Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Stockholders’ Equity

Authorized and Outstanding Capital Stock

On June 5, 2020, the Company filed a Certificate of Amendment to its Ninth Amended and Restated Certificate of Incorporation, or its Charter, to increase the number of authorized shares of common stock from 175,000,000 to 350,000,000. As of September 30, 2020, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $0.00001 per share, of which 143,328,652 and 121,674,568 shares were issued and outstanding at September 30, 2020 and December 31, 2019, respectively; and 25,000,000 shares of undesignated preferred stock, par value $0.00001 per share, of which no shares were issued and outstanding at September 30, 2020 and December 31, 2019.

At-the-Market Facility

On November 12, 2019, the Company entered into an Amended and Restated Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co. for the offer and sale of common stock at the then current market prices in amounts to be determined from time to time. Also, on November 12, 2019, the Company filed a prospectus supplement pursuant to which it was able to offer and sell up to $75.0 million its common stock at the then current market prices from time to time. In December 2019, the Company commenced sales under this program. Through December 31, 2019, the Company sold 2,684,392 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $16.8 million. During the three months ended March 31, 2020, the Company sold 7,973,967 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $56.7 million. On

March 12, 2020, the Company filed an additional prospectus supplement, pursuant to which it is able to offer and sell up to $65.0 million in its common stock at current market prices from time to time. During the three and nine months ended September 30, 2020 and through the date of this Quarterly Report on Form 10-Q, the Company did not sell any shares of common stock pursuant to the March 12, 2020 prospectus supplement.

Equity Offering

In May 2020, the Company sold 12,650,000 shares of its common stock in a public offering at a price of $12.00 per share, including 1,650,000 shares from the full exercise of the underwriters' option to purchase additional shares. The aggregate net proceeds received by the Company from the offering were $142.4 million, net of underwriting discounts and commissions and offering expenses payable by the Company.

Equity Plans

On February 28, 2014, the Company’s Board of Directors adopted its 2014 Incentive Plan and its 2014 Employee Stock Purchase Plan, or the 2014 ESPP, which were subsequently approved by its shareholders and became effective upon the closing of the Company’s initial public offering on March 25, 2014. The Company’s 2014 Incentive Plan was subsequently amended on December 11, 2018, which amendment did not require shareholder approval. The Company’s 2014 Incentive Plan, as amended, is referred to as the 2014 Plan. The 2014 Plan replaced the Company’s Amended and Restated 2008 Equity Incentive Plan, or the 2008 Plan; however, options or other awards granted under the 2008 Plan prior to the adoption of the 2014 Plan that have not been settled or forfeited remain outstanding and effective. On June 6, 2019, the Company’s shareholders approved the Amended and Restated 2014 Employee Stock Purchase Plan, or the ESPP. In May 2016, the Company’s Board of Directors approved an inducement award program that was separate from the Company’s equity plans and which, consistent with Nasdaq Listing Rule 5635(c)(4), did not require shareholder approval, or the Inducement Award Program. During the nine months ended September 30, 2020, the Company granted 948,250 options to purchase shares of the Company’s common stock to new hires under the Inducement Award Program, of which 907,250 options to purchase Akebia Shares remained outstanding at September 30, 2020.

The 2014 Plan allows for the granting of stock options, stock appreciation rights, or SARs, restricted stock, unrestricted stock, RSUs, performance awards and other awards convertible into or otherwise based on shares of the Company’s common stock. Dividend equivalents may also be provided in connection with an award under the 2014 Plan. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2014 Plan. The Company initially reserved 1,785,000 shares of its common stock for the issuance of awards under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the 2014 Plan will automatically increase annually on January 1 of each calendar year, by an amount equal to three percent (3%) of the number of Akebia Shares outstanding on a fully diluted basis as of the close of business on the immediately preceding December 31, or the 2014 Plan Evergreen Provision. The Company’s Board of Directors may act prior to January 1 of any year to provide that there will be no automatic increase in the number of Akebia Shares available for grant under the 2014 Plan for that year (or that the increase will be less than the amount that would otherwise have automatically been made). On December 12, 2018, in connection with the consummation of the Merger, the Company assumed outstanding and unexercised options to purchase Keryx Shares, as adjusted by the Exchange Multiplier pursuant to the terms of the Merger Agreement, under the following Keryx equity plans, or the Keryx Equity Plans: the Keryx 1999 Share Option Plan, the Keryx 2004 Long-Term Incentive Plan, the Keryx 2007 Incentive Plan, the Keryx Amended and Restated 2013 Incentive Plan, and the Keryx 2018 Equity Incentive Plan, or the Keryx 2018 Plan. In addition, the number of Keryx Shares available for issuance under the Keryx 2018 Plan, as adjusted by the Exchange Multiplier pursuant to the terms of the Merger Agreement, may be used for awards granted by the Company under its 2014 Plan, or the Assumed Shares, provided that the Company uses the Assumed Shares for individuals who were not employees or directors of the Company prior to the consummation of the Merger. During the nine months ended September 30, 2020, the Company granted 1,714,800 options to purchase Akebia Shares to employees under the 2014 Plan, 948,250 options to purchase Akebia Shares to employees under the Inducement Award Program, 2,400,650 Akebia RSUs to employees under the 2014 Plan, 515,500 Akebia PSUs to employees under the 2014 plan, 220,900 options to purchase Akebia Shares to directors under the 2014 Plan, and 95,900 Akebia RSUs to directors under the 2014 Plan.

The ESPP provides for the issuance of options to purchase shares of the Company’s common stock to participating employees at a discount to their fair market value. As noted above, the Company’s stockholders approved the ESPP, which amended and restated the Company’s 2014 ESPP, on June 6, 2019. The maximum aggregate number of shares at September 30, 2020 of the Company’s common stock available for future issuance under the ESPP is 5,480,334. Under the ESPP, each offering period is six months, at the end of which employees may purchase shares of the Company’s common stock through payroll deductions made over the term of the offering. The per-share purchase price at the end of each offering period is equal to the lesser of eighty-five percent (85%) of the closing price of the Company’s common stock at the beginning or end of the offering period.

Shares Reserved for Future Issuance

The Company has reserved for future issuance the following number of shares of common stock:


	September 30, 2020	December 31, 2019
Common stock options and RSUs outstanding (1)	15,653,443	12,195,031
Shares available for issuance under Akebia equity plans (2)	3,156,911	2,983,256
Warrant to purchase common stock	509,611	509,611
Shares available for issuance under the ESPP (3)	5,480,334	5,715,992
Total	24,800,299	21,403,890

(1)Includes awards granted under the 2014 Plan and the Inducement Award Program and awards issued in connection with the Merger.

(2)On January 1, 2020, January 1, 2019 and January 1, 2018, the shares reserved for future grants under the 2014 Plan increased by 4,031,376, 3,801,198 and 1,575,329 shares, respectively, pursuant to the 2014 Plan Evergreen Provision. On December 12, 2018, the shares reserved for future grants under the 2014 Plan increased by 2,323,213 shares as a result of the Company’s addition of the Assumed Shares to the 2014 Plan. On January 30, 2019, the Company’s Board of Directors approved 3,150,000 shares for issuance as option awards in fiscal year 2019 under the Inducement Award Program.

(3)On June 6, 2019, the shares reserved for future issuance under the ESPP increased by 5,200,000 shares upon shareholder approval of the Amended and Restated 2014 Employee Stock Purchase Plan. On February 28, 2018 and February 28, 2017, the shares reserved for future issuance under the 2014 ESPP remained unchanged. There were no increases in the shares reserved for future issuance pursuant to the evergreen provision under the ESPP in 2017 and 2018 as the maximum aggregate number of shares available for purchase under the 2014 ESPP had reached its cap of 739,611 on February 28, 2016.

Stock-Based Compensation

Stock Options

Service-Based Stock Options

On February 28, 2020, as part of the Company’s annual grant of equity, the Company issued 1,714,800 stock options to employees. In addition, the Company issues stock options to directors, new hires and occasionally to other employees not in connection with the annual grant process. Options granted by the Company vest over periods of between 12 and 48 months, subject, in each case, to the individual’s continued service through the applicable vesting date. Options vest either 100% on the first anniversary of the grant date or in installments of (i) 25% at the one year anniversary and (ii) 12 equal quarterly installments beginning after the one year anniversary of the grant date, subject to the individual’s continuous service with the Company. Options generally expire ten years after the date of grant. The Company recorded approximately $2.3 million and $1.3 million of stock-based compensation expense related to stock options during the three months ended September 30, 2020 and 2019, respectively, and approximately $6.3 million and $3.5 million during the nine months ended September 30, 2020 and 2019, respectively.

Performance-Based Stock Options

On December 12, 2018, pursuant to the Merger Agreement, each outstanding and unexercised performance-based option to acquire Keryx Shares granted under a Keryx equity plan converted into a service-based option or performance-based option to acquire Akebia Shares, with the number of shares and exercise price adjusted by the Exchange Multiplier. As a result, the Company issued 233,954 performance-based options related to the Merger. The Company did not have any performance-based options outstanding in fiscal year 2018 prior to the Merger. The Company did not issue any performance-based options during the nine months ended September 30, 2020 and 2019. As of September 30, 2020, the Company had no performance-based options outstanding compared to 46,790 performance-based options outstanding at December 31, 2019.

Restricted Stock Units

Service-Based Restricted Stock Units

On February 28, 2020, as part of the Company’s annual grant of equity, the Company issued 2,268,000 restricted stock units, or RSUs, to employees. In addition, the Company occasionally issues RSUs not in connection with the annual grant process to employees. Generally, RSUs granted by the Company vest in one of the following ways: (i) 100% of each RSU grant vests on either the first or the third anniversary of the grant date, (ii) one third of each RSU grant vests on the first, second and third anniversaries of the grant date, subject, in each case, to the individual’s continued service through the applicable vesting date, or (iii) 50% of each RSU grant vests on the first anniversary and 25% of each RSU grant vests in 6 months increment after the one year anniversary of the grant date. The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized on a straight-line basis over the vesting period. The Company recorded approximately $3.9 million and $1.2 million of stock-based compensation expense related to employee RSUs during the three months ended September 30, 2020 and 2019, respectively, and approximately $11.1 million and $3.3 million during the nine months ended September 30, 2020 and 2019, respectively.

Performance-Based Restricted Stock Units

On February 28, 2020, as part of the Company’s annual grant of equity, the Company issued 479,000 performance-based restricted stock units, or PSUs, to the Company’s executives. The PSUs granted by the Company vest in connection with the achievement of specified commercial and regulatory milestones. The PSUs also feature a time-based vesting component. The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized over time based on the probability of meeting such commercial and regulatory milestones. The Company recorded approximately $0.1 million and $0 of stock-based compensation expense related to employee PSUs during the three months ended September 30, 2020 and 2019, respectively, and approximately $0.4 million and $0 during the nine months ended September 30, 2020 and 2019, respectively.

Employee Stock Purchase Plan

The first offering period under the ESPP opened on January 2, 2015. The Company issued 235,658 shares during the nine months ended September 30, 2020. The Company recorded approximately $0.3 million and $0.1 million of stock-based compensation expense related to the ESPP during the three months ended September 30, 2020 and 2019, respectively, and approximately $0.6 million and $0.2 million during the nine months ended September 30, 2020 and 2019, respectively.

Compensation Expense Summary

The Company has classified its stock-based compensation expense related to share-based awards as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)				(in thousands)
Research and development	$	1,468	$	556	$	4,726	$	2,118
Selling, general and administrative	5,124		2,057		13,646		4,873
Total	$	6,592	$	2,613	$	18,372	$	6,991

Compensation expense by type of award:


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)				(in thousands)
Stock options	$	2,322	$	1,305	$	6,305	$	3,490
Restricted stock units	3,990		1,217		11,476		3,318
Employee stock purchase plan	280		91		591		183
Total	$	6,592	$	2,613	$	18,372	$	6,991