Akero Therapeutics, Inc. [AKRO] Filings

10-Q 1 akro-20240630.htm 10-Q 10-Q

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, 2024



	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38944

Akero Therapeutics, Inc.

(Exact name of registrant as specified in its charter)


Delaware		81-5266573
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

601 Gateway Boulevard, Suite 350

South San Francisco, CA 94080

(650) 487-6488

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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, par value $0.0001 per share	AKRO	The Nasdaq Global Select Market

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 12b‑2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2024, the registrant had 69,430,754 shares of common stock, $0.0001 par value per share, outstanding.

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SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. The principal risks and uncertainties affecting our business includes:

•

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including difficulties in identifying patients with metabolic dysfunction-associated steatohepatitis (“MASH,” formerly known as nonalcoholic steatohepatitis), significant competition for recruiting such patients in clinical trials, and restrictions on patients and investigators related to outbreaks of infectious diseases or public health crises.

•

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than us.

•

Failures or delays in the commencement or completion of, or ambiguous or negative results from our planned clinical trials of our product candidates, could result in increased costs to us and could delay, prevent, or limit our ability to generate revenue and continue our business.

•

Clinical development is uncertain and our clinical trials for efruxifermin (“EFX”) and any future product candidates may experience delays, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business.

•

We rely and will continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval of or commercialize any potential product candidates.

•

The manufacture of our product candidates is complex and we may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

•

We are heavily dependent on the success of EFX, our only product candidate.

•

If we fail to develop and successfully commercialize other product candidates, our business and future prospects may be harmed and our business will be more vulnerable to any problems that we encounter in developing and commercializing our product candidate.

•

We may develop EFX, and potentially future product candidates, in combination with other therapies, which exposes us to additional risks.

•

If we are not successful in discovering, developing, receiving regulatory approval for and commercializing EFX and any future product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

•

We may be required to make significant payments under our license agreement for EFX.

•

The regulatory approval processes of the U.S. Food and Drug Administration (the “FDA”) and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. Our inability to obtain regulatory approval for EFX or any future product candidate would substantially harm our business.

•

Even if we are able to obtain regulatory approvals for our product candidate or any future product candidates, if they exhibit harmful side effects after approval, our regulatory approvals could be revoked or otherwise negatively impacted, and we could be subject to costly and damaging product liability claims.

•

Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which, if violated, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

•

We have incurred significant losses since our inception and we expect to incur losses for the foreseeable future.

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•

We currently have a limited operating history, have not generated any revenue to date, and may never become profitable.

•

We will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development and commercialization of our product candidate or develop any future product candidates.

•

Business interruptions resulting from public health crises, as well as from geopolitical and military conflicts such as the ongoing Russia-Ukraine and Israel-Hamas conflicts, could cause disruption of the development of our product candidates and adversely impact our business.

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	7
	Condensed Consolidated Balance Sheets (Unaudited)	7
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	8
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)	9
	Condensed Consolidated Statements of Cash Flows (Unaudited)	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3.	Defaults Upon Senior Securities	89
Item 4.	Mine Safety Disclosures	89
Item 5.	Other Information	89
Item 6.	Exhibits	90
Signatures		91

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•

the success, cost and timing of our product development activities and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

•

our ability to successfully initiate, enroll, conduct and complete the three parallel, randomized, placebo-controlled, global clinical trials of our Phase 3 SYNCHRONY program, including our ability to reach agreement with FDA and other regulatory authorities on clinical trial designs and the enrollment of patients in Israel and Turkey amidst the ongoing armed conflict between Israel and Hamas and the escalating conflict in the Middle East;

•

our ability to maintain our expected timeline for reporting week 96 results of the Phase 2b clinical trial of EFX in patients with compensated cirrhosis due to MASH (F4 fibrosis), known as the SYMMETRY study;

•

our ability to maintain our expected timeline for reporting primary endpoint results of the Phase 3 SYNCHRONY Histology and SYNCHRONY Real-World clinical trials;

•

the potential for another pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, to disrupt our business plans, product development activities, ongoing clinical trials, including the timing and enrollment of patients, the health of our employees and the strength of our supply chain;

•

our ability to advance any product candidate into or successfully complete any clinical trial;

•

our ability to successfully manufacture our product candidates for future clinical trials or for commercial use, if approved;

•

the potential for our identified research priorities to advance our technologies;

•

our ability to obtain and maintain regulatory approval, if obtained, of EFX or any future product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

•

the ability to license additional intellectual property relating to any future product candidates and to comply with our existing license agreement;

•

our ability to commercialize our products in light of the intellectual property rights of others;

•

the success of competing therapies that are or become available;

•

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

•

the commercialization of our product candidates, if approved;

•

our plans to research, develop and commercialize our product candidates;

•

our ability to attract collaborators with development, regulatory and commercialization expertise;

•

future agreements with third parties in connection with the commercialization of our product candidates and any other approved product;

•

the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

•

the rate and degree of market acceptance of our product candidates, if approved;

•

regulatory developments in the United States and foreign countries;

•

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•

our ability to attract and retain key scientific or management personnel;

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•

the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•

the impact of laws and regulations; and

•

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or into which we may enter.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

NOTE REGARDING TRADEMARKS

Akero Therapeutics, Inc. is the owner of the AKERO trademark, as well as certain other trademarks, including design versions of some of these trademarks. The symbols ™ and ® are not used in connection with the presentation of these trademarks in this report and their absence does not indicate a lack of trademark rights. Certain other trademarks used in this report are the property of third-party trademark owners and may be presented with or without trademark references.

All brand names or trademarks appearing in this report are the property of their respective owners. Unless the context requires otherwise, references in this report to “Akero,” the “Company,” “we,” “us” and “our” refer to Akero Therapeutics, Inc. and its subsidiary.

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Akero Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	June 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	310,355		$	234,207
Short-term marketable securities		449,839			315,803
Prepaid expenses and other current assets		15,816			9,952
Total current assets		776,010			559,962
Long-term marketable securities		88,133			19,283
Property and equipment, net		16			18
Right of use asset		884			1,008
Total assets	$	865,043		$	580,271
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,568		$	7,038
Accrued expenses and other current liabilities		16,606			12,090
Total current liabilities		31,174			19,128
Loan payable, noncurrent		34,959			24,964
Warrant liability		164			54
Operating lease liability, noncurrent		679			819
Total liabilities		66,976			44,965
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.0001 par value, 150,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 69,205,668 and 55,754,445 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		7			6
Additional paid-in capital		1,481,748			1,109,126
Accumulated other comprehensive (loss) income		(261	)		270
Accumulated deficit		(683,427	)		(574,096	)
Total stockholders’ equity		798,067			535,306
Total liabilities and stockholders’ equity	$	865,043		$	580,271

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Akero Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Operating expenses:
Research and development	$	55,322		$	27,985		$	105,972		$	49,772
General and administrative		10,419			7,644			19,723			14,610
Total operating expenses		65,741			35,629			125,695			64,382
Loss from operations		(65,741	)		(35,629	)		(125,695	)		(64,382	)
Interest expense		(1,231	)		(857	)		(2,222	)		(1,314	)
Interest and other income, net		10,985			5,403			18,586			8,782
Net loss		(55,987	)		(31,083	)		(109,331	)		(56,914	)
Net unrealized loss on marketable securities		(182	)		(272	)		(531	)		(288	)
Comprehensive loss	$	(56,169	)	$	(31,355	)	$	(109,862	)	$	(57,202	)
Net loss per common share, basic and diluted	$	(0.81	)	$	(0.60	)	$	(1.70	)	$	(1.15	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		69,160,484			51,867,854			64,234,122			49,419,558

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Akero Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-In-		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity (Deficit)
Balances at December 31, 2022		46,865,206	$	5	$	748,857	$	37		$	(422,337	)	$	326,562
Exercise of stock options		105,783		—		456		—			—			456
Common stock issued for Vested restricted stock units		8,067		—		—		—			—			—
Vested warrants issued pursuant to loan agreement		—		—		330		—			—			330
Stock-based compensation expense		—		—		4,844		—			—			4,844
Net unrealized loss on short-term marketable securities		—		—		—		(16	)		—			(16	)
Net loss		—		—		—		—			(25,831	)		(25,831	)
Balances at March 31, 2023		46,979,056	$	5	$	754,487	$	21		$	(448,168	)	$	306,345
Exercise of stock options		306,510		—		1,556		—			—			1,556
Common stock issued for vested restricted stock units		9,956		—		—		—			—			—
Issuance of common stock pursuant to ESPP purchases		7,885		—		313		—			—			313
Issuance of common stock pursuant to At-The-Market ("ATM") offering, net of issuance costs		3,006,052		—		123,824		—			—			123,824
Issuance of common stock pursuant to a direct offering, net of issuance costs		5,238,500		1		210,955		—			—			210,956
Stock-based compensation expense		—		—		4,798		—			—			4,798
Net unrealized loss on marketable securities		—		—		—		(272	)		—			(272	)
Net loss		—		—		—		—			(31,083	)		(31,083	)
Balances at June 30, 2023		55,547,959	$	6	$	1,095,933	$	(251	)	$	(479,251	)	$	616,437

Balances at December 31, 2023		55,754,445		6		1,109,126		270			(574,096	)		535,306
Exercise of stock options		233,321		—		1,769		—			—			1,769
Common stock issued for vested restricted stock units		10,663		—		—		—			—			—
Vested warrants issued pursuant to loan agreement		—		—		431		—			—			431
Issuance of common stock pursuant to At-The-Market ("ATM") offering, net of issuance costs		500,000		—		10,604		—			—			10,604
Issuance of common stock pursuant to a follow-on offering, net of issuance costs		12,650,000		1		344,437		—			—			344,438
Stock-based compensation expense		—		—		7,398		—			—			7,398
Net unrealized loss on marketable securities		—		—		—		(349	)		—			(349	)
Net loss		—		—		—		—			(53,344	)		(53,344	)
Balances at March 31, 2024		69,148,429	$	7	$	1,473,765	$	(79	)	$	(627,440	)	$	846,253
Exercise of stock options		334		—		3		—			—			3
Common stock issued for vested restricted stock units		40,661		—		—		—			—			—
Issuance of common stock pursuant to ESPP purchases		16,244		—		324		—			—			324
Stock-based compensation expense		—		—		7,656		—			—			7,656
Net unrealized loss on marketable securities		—		—		—		(182	)		—			(182	)
Net loss		—		—		—		—			(55,987	)		(55,987	)
Balances at June 30, 2024		69,205,668	$	7	$	1,481,748	$	(261	)	$	(683,427	)	$	798,067

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Akero Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(109,331	)	$	(56,914	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		15,054			9,642
Depreciation		2			22
Non-cash lease expense		124			115
Net amortization of premiums and discounts on short-term investments		(6,369	)		(2,639	)
Amortization of debt issuance costs and discount		269			212
Fair value change in warrant liability		487			110
Write-off of deferred offering costs		—			337
Unrealized foreign exchange gain and loss		(19	)		(20	)
Acquired in-process research and development expense		999			—
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(5,734	)		(372	)
Accounts payable		7,549			2,245
Accrued expenses and other current liabilities		4,501			352
Operating lease liability		(125	)		(111	)
Net cash used in operating activities		(92,593	)		(47,021	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term and long-term marketable securities		(378,383	)		(213,712	)
Proceeds from maturities of short-term marketable securities		181,335			103,000
Purchase of in-process research and development		(999	)		—
Net cash used in investing activities		(198,047	)		(110,712	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the exercise of stock options		1,772			2,011
Proceeds from the issuance of common stock pursuant to employee stock purchase plan purchases		324			313
Proceeds from the issuance of common in a follow-on public offering		344,839			—
Proceeds from the issuance of common stock pursuant to the ATM offering		10,604			124,212
Proceeds from the issuance of common stock pursuant to registered direct offering		—			211,217
Proceeds from loan payable		10,000			15,000
Payment of debt and equity issuance costs		(751	)		(745	)
Net cash provided by financing activities		366,788			352,008
Net increase in cash, cash equivalents and restricted cash		76,148			194,275
Cash, cash equivalents and restricted cash at the beginning of the period		234,207			249,881
Cash, cash equivalents and restricted cash at the end of the period	$	310,355		$	444,156

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	1,861		$	949

NON-CASH INVESTING AND FINANCING INFORMATION:
Change in net unrealizable loss on marketable securities	$	(531	)	$	(288	)
Warrant liability costs reclassified to additional paid-in equity on vested warrants issued	$	431		$	330
Debt and equity issuance costs included in accounts payable and accrued expenses and other current liabilities	$	64		$	206
Deferred offering costs reclassified to additional paid-in equity	$	—		$	364

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

1. Nature of the business and basis of presentation

Akero Therapeutics, Inc., together with its subsidiaries, (“Akero” or the “Company”) is a clinical-stage company dedicated to developing transformational treatments for patients with serious metabolic diseases marked by high unmet medical need, including metabolic dysfunction-associated steatohepatitis, or MASH, formerly known as non-alcoholic steatohepatitis, or NASH. MASH is a severe form of metabolic dysfunction-associated steatotic liver disease, or MASLD, formerly known as nonalcoholic fatty liver disease, or NAFLD, characterized by inflammation and fibrosis in the liver that can progress to cirrhosis, liver failure, cancer and death. The Company's lead product candidate, efruxifermin, or EFX, is an analog of fibroblast growth factor 21, or FGF21, which is an endogenously expressed hormone that protects against cellular stress and regulates metabolism of lipids, carbohydrates and proteins throughout the body. The Company has initiated a Phase 3 program called SYNCHRONY, which is comprised of three ongoing clinical trials designed to support applications for marketing approval for patients with pre-cirrhotic MASH (F2-F3) and compensated cirrhosis due to MASH (F4). EFX is also being evaluated in the ongoing, 96-week Phase 2b SYMMETRY study in patients with compensated cirrhosis due to MASH (F4). Based on statistically significant fibrosis regression and MASH resolution among patients with biopsy-confirmed pre-cirrhotic MASH, as well as a trend toward fibrosis improvement and statistically significant MASH resolution among patients with cirrhosis due to MASH, the Company believes EFX has the potential, if approved, to be an important medicine for treating MASH.

The Company is subject to risks and uncertainties common to mid-stage companies in the biotechnology industry, including, but not limited to, completion and success of clinical testing, preparation for a potential commercial launch of EFX, if approved, development by competitors of new technological innovations, compliance with governmental regulations, dependence on key personnel and protection of proprietary technology and the ability to secure additional capital to fund operations. EFX will require extensive clinical testing prior to regulatory approval and commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company after elimination of all intercompany accounts and transactions. All adjustments necessary for the fair presentation of the Company’s condensed consolidated financial statements for the periods presented have been reflected.

Liquidity

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

Since its inception, the Company has raised $1,427,900 in capital funds, including $105,800 in proceeds from its initial public offering (“IPO”) in June 2019, $1,196,600 in proceeds from the sales of common stock in equity offerings between 2020 and 2024, which includes a $25,000 equity investment from Pfizer, Inc. in 2022, $90,500 in proceeds from the sale of redeemable convertible preferred stock and $35,000 in venture debt borrowings. The Company has incurred recurring losses since its inception, including net losses of $109,331 and $56,914 for the six months ended June 30, 2024 and 2023, respectively, and net losses of $151,759 and $112,033 for the years ended December 31, 2023 and 2022, respectively. In addition, as of June 30, 2024, the Company had an accumulated deficit of $683,427. The Company expects to continue to generate operating losses for the foreseeable future. As of August 9, 2024, the issuance

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

date of these condensed consolidated financial statements, the Company expects that its existing cash, cash equivalents and short- and long-term marketable securities of $848,327 as of June 30, 2024, will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of these condensed consolidated financial statements. The Company expects that it will require additional funding to complete the clinical development of EFX, commercialize EFX, if it receives regulatory approval, and pursue in-licenses or acquisitions of other product candidates.

If the Company is unable to obtain funding, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

2. Summary of significant accounting policies

Unaudited interim financial statements

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with GAAP for interim financial reporting and as required by Regulation S-X, Rule 10-01. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statement of stockholders’ equity (deficit) for the three months ended March 31, 2024 and 2023 and the three months ended June 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2024 and 2023 are unaudited. The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

Operating segment information

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s focus is the research and development of treatments for patients with serious metabolic diseases marked by high unmet medical need, including MASH. The Company’s chief operating decision maker, its chief executive officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources.

Use of estimates

The preparation of the Company's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the recognition of research and development expenses, stock-based compensation expense, warrant liabilities and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts. The fair value of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.

Short and long-term marketable securities

The Company invests in short-term and long-term marketable securities, primarily money market funds, commercial paper, U.S. treasury securities and corporate debt securities. The Company continually evaluates the credit ratings of its investment portfolio and underlying securities. The Company invests in accordance with its investment policy and invests at the date of purchase in securities with high ratings from top rating agencies. The Company classifies its short- and long-term marketable securities as available-for-sale securities and reports them at fair value in short-term and long-term marketable securities on the condensed consolidated balance sheets with related unrealized gains and losses included within accumulated other comprehensive gain (loss) on the condensed consolidated balance sheets. The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in other income on the condensed consolidated statements of operations and comprehensive loss. When the fair value is below the amortized cost of a marketable security, the Company reviews and determines whether the impairment is due to credit-related factors or noncredit-related factors. The credit-related impairment amount is recognized in other income on the condensed consolidated statements of operations and comprehensive loss, with a corresponding allowance for credit losses account in the condensed consolidated balance sheet. Subsequent improvements in expected credit losses are recognized as a reversal of an amount in the allowance account. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis, then the allowance for the credit loss is written-off and the excess of the amortized cost basis of the asset over its fair value is recorded in the condensed consolidated statements of operations. There were no credit losses recorded during the periods ended June 30, 2024 and 2023.

Concentrations of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and short- and long-term marketable securities. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash investments in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. At June 30, 2024, all of the Company's cash, cash equivalents and short and long-term investments were held at three accredited financial institutions.

Leases

The Company determines whether an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether the Company has the right to control the identified asset. Right-of-use (“ROU“) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and are further adjusted by any lease payments made prior to or on lease commencement, lease incentives received and initial direct costs incurred, as applicable. The Company has elected to not recognize leases with a lease term of one year or less on its balance sheet. Operating lease costs included in the measurement of the lease are recognized on a straight-line basis over the lease term. Variable lease costs are expensed as incurred as an operating expense.

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

The Company determines the lease classification and the present value of future lease payments at the time of the lease commencement using an incremental borrowing rate that it estimates based upon the Company’s credit risk and term of the lease. The interest rate implicit in lease contracts has not historically been readily determinable and the Company must therefore use the appropriate incremental borrowing rate to measure its leases. To estimate the incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating.

Research and development costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, third-party license fees and external costs including fees paid to consultants, contract manufacturing organizations or CMOs and clinical research organizations or CROs in connection with drug product manufacturing, nonclinical studies and clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

Foreign currency transaction gains and losses related to the purchase of contract manufacturing services are included as a component of research and development expense.

Costs incurred in obtaining technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.

Accrued and prepaid research and development expenses

The Company has entered into various research and development and other agreements with commercial firms, researchers and others for provisions of goods and services. These agreements are generally cancelable, and the related costs are recorded as research and development expenses as incurred. The Company makes estimates of accrued and prepaid research and development expenses as of each balance sheet date based on facts and circumstances known at that time. When evaluating the adequacy of the accrued liabilities and the appropriateness of the prepaid expenses, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued and prepaid balances at the end of any reporting period. Actual results could differ materially from the Company's estimates.

Stock-based compensation

The Company makes stock-based awards from its stock compensation plans (see Note 8). The Company measures all stock option awards granted to employees and nonemployees based on the fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis. The Company accounts for forfeitures as they occur. The Company recognizes stock-based compensation expense for awards that contain performance-based conditions using the accelerated attribution method when management determines it is probable that the performance condition will be satisfied. The Company measures restricted stock unit awards based on the market closing price of the Company's common stock on the grant date. Stock-based compensation expense for these awards is recognized on a straight-line basis over the requisite service period, generally four years.

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company's expected dividend yield. The Company currently estimates its share price volatility using a combined weighting of the historical volatility of publicly traded peer companies and the volatility of its traded share price and expects to continue to do so until mid-2025. The expected term of the Company's stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and the expectation that it will not pay any cash dividends in the foreseeable future.

Compensation expense for purchases under the Employee Stock Purchase Plan is recognized based on the fair value of the common stock estimated based on the closing price of our common stock as reported on the date of offering, less the purchase discount percentage provided for in the plan.

The Company classifies stock-based compensation expense in its condensed consolidated statement of operations and comprehensive loss in the same manner in which the award recipient's payroll costs are classified or in which the award recipient's service payments are classified.

Loan payable

Loan Payable represents borrowings under the Loan and Security Agreement, dated June 15, 2022 (“Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), subsequently amended on June 7, 2023 and February 28, 2024, which the Company has accounted for as a debt financing arrangement. Interest expense is accrued using the effective interest rate method over the estimated period the loan will be repaid. Loan issuance costs have been recorded as a debt discount in the condensed consolidated balance sheets and are being amortized and recorded as interest expense throughout the life of the Loan Agreement using the effective interest rate method. The Company considered whether there were any embedded features in the Loan Agreement that require bifurcation and separate accounting as derivative financial instruments pursuant to Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging.

The Loan Agreement was amended on February 28, 2024. The Company accounted for the amendment as a debt modification arrangement pursuant to ASC Topic 470, Debt—Modifications and Extinguishments.

Warrant liabilities

The Company accounts for warrants anticipated to be issued in the future under the Loan Agreement as liabilities and measures them at fair value using the Black-Scholes valuation model. The warrants are subject to remeasurement at each prospective balance sheet date, with any changes in the fair value recorded in the condensed consolidated statements of operations.

Comprehensive loss

Comprehensive loss includes net loss as well as other changes in stockholders' equity (deficit) that result from transactions and economic events other than those with stockholders. The Company’s comprehensive loss is comprised of net loss and changes in unrealized gains and losses on its short- and long-term marketable securities.

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

Recently issued accounting standards not yet adopted

In November 2023, the FASB, issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements. The amendment introduced new requirements to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”) and extend certain annual disclosures to interim periods. Entities with a single reportable segment must apply ASC 280 in its entirety, are permitted to report more than one measure of segment profit or loss under certain conditions and are required to disclose the title and position of the CODM. ASU No. 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements and related disclosures.

In December 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The enhancement will provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company is currently evaluating the impact ASU No. 2023-09 will have on its condensed consolidated financial statements and related disclosures.

3. Fair value measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

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Akero Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

The following is a summary of our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:


	June 30, 2024
	Total		Level 1		Level 2		Level 3
Money market funds	$	244,283	$	244,283	$	—	$	—
U.S. Treasury securities		275,738		275,738		—		—
U.S. Government agency securities		119,338		—		119,338		—
Commercial paper		84,436		—		84,436		—
Corporate debt securities		68,611		—		68,611		—
Total assets	$	792,406	$	520,021	$	272,385	$	—

Warrant liabilities	$	164	$	—	$	—	$	164
Total liabilities	$	164	$	—	$	—	$	164

	December 31, 2023
	Total		Level 1		Level 2		Level 3
Money market funds	$	206,879	$	206,879	$	—	$	—
U.S. Treasury securities		117,307		117,307		—		—
U.S. Government agency securities		133,297		—

Akero Therapeutics, Inc. [AKRO] Filings
10-Q	[2024-08-09]
10-Q	[2024-05-10]
10-K	[2024-02-29]
10-Q	[2023-11-13]
10-Q	[2023-08-11]
10-Q	[2023-05-15]
10-K	[2023-03-17]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-12]
10-Q	[2021-08-13]
10-Q	[2021-05-13]
10-K	[2021-03-16]
10-Q	[2020-11-12]
10-Q	[2020-08-12]
S-1	[2020-07-06]
10-Q	[2020-05-13]
10-K	[2020-03-16]
10-Q	[2019-11-12]
10-Q	[2019-08-12]
S-1	[2019-05-24]