Attempted to post this on Yahoo, but their forums BLOW...
I just wanted to outline some key points here that shareholders should seriously consider. I’ll start this at a random date 5/1.
5/1/17 Butler is KERX's Chairman & AKBA's CEO/President
5/15/17 AKBA, under Butler's leadership, signs a deal w/ Vifor. Vifor is 45% owned by Fresenius (FRE) who has 40% of the dialysis market in the USA. Let’s look at how much of Vadadustat’s sales “we” are getting.
AKBA has a profit share w/ Vifor. The SEC filing states, “Akebia will receive a majority of the profit from Vifor’s sales of vadadustat to FKC in the Territory”. Is it 51%/49% or is it 90%/10%? There’s no mention in the SEC filing. Now, after Vifor takes it's cut, the remainder of the income is split 50/50 w/ Otsuka Pharma (See 12/18/16 SEC filing): “the parties will equally share all net sales of vadadustat in the Territory, and each party will bear half of all costs in the Territory (including medical affairs, commercialization and manufacturing costs).. AKBA gets the remainder that would be split w/ us.” So we get 37% (KERX shareholders are getting 37% of the combined companies upon completion of the merger) of the 50% AKBA keeps after giving some unknown % to Vifor. Woohoo. Any surprise mgmt forgot to mention this? We just gave up 2/3 of KERX to get a minority interest in a drug that’s HOPEFULLY APPROVED and split multiple ways before hitting “our” bottom line.
Now, Vifor has an EXCLUSIVE right to sell Vadadustat in the dialysis market and in return for granting that right, we can’t sell to the rest of the dialysis market. So kiss 60% of that market bye bye. Recall FRE has a 40% market share. Great, huh? At least it can still be sold in the non-dialysis market. Per AKBA 8K: “Akebia retains all rights to commercialize vadadustat for use in the non-dialysis dependent CKD market and in other dialysis organizations in the Territory, which will be done in collaboration with Otsuka following FDA approval.” So we’re at a major disadvantage from DAY 1. Keeping 100% of Auryxia is sure sounding better to me.
Let me stress the above again and use a hypothetical market size of $1bil for Vadadustat. First, subtract 60% due to the exclusivity. We’re now at $400mil. Then Vifor takes its share. Let’s assume worst case scenario (49%) because we (I) just don’t know what that split is other than what’s mentioned above in the SEC filing. Subtract another $196mil. That leaves us $204 mil. But now Otsuka gets their 50%. We’re now down to $102 mil and since we are only a 37% owner, our piece of the pie is $37.74 million. What are Auryxia sales at right now? In q3 we did $21.75 mil (almost double YoY). So my guess is that we would have come close to doing $100mil this yr in revenue. AKBA now gets 63% of it. You PO’d yet? Now granted I used the worst case scenario for the AKBA/VIFOR split. However, if you run the same scenario using a 90/10 AKBA/VIFOR split, the net number to us is still only $59.2 mil. So they get 2/3 of our 100mil and we get 59 mil of vadadustat only if A LOT of assumptions follow through. Ridiculous.
I’ll remind you again. There’s no guarantee Vadadustat gets approved. But it’s a sure thing that AKBA keeps 63% of Auryxia sales, which will also be the sole source of steady income for at least THE NEXT FIVE YEARS, since that’s how long I estimate it takes for Vadadustat to generate income of any significant value.
But wait. It gets better!
7/13/17 FRE (Vifor’s 45% owner) petitions the FDA to deny the pre-ckd label for Auryxia. Ya can’t make this stuff up. Our proposed partner’s partner who has 40% of the dialysis market and sells 2 competing products (to Auryxia) doesn’t want Auryxia sold to the pre-CKD market. Did we get any assurances that they would allow Auryxia to be marketed to their pre-ckd patients? Anyone? Anyone? Not that I’m aware of. (Ferinject & Venofer are the drugs’ names). Ferinject is an intravenous iron product. So it would definitely suffer from Auryxia’s proliferation. I guess KERX mgmt just forgot to mention this little tidbit. Upset yet? You should be.
Care to guess what are stock price was at when FRE filed their petition w/ the FDA? How about the mid $7’s. After that letter we went back to the low $4’s. 2 months later Butler resigns. 5 months later bylaw amendments are filed.
9/30/17 Butler resigns from his Chairman position at KERX.
12/19/17 KERX files amendments to its Bylaws (w/ SEC) which appears to strengthen the BoD’s position. We don’t know what prompted this, but I believe there was an internal power struggle occurring and I think Madison was against this transaction. Why? He leaves and this deal gets announced shortly after. Hard to believe it’s just a coincidence.
6/28/18 AKBA/KERX merger announced. KERX shareholders lost $100 mil +/- for the privelege of losing 2/3 of our company. Unreal. We were so close to being cash flow positive, growing 20% every quarter and would have had a MUCH higher valuation w/ net cash flow. This transaction is awful.
KERX management clearly didn’t have shareholders’ interests in mind when they signed this “deal.” It’s a complete ripoff designed to provide big payoffs to KERX mgmt in the form of expensive severance packages so they can walk away fat and happy.
If you are a large retail shareholder, 10,000+ shares, I strongly urge you to reach out to an attorney. We got it stuck to us. If we win, it’s likely insurance pays the attorney bills. You don’t pay a dime. I reached out to Weiss. I don’t care who you reach out to. I just care that you take some action.
