Regulatory Pressures Will Erode Dialysis Growth While Value Will Emerge

Key Takeaways

• Heavy dependence on Vafseo for revenue exposes Akebia to risks from market shifts, regulatory challenges, and competition.
  
• Future growth and diversification efforts are threatened by high development costs, slow regulatory progress, and potential dilution from additional fundraising.
  
• Heavy reliance on lead products and regulatory outcomes intensifies risk amid potential revenue loss from generics, reimbursement pressures, and increased competition in renal and anemia therapies.

Catalysts

A biopharmaceutical company, focuses on the development and commercialization of therapeutics for patients with kidney diseases.

• While Akebia's rapid expansion of Vafseo access from 40,000 to a projected 275,000 dialysis patients and increasing coverage among both Medicare Advantage and fee-for-service patients could drive substantial revenue gains in the near term, the company still faces mounting government and payer scrutiny of drug prices, which threatens to limit long-term pricing power and revenue growth for its core products.
  
• Although long-term demographic trends-such as an aging global population and rising chronic kidney disease prevalence-suggest a growing addressable market, Akebia is heavily reliant on driving broad adoption and differentiation of Vafseo to achieve sustainable earnings growth. This reliance is risky, as demographic shifts toward prevention or changing CKD incidence could shrink the patient pool and undermine forward revenue assumptions.
  
• Despite successful initial launches and increasing depth and breadth of prescribing among nephrologists, Akebia's concentration of financial performance around the commercialization of a single drug exposes it to significant volatility. A clinical setback, regulatory challenge, or difficulties expanding outside the U.S. could quickly reverse recent margin improvements and threaten future earnings.
  
• While Akebia's pipeline expansion ambitions (such as non-dialysis CKD indications and other R&D programs) provide some long-term optionality, the increasing complexity and cost of clinical development and a slow-moving regulatory environment may delay or derail these projects, increasing the likelihood of ongoing net losses and potential dilution from future capital raises.
  
• Though the company benefits from favorable shifts toward innovative, patient-specific therapies and rising global healthcare expenditure, the entry of larger pharmaceutical competitors and evolving next-generation treatments (including gene or cell therapies) places Akebia at risk of losing market share and future revenue momentum if it cannot maintain a competitive edge or diversify its portfolio.

Akebia Therapeutics Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Akebia Therapeutics compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Akebia Therapeutics's revenue will grow by 14.3% annually over the next 3 years.
• The bearish analysts are not forecasting that Akebia Therapeutics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Akebia Therapeutics's profit margin will increase from -17.9% to the average US Biotechs industry of 16.3% in 3 years.
• If Akebia Therapeutics's profit margin were to converge on the industry average, you could expect earnings to reach $49.5 million (and earnings per share of $0.15) by about August 2028, up from $-36.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 48.1x on those 2028 earnings, up from -22.0x today. This future PE is greater than the current PE for the US Biotechs industry at 15.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.02%, as per the Simply Wall St company report.

Akebia Therapeutics Future Earnings Per Share Growth

Risks

• The impending loss of IP exclusivity and the introduction of authorized generics for Auryxia create significant uncertainty about future sales, exposing Akebia to a risk of rapid revenue erosion and margin compression if additional generic competitors enter the market soon.
  
• Akebia's financial performance and future earnings are heavily dependent on the successful market adoption and expansion of a single lead product, Vafseo, exposing the company to concentration risk should Vafseo face clinical, regulatory, or commercial setbacks.
  
• Delays or difficulties in obtaining regulatory approval and label expansion for Vafseo in nondialysis patients, including dependence on the successful and timely completion of the VALOR and VOICE trials and subsequent FDA alignment, could slow future revenue growth and limit market expansion.
  
• Increased scrutiny from payers and government reimbursement programs, such as Medicare Advantage and Medicare fee-for-service, could introduce pricing pressures or reimbursement challenges, potentially limiting Akebia's pricing power and impacting both revenue and net margins over the long term.
  
• The broader industry trend of large pharmaceutical companies investing heavily in renal and anemia therapies will likely intensify competitive pressures, putting Akebia at risk of losing market share and facing downward pressure on both revenue and long-term profitability.

Valuation

• The assumed bearish price target for Akebia Therapeutics is $6.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Akebia Therapeutics's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.0, and the most bearish reporting a price target of just $6.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $304.5 million, earnings will come to $49.5 million, and it would be trading on a PE ratio of 48.1x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $3.03, the bearish analyst price target of $6.0 is 49.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.