Why Akebia Therapeutics Shares Soared 33.4% Today

What happened

After inking an expanded deal withOtsuka Pharmaceutical on its midstage anemia drug, shares ofAkebia Therapeutics (NASDAQ: AKBA)skyrocketed 33.4% today.

So what

Otsuka already had licensing rights to Akebia Therapeutics' vadadustat in the U.S. thanks to a deal cut between the two companies in December, and now, Otsuka has nailed down rights to vadadustat inEurope, China, Russia, Canada, Australia, and the Middle East.

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Vadadustat is an oral drug that can boost red blood cell counts in patients with chronic kidney disease, and if its trials are successful, it could compete againstAmgen Inc.'sEpogen in a multibillion-dollar market.

In December, Otsuka paid $125 million upfront, plus additional future payments, for co-commercialization rights to vadadustat in the United States. Including milestones, Akebia could receive more than $1 billion from Otsuka, plus half of any profit on U.S. sales.

Today, Otsuka agreed to pay Akebia $73 million upfront, plus additional future payments, to secure rights to vadudustat in even more markets. In this new deal, Akebia could collect $657 million in milestone payments (plus another $135 million in development funding), as well as a royalty on sales of up to 30% in these territories.

Now what

In addition to its deal with Otsuka, Akebia has also licensed rights to vadadustat in Japan, Taiwan, South Korea, Indonesia, India, and elsewhere to Mitsubishi Tanabe Pharma.In that deal, Akebia received $40 million up front ($20 million is refundable depending on conversations with Japan's regulators), plus up to $250 million in milestones, and royalties.

Clearly, these big Japanese drugmakers think vadadustat's got a very good chance at getting across the regulatory finish line, and because both of these companies have a big sales presence in their respective markets, there's reason to think that vadudustat could hit the ground running.

First, however, phase 3 studies have to confirm vadadustat's efficacy and safety, and there's no guarantee of that happening. Therefore, while there's unquestionably a big market opportunity for Akebia, this remains a risky stock.

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