

106

 

Currency translation adjustment

 

 

(93

)

 

 

20

 

 

 

(8

)

 

48

 

Comprehensive loss

 

$

(37,406

)

 

$

(61,875

)

 

$

(9,922

)

 

$

(91,519

)

 

See accompanying notes.

5


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended June 30, 2018 and 2019

(In thousands)

(Unaudited)

 

 

 

 

For the Three Months Ended June 30, 2018

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

Description

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2018

 

 

66,804

 

 

$

67

 

 

$

472,549

 

 

$

(468

)

 

$

(325,848

)

 

$

146,300

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(62,046

)

 

 

(62,046

)

Change in unrealized gains, net of tax

 

 

 

 

 

 

 

 

 

 

 

151

 

 

 

 

 

 

151

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Exercise of common stock options

 

 

210

 

 

 

 

 

 

1,545

 

 

 

 

 

 

 

 

 

1,545

 

Issuance of common stock to Ionis in connection with

   TTR License Agreement

 

 

18,667

 

 

 

19

 

 

 

200,081

 

 

 

 

 

 

 

 

 

 

 

200,100

 

Distribution to Ionis in connection with the TTR license

   transaction

 

 

 

 

 

 

 

 

(7,792

)

 

 

 

 

 

 

 

 

 

 

(7,792

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,126

 

 

 

 

 

 

 

 

 

12,126

 

Balance at June 30, 2018

 

 

85,681

 

 

$

86

 

 

$

678,509

 

 

$

(297

)

 

$

(387,894

)

 

$

290,404

 

 

 

 

For the Three Months Ended June 30, 2019

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

Description

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2019

 

 

92,635

 

 

$

93

 

 

$

883,653

 

 

$

(27

)

 

$

(494,855

)

 

$

388,864

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,323

)

 

 

(37,323

)

Change in unrealized gains, net of tax

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(93

)

 

 

 

 

 

(93

)

Exercise of common stock options

 

 

286

 

 

 

 

 

 

2,821

 

 

 

 

 

 

 

 

 

2,821

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

14,363

 

 

 

 

 

 

 

 

 

14,363

 

Balance at June 30, 2019

 

 

92,921

 

 

$

93

 

 

$

900,837

 

 

$

(110

)

 

$

(532,178

)

 

$

368,642

 

 

See accompanying notes.

6


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

Six Months Ended June 30, 2018 and 2019

(Unaudited)

 

 

 

For the Six Months Ended June 30, 2018

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

Description

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2017

 

 

66,542

 

 

$

67

 

 

$

464,430

 

 

$

(451

)

 

$

(296,221

)

 

$

167,825

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(91,673

)

 

 

(91,673

)

Change in unrealized gains, net of tax

 

 

 

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

106

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

48

 

 

 

 

 

 

48

 

Exercise of common stock options

 

 

456

 

 

 

 

 

 

3,174

 

 

 

 

 

 

 

 

 

3,174

 

Issuance of common stock to Ionis in connection with

   TTR License Agreement

 

 

18,667

 

 

 

19

 

 

 

200,081

 

 

 

 

 

 

 

 

 

200,100

 

Distribution to Ionis in connection with the TTR license

   transaction

 

 

 

 

 

 

 

 

(7,792

)

 

 

 

 

 

 

 

 

(7,792

)

Issuance of common stock in connection with

   employee stock purchase plan

 

 

16

 

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

107

 

Stock compensation expense

 

 

 

 

 

 

 

 

18,509

 

 

 

 

 

 

 

 

 

18,509

 

Balance at June 30, 2018

 

 

85,681

 

 

$

86

 

 

$

678,509

 

 

$

(297

)

 

$

(387,894

)

 

$

290,404

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

Description

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

 

89,346

 

 

$

89

 

 

$

799,001

 

 

$

(324

)

 

$

(522,042

)

 

$

276,724

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,136

)

 

 

(10,136

)

Change in unrealized gains, net of tax

 

 

 

 

 

 

 

 

 

 

 

222

 

 

 

 

 

 

222

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

(8

)

Exercise of common stock options

 

 

720

 

 

 

1

 

 

 

7,026

 

 

 

 

 

 

 

 

 

7,027

 

Issuance of common stock in connection with

   employee stock purchase plan

 

 

18

 

 

 

 

 

 

382

 

 

 

 

 

 

 

 

 

382

 

Issuance of common stock in connection with Ionis

   sublicense fee

 

 

2,837

 

 

 

3

 

 

 

74,997

 

 

 

 

 

 

 

 

 

75,000

 

Distribution to Ionis

 

 

 

 

 

 

 

 

(13,492

)

 

 

 

 

 

 

 

 

(13,492

)

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

32,923

 

 

 

 

 

 

 

 

 

32,923

 

Balance at June 30, 2019

 

 

92,921

 

 

$

93

 

 

$

900,837

 

 

$

(110

)

 

$

(532,178

)

 

$

368,642

 

 

See accompanying notes.

7


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(10,136

)

 

$

(91,673

)

Adjustments to reconcile net loss to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

400

 

 

 

54

 

Amortization of right-of-use operating lease assets

 

 

501

 

 

 

 

Amortization of intangibles

 

 

2,908

 

 

 

70

 

Amortization of discount/premium on investment securities, net

 

 

(434

)

 

 

208

 

Non-cash sublicensing expense

 

 

75,000

 

 

 

 

Stock-based compensation expense

 

 

32,923

 

 

 

18,509

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(4,596

)

 

 

2,118

 

Other current and long-term assets

 

 

(966

)

 

 

(2,275

)

Inventory

 

 

(4,014

)

 

 

Accounts payable

 

 

(2,890

)

 

 

325

 

Payable/receivable to/from Ionis Pharmaceuticals, Inc.

 

 

(26,812

)

 

 

12,772

 

Accrued compensation

 

 

(1,062

)

 

 

465

 

Accrued liabilities

 

 

2,128

 

 

 

17,976

 

Income taxes payable

 

 

(169

)

 

 

(720

)

Deferred revenue

 

 

(12,958

)

 

 

(29,141

)

Net cash provided by (used in) operating activities

 

 

49,823

 

 

 

(71,312

)

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(78,606

)

 

 

(22,197

)

Proceeds from maturity of short-term investments

 

 

100,043

 

 

 

94,736

 

Purchases of property, plant and equipment

 

 

(1,389

)

 

 

(5

)

Net cash provided by investing activities

 

 

20,048

 

 

 

72,534

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options and employee stock

   purchase plan issuances

 

 

7,409

 

 

 

3,281

 

Distribution to Ionis

 

 

(13,492

)

 

 

(7,792

)

Proceeds from issuance of common stock to Ionis in TTR transaction

 

 

 

 

 

164,098

 

Net cash (used in) provided by financing activities

 

 

(6,083

)

 

 

159,587

 

Effect of exchange rates on cash

 

 

(8

)

 

 

48

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

63,780

 

 

 

160,857

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

88,838

 

 

 

58,367

 

Cash, cash equivalents and restricted cash at end of period

 

$

152,618

 

 

$

219,224

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash operating and financing activities:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease liabilities

 

$

363

 

 

$

 

Purchases of property, plant and equipment included in accrued liabilities

 

$

 

 

$

491

 

Purchases of property, plant and equipment included in long-term

   portion of deferred rent

 

$