Why Akebia Therapeutics Inc. Tanked Today

What happened

After it announced fourth-quarter earnings after the closing bell Monday, Akebia Therapeutics (NASDAQ: AKBA) saw its shares fall as much as 16% Tuesday morning, though they have recovered somewhat -- shares were only down 11.1% at 2:05 p.m. EST.

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So what

As a development-stage biotech, it shouldn't beAkebia Therapeutics' revenue or earnings -- or lack thereof -- that have investors worried. Investors know they will have to deal with it burning cash until it has a drug on the market.

Instead, it appears it this comment from CFO Jason Amello, courtesy of Thomson StreetEvents, might be the reason investors woke up worried about Akebia:

In other words, some of the upfront payment from Mitsubishi Tanabe could be taken back if the development ofAkebia's anemia drug vadadustatstalls in Japan, so it remains as deferred revenue. But as the buy-side biotech analyst whoo goes by just Zach on Twitter pointed out, the potential claw-back of the upfront payment has been in the public record since the deal was done:

Sure enough, there it is in the 10-K:

Now what

Assuming the shares really were down because of the deferred revenue "revelation" and not for another reason -- like investors were hoping for a more-substantial update that didn't materialize -- the moral of the story is that investors should read companies' SEC 10-K and 10-Q filings. Sure, the material can be boring, but knowing the details of deals can keep investors from getting surprised about events that could change a company's cash situation.

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Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.