Q1 2022 Akebia Therapeutics Inc Earnings Call

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to that T. B S first quarter 2022 financial results conference call.

Operator: Ladies and gentlemen, thank you for standing by and welcome to Akebia's first quarter 2022 financial results. At this time, all participants are in a. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone.

At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero. Thank you.

Operator: If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mercedes Carrasco, Director of Corporate Communications. Please go ahead.

I would now like to hand, the conference or with your Speaker today, Mercedes Glasgow Director of corporate Communications. Please go ahead ma'am.

Thank you.

Mercedes Carrasco: Thank you. Thank you, and welcome to Akebia's first quarter 2022 financial results and business updates conference call. Please note that a press release was issued earlier today, Monday, May 9, detailing our first quarter financial results. And that release is available in the investor section of our website. For your convenience, a replay of today's call will be available on our website shortly after we conclude. Joining me on today's call are John Butler, Chief Executive Officer, and Dave Spellman, Chief Financial Officer.

Thank you and welcome to <unk> first quarter 2022 financial results and business update conference call. Please note that our press release was issued earlier today Monday may 9th detailing our first quarter financial results and that release is available on the investors section of our website for your convenience a replay of.

Today's call will be available on our website shortly after we conclude.

Joining me for today's call, we have John Butler, Chief Executive Officer, and Dave Spellman, <unk> Chief Financial Officer.

Mercedes Carrasco: Before we begin, I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information describing these risks is included in the financial results and financial results press release that we issued on May 9th, as well as in the risk factors and management discussion and analysis section of our most recent annual and quarterly reports filed with the SEC. The forward-looking statements on this call speak only as to the original date of this call, and, except as required by law, we do not undertake any obligation to update or revise any of these statements.

Before we begin I'd like to remind everyone that this call includes forward looking statements. Each forward looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements additional information describing these risks is included in the financial results.

Financial results press release that we issued on May nine as well as in the risk factors and management discussion and analysis section of our most recent annual and quarterly reports filed with the SEC. The forward looking statements on this call speak only as to the original date of this call and except as required.

Wired by law, we do not undertake any obligation to update or revise any of these statements with that I'd like to introduce our CEO John Butler.

Mercedes Carrasco: With that, I'd like to introduce our CEO, John Butler. Thanks, Mercedes, and thank you all for joining us. Our first quarter and the week since have been extremely eventful for the Akebia team.

Thanks, Mercedes and thank you all for joining us.

Our first quarter and the week since have been extremely eventful for the <unk> team.

John Butler: Given all the moving pieces, I believe it's important to start with an outline of our strategic focus as we reshape Akebia to maximize value and deliver on our purpose. As you know, Akebia received a complete response letter, or CRL, for the company's new drug application for Vatadustat, an Investigational Oral Hypoxia Inducible Factor Prolohydroxylase Inhibitor for the Treatment of Anemia The CRL came as a surprise, and we're extremely disappointed by the outcome.

Given all the moving pieces I believe it's important to start with an outline of our strategic focus as we reshape CBS to maximize value and deliver on our purpose.

As you know I keep you received a complete response letter or CRM for the company's new drug application for <unk>.

An investigational oral hypoxia inducible factor prolyl hydroxylase inhibitor for the treatment of anemia due to chronic kidney disease.

The CRM came as a surprise and we're extremely disappointed by the outcome.

John Butler: Regardless, we acted quickly with the goal to both strengthen and secure the company financially, as well as begin to recast our near-term and longer-term focus. We've organized our strategic focus into three pillars. First, maximizing Erixir performance and corporate-wide cost management. Second, supporting our global partners through VATADUSTAT review, approval, and launch, as well as additional geographic expansion and evaluating options for potential U.S. approval. Third, at the appropriate time, thoughtfully investing in our pipeline by developing internal assets and evaluating other strategic growth opportunities. These efforts are intended to create shareholder value.

Garbus, we acted quickly with the goal to both strengthen and secure the company financially as well as begin to recharge, our near term and longer term focus.

We've organized our strategic focus into three pillars.

First maximizing auryxia performance and corporate wide cost management.

Supporting our global partners through value step review approval and launch as well as additional geographic expansion and evaluating options for potential U S approval.

Third at the appropriate time thoughtfully investing in our pipeline by developing internal assets and evaluating other strategic growth opportunities.

These efforts are intended to create shareholder value.

Let me begin with our first pillar.

John Butler: Let me begin with our first pillar, the most critical for our success, maximizing the value of our commercial product, Arixia. The commercial team has done a great job positioning the product to increase revenue and contribution from the brand. Our financial guidance of $165-$170 million represents a 17-20% annual net revenue growth for the year. We made some important decisions in 2021 that created the opportunity to increase our net price to Akebia. Those decisions are now beginning to bear fruit.

Most critical for our success is maximizing the value of our commercial product auryxia or.

Our commercial team has done a great job positioning the product to increase revenue and contribution from the brand.

Our financial guidance of $165 million to $170 million represents 17% to 20% annual net revenue growth for the year.

We made some important decisions in 2021 that created the opportunity to increase net price to a TBA those decisions are beginning to bear fruit now.

In addition, we've been very deliberate in our efforts to rationalize costs with a goal to align our spending with our top strategic objectives.

John Butler: In addition, we've been very deliberate in our efforts to rationalize costs with a goal to align our spending with our top strategic objectives. We believe this work will enable meaningful value creation in the near term. Again, the goal is to drive Erixir revenue and identify cash management opportunities with the objective to enable Akebia to manage the company with existing cash resources and ongoing cash from operations. Our recently announced reduction in force aligns with our go-forward operating model and strategic plan. Several members of our leadership team will also depart the company over the coming quarters. The planned transition time for each executive is to ensure Akebia is positioned for long-term success.

We believe this work will enable meaningful value creation in the near term.

Again, the goal is to drive Auryxia revenue and identified cash management opportunities with the objective to enable a TBS to manage the company with existing cash resources and ongoing cash from operations.

Our recently announced reduction in force aligns with our go forward operating model and strategic plan.

Several members of our leadership team will also depart the company over the coming quarters.

The planned transition time for each executive is to ensure <unk> is positioned for long term success.

John Butler: We're very fortunate that we've had a focus on leadership development for a number of years. For example, while Dale Fockingham, our chief commercial officer, will be leaving the company at the end of June, he's built an incredibly strong leadership team and, frankly, an incredibly strong commercial organization, which I'm confident will continue to deliver results for Akebia and our patients. For me, losing anyone is tough, but especially losing these leaders and employees who are impacted by this necessary change in direction. They have made lasting contributions to Akebia.

Very fortunate that we've had a focus on leadership development for a number of years for.

For example, while Dell talking him, our Chief commercial officer will be leaving the company at the end of June . He has built an incredibly strong leadership team and frankly incredibly strong commercial organization, which im confident we will continue to deliver results for our <unk> and our patients.

For me, losing anyone as cost, but especially losing these leaders and employees who are impacted by this necessary change in direction.

They have made lasting contributions to <unk>. Each has helped establish a foundation of talent and culture that will enable us to build for the future for that work I am extremely grateful.

John Butler: Each has helped establish a foundation of talent and culture that will enable us to build for the future. For that work, I'm extremely grateful. Moving to our second pillar, Vatiducet is still a key value driver for Akebia.

Moving to our second pillar.

And as you said is still a key value driver for our key beer, it's approved in Japan and under review in Europe and several other markets.

John Butler: It's approved in Japan and under review in Europe and several other markets. We will continue to support our partners in their efforts to obtain regulatory approval for and sell Vatadustat outside the U.S. As you recall, our partner, Otsuka, filed an MAA with the European Medicines Agency for Vatadustat in October of last year. Approval in Europe, if obtained, could drive significant, non-dilutive growth capital and potentially benefit thousands of patients. As I've always said, we're committed to all people impacted by kidney disease. That commitment drives our efforts to explore a path forward for Vatadustat in the U.S. as we continue to believe in its benefit as a treatment for anemia due to CKD.

We will continue to support our partners in their efforts to obtain regulatory approval for and sell that induce that outside the U S. As you recall our partner Otsuka filed an MAA with the European Medicines agency for <unk> in October of last year.

Approval in Europe , if obtained could drive significant non dilutive growth capital and potentially benefit thousands of patients.

As I've always said, we're committed to all people impacted by kidney disease.

That commitment drives our efforts to explore a path forward for <unk> in the U S. As we continue to believe and its benefit as a treatment for anemia due to <unk>.

The next step available to US is to request an end of review conference with the FDA.

John Butler: The next step available to us is to request an end-of-review conference with the FDA. We're working on the documentation to support that request and expect to submit it to the FDA this quarter. Now on to our third pillar.

We're working on the documentation to support that request and expect to submit it to the FDA this quarter.

Now onto our third pillar.

John Butler: We've been working hard to build a pipeline beyond Rixia and Vatidustat, and these efforts have become even more important now. In addition to our clinical development pipeline opportunities, we have several promising preclinical stage programs based on internal research that we're currently evaluating. We will take advantage of opportunities to advance our pipeline as appropriate. Building our pipeline and leveraging our excellent commercial organization is a key component of our strategy. We have maintained several important capabilities that we believe will continue to make us an appealing partner moving forward.

We've been working hard to build a pipeline beyond the auryxia embedded used at these efforts have become even more important now.

In addition to our clinical development pipeline opportunities, we have several promising preclinical stage programs based on internal research that we're currently evaluating.

We will take advantage of opportunities to advance our pipeline as appropriate.

Building, our pipeline and leveraging our excellent commercial organization is a key component of our strategy.

We've maintained several important capabilities that we believe continue to make us an appealing partner moving forward.

Furthermore, as we've shared that in <unk> is being studied by the University of Texas health as a potential therapy to prevent and lessen the severity of acute respiratory distress syndrome or <unk> in adult patients who have been hospitalized due to COVID-19.

John Butler: Furthermore, as we've shared, Vatidustad is being studied by the University of Texas Health as a potential therapy to prevent and lessen the severity of acute respiratory distress syndrome, or ARDS, in adult patients who've been hospitalized due to COVID-19.

John Butler: UT Health expects to read out the data from the investigator-sponsored study later this quarter. We look forward to updating you there as appropriate. With that, let me pass it over to Dave to look more carefully at the numbers.

UT health expects to readout of the data from the investigator sponsored study later this quarter, we look forward to updating you there as appropriate.

With that let me pass it over to Dave to look more carefully at the numbers Dave. Thank.

Dave Spellman: Thank you, John. Good afternoon, everyone. As John mentioned, we've made several difficult and important decisions this month. With our cost savings plan aligned to our strategic pillars, we believe we can build a company that can fund its current operating plan with collaboration and product revenues. We are excited to be one of the few biotechs that can look to its lead product for key strategic cash in these challenging times in the biotech and broader equity markets.

Thank you John and good afternoon, everyone.

As John mentioned, we've made several difficult and important decisions. This month with our cost savings plan aligned to our strategic pillars. We believe we can build a company that can fund its current operating plan with collaboration in product revenues.

We are excited to be one of the few biotechs that could look towards lead products for key strategic cash in these challenging times in the biotech and broader equity markets.

In addition to the Auryxia revenue guidance, we plan to reduce our operating expenses in each of the next few quarters for the remainder of 2022 as we see the benefits from our head count reductions and anticipate a reduction in contractual commitments.

Dave Spellman: In addition to the Erixia Revenue Guidance, we plan to reduce our operating expenses in each of the next few quarters for the remainder of 2022, as we see the benefits from our headcount reductions and anticipated reduction in contractual commitments. We are working to preserve cash until we're in a position where our cash from operations is contributing important funds to profitability, reinvestment, or both, which we will evaluate in future periods. Some of the cost savings we have already implemented include reductions to our VAT incurred on external marketing costs and the US supply chain bill.

We are working to preserve cash until we're in a position, where we where our cash from operations is contributing important funds to profitability reinvestment or bowls, which we will evaluate it in future periods.

Some of the cost savings we have already implemented include reductions to our attitudes that external marketing costs in the U S supply chain belt.

Dave Spellman: We are taking steps to reduce our overhead costs across our G&A functions and plan to continue to find ways to streamline our external cost structure and R&D and commercial activities. Most importantly, our team is showing resilience and resourcefulness as we undertake these activities. Turning to some important selected financial results for the quarter, starting with revenue, net product revenue for Erixia increased 36% to $41.4 million for the first quarter of 2022, compared to $30.4 million for the first quarter of 2021. The Akebia team is very proud of their performance.

We're taking steps to reduce our overhead costs across our G&A functions and plan to continue to find ways to streamline our external cost structure R&D and commercial.

Most importantly, our team is showing resilience and resourcefulness as we undertake these activities.

Turning to some important selected financial results for the quarter starting with revenue.

Net product revenue for Auryxia increased 36% to $41 4 million for the first quarter of 2022 compared to $30 4 million for the first quarter of 2021.

The team is very proud of the performance. This is a challenging market, where COVID-19 is increased mortality and the patients. We serve the growth is reflective of a higher net revenue per pill.

Dave Spellman: This is a challenging market where COVID has increased mortality in the patients we serve. The growth is reflective of higher net revenue per pill. Collaboration revenue was $20.3 million for the first quarter of 2022 compared to $21.9 million for the first quarter of 2021. The decrease was primarily due to lower collaboration revenue from Otsupa.

Collaboration revenue was $23 million for the first quarter of 2022 compared to $21 9 million for the first quarter of 2021. The decrease was primarily due to lower collaboration revenue from Otsuka.

Dave Spellman: Turning to expenses, our total cost of goods sold in the quarter was $31.3 million versus $34.6 million a year ago. The cost of goods sold compared consisted of costs associated with the manufacturing of Erixia and supply of VASIO to Mitsubishi for commercial sale in Japan. Additionally, $5.3 million was related to excess and obsolescence reserves associated with Erixia, partially offset by a $0.8 million reduction to the liability for excess purchase commitments, and $9 million related to amortization of intangibles.

Turning to expenses.

Our total cost of goods sold in the quarter were $31 3 million versus $34 6 million a year ago.

Cost of goods sold compared.

Consisted of costs associated with the manufacture of Auryxia and supply.

That's seo to Mitsubishi for commercial sale in Japan.

Additionally, $5 3 million was related to excess and obsolescence reserves associated with the Rx yet partially.

All set by a point $8 million reduction to the liability for excess purchase commitments and.

And $9 million related to amortization of intangibles.

Additionally, we estimate our restructuring charge in connection with our recently announced reduction in force to be approximately $16 5 million driven by head count reductions and associated costs.

Dave Spellman: Additionally, we estimate our restructuring charges in connection with our recently announced reduction in force to be approximately $16.5 million, driven by headcount reductions and associated costs. On the bottom line, our net loss was $62.4 million for the first quarter of 2022 compared to $69.6 million for the first quarter of 2021.

Our bottom line net loss was $62 4 million for the first quarter of 2022 compared to $69 6 million for the first quarter of 2021.

Dave Spellman: Regarding our capital position, we ended the first quarter with $174.6 million in cash and cash equivalents. We believe that our cash resources should be sufficient to fund our current operating plan through at least the next 12 months. To achieve this cash runway, we will have to continue to reduce our cost base from where it is today. As mentioned earlier, we have not yet achieved all the savings we are targeting, and the team is diligently working to execute our plan.

Regarding our capital position, we ended the first quarter with $174 6 million in cash and cash equivalents.

We believe that our cash resources should be sufficient to fund our current operating plan through at least the next 12 months to achieve this cash runway, we will have to continue to reduce our cost base from where it is today.

As mentioned earlier, we have not yet achieved all the savings we are targeting and the team is diligently working to execute our plan.

Overall as we move through the second quarter, we are proud with the progress we have made despite these unexpected circumstances.

Dave Spellman: Overall, as we move through the second quarter, we are proud of the progress we have made despite these unexpected circumstances. Orixia continues to perform well, and we look forward to providing further updates throughout the year. With that, we'll open the line for questions. Operator. As a reminder, to ask any questions you may have, please use the Q&A box on your screen. Please press star then the number one on your telephone.

Auryxia continues to perform well and we look forward to providing further updates throughout the year.

With that we'll open the line for questions operator.

As a reminder to ask a question. Please press Star then the number one on your telephone keypad again Thats Star then the number one on your telephone keypad.

Operator: Again, that star, then the number one on your telephone. Your first question comes from the line of Allison Bratzel from Piper Sandler. Your line is open. Hi, good afternoon. And thank you for taking my questions. Just two from me.

Your first question comes from the line of Allison <unk> from Piper Sandler Your line is open.

Hi, good afternoon, and thank you for taking my questions.

Just two from me so I think first.

Allison Bratzel: So I think first, on Erixia, I guess, could you just help us understand the growth drivers going forward for 2020? Is it really going to be limited to the increased revenue per pill, I think you were talking about? I just, doing some math, it seems like guidance assumes relatively limited sequential growth for the remainder. And also, just hoping you could kind of walk us through how to think about Orixia's margins going forward.

On Auryxia I guess could you just help us understand the growth drivers going forward for 2000.

Is it really.

It can be limited to the increased revenue propel I think you were talking about.

Doing some math it seems like guidance assumes relatively limited sequential growth for the remainder of the year.

And also just hoping you could kind of walk us through how to think about auryxia as margins going forward.

Allison Bratzel: I know there's a lot of non-cash items included in COGS, and you announced that some of the expense cuts you announced won't be realized until later this year. So it would just be helpful if you could kind of walk us through some of those when they're, and kind of what gives you confidence that you can make this a cash flow positive product before generic entry and 25. And then

I know theres a lot of noncash items included in Cogs and <unk>.

And then some of the expense cuts you announced won't be realized until later this year. So it would just be helpful. If you could kind of walk us through some of those onetime parts.

What gives you confidence that you can make this a cash flow positive product before a generic entry in and not 25.

And then.

The other question on the cash position could you just kind of remind us on your cash runway guidance, what what assumptions are made for milestone payments related to EU approval.

Allison Bratzel: The other question on the cash position, could you just kind of remind us in your cash runway guidance what assumptions are made for milestone payments related to EO approval and also repayment of the term loan, and then what other factors, like use of the ATM, are not contemplated in that? Great. Thanks, Alec. Dave, do you want to?

And also repayment of the term loan and then what other factors like use of the ATM.

Or are not contemplated in that guidance.

Great. Thanks, Dave do you want to yes, yes, I'd be happy I'd be happy to.

Dave Spellman: Yeah, I'd be happy. I'd be happy to. So, on your first question on Erixia revenue growth, so like you said, the guidance is limited at this time, really based on a couple of factors. Number one, we're extremely proud of where we've been for the last six months in terms of realizing this higher net price per pill. But it is still early in the year.

Yeah. So on your first question on the Auryxia revenue growth.

So like you said the guidance is limited at this time really based on a couple of factors number one we're extremely proud of where we've been for the last six months in terms of realizing this higher net price per pill, but it is still early in the year and with some of these contractual changes we just want to make sure that we continue.

Dave Spellman: And with some of these contractual changes, we just want to make sure that we continue to see the product perform well. And we look forward to giving you further updates on that throughout the year. We're really proud of how things are going so far.

See the product performed well and we look forward to giving you further updates on that throughout the year, we're really proud of how.

Things are going so far the other the other reason to just be a little cautious to begin with is we do know and you've seen the large dialysis providers.

Dave Spellman: The other reason to just be a little cautious to begin with is, you know, we do know, and you've seen the large dialysis providers, you know, provide guidance that, while they're not seeing as much of the excess mortality in their patients as they saw, they're still seeing, you know, Omicron has impacted patients showing up for sessions, they have staffing issues, all of those, you know, we just want to be cautious On the second question about expense guidance, so our expense guidance does factor in several things, as you mentioned. So we do plan to be able to service our term loan with Pharmacom. That is part of the plan.

We provide guidance that.

While they are not seeing as much of the excess mortality and their patients as they saw theres still seeing.

Omicron has impacted.

Patients showing up for for sessions, they have staffing issues all of those we just want to be cautious as we look at how they'll look at changing phosphate binders in the marketplace.

On the on the second question on the expense guidance.

So our expense guidance does factor in several things like you mentioned, so we do plan to be able to service our term loan with pharma column that is part of the plan.

Dave Spellman: We're also exiting, as we mentioned in the prepared remarks, we're exiting several external expenses that have been cost drivers, as in addition to winding down some of the things in the research and development area, like the three times weekly studies, those will be winding down later this year or so. We believe that with all of that, we should be able to support the product and the company. I'll also remind you that any ongoing work, like we mentioned, supporting our partners with approvals outside the US does come with partnering funds that our partners do contribute. So that's why we mentioned both collaboration as well as product revenue. Um,

We're also exited as we mentioned in the prepared remarks.

We're exiting several.

External expenses that had been cost drivers as an addition to winding down some of the things in.

The research and development area.

The three times weekly studies also be winding it down later this year or so.

We believe that with all of that we should be able to support that.

The company I'll also remind you that any ongoing work like we mentioned supporting our partners with the approvals outside the U S does come with a partner in funds that the that our partners do contribute so that's why we mentioned both collaboration as well as product revenue.

And then.

Dave Spellman: And then you asked about the cost of goods and cost of goods drivers. So we do plan to continue to amortize the intangibles for Erixia, and that will continue to be about $9 million a quarter. The rest of what's in cost of goods is split between Erixia and Batadustat. We do supply our partner Mitsubishi with a drug substance, sorry, drug product, for their market.

You had asked about the cost of goods and cost of goods drivers. So we do plan to continue to amortize the intangible.

For Auryxia that will continue to be about $9 million a quarter.

Rest of what's in cost of goods is split between Auryxia and <unk> that we do supply our partner Mitsubishi.

With.

With.

Drug substance.

Drug product.

Or their market.

Dave Spellman: We, we have to recognize the revenue through collaboration revenue that goes through cost of goods as well. And to your last question on cash cash position, while we do plan to, like we said, be able to fully service our term loan, there is no assumption in our cash guidance on the use of the ATM. You know, again, this is our current operating plan. We have a significant amount of cash, cash savings that we do need to go get.

We have to recognize revenue to collaboration revenue that goes through cost of goods as well.

And to your last question on cash cash position.

While we do plan to like we said to be able to fully service. Our our term loan there is no assumption in our.

And our cash guidance on use of the ATM.

Yeah again. This is our current operating plan, we have a significant amount of cash rate cash savings that we do need to go get I guess, the last thing I would say just to tie it altogether will just be some of the reductions that we've made like I said in the prepared remarks will come over the next few quarters as we exit some of those.

Dave Spellman: I guess the last thing I would say is to tie it all together. Some of the reductions that we've made, like I said in the prepared remarks, will come over the next few quarters as we exit some of those expenses. Um, sorry. You also asked about milestones in the EU. It's a pretty packed question, milestones in the EU. So our operating plan assumes minimal contribution from those. If you'll remember from prior quarters, anything that we do get for milestones in Europe is clawed back at about 50% to offset some of the excess R&D cost share that OTUCA has paid. So from a net revenue perspective, it's pretty minimal in the long run. Got it.

Expenses.

So you also asked about milestones in the EU is a pretty packed question.

Milestones in the EU, so our operating plan.

Assumes minimal contribution from those if you'll remember from prior quarters anything that we do get from milestones in Europe are clawed back at about 50%.

To offset some of the excess R&D cost share that otsuka has paid so from a net revenue perspective.

Pretty minimal.

Okay.

Got it very helpful. Thank you.

Allison Bratzel: Very helpful. Thank you. Did we capture everything there, Allie? You did have a long list. Yeah, I thought I missed that last one. Thank you. Got it all.

Capture everything their alley.

You did have a long list, yes, I thought I missed that last one.

Thank you got it all thanks.

Operator: Thanks. Great. Thank you, Allison.

Great. Thank you Elliot.

Your next question comes from the line of Mara Goldstein from Mizuho. Your line is open.

Operator: Your next question comes from the line of Mara Goldstein from Missouho. Great, thanks very much for taking the questions. So I just wanted to, I wanted to ask a couple of things.

Mara Goldstein: And the first question is on any update from any of your discussions that you have had with your partners for Vatidustat outside the U.S., and then with respect to the request for the FDA meeting, can you maybe just walk us through the timeline of when you think your request and when you think you'll ultimately have the meeting? And then the last question I had was actually just on the R&D, or rather the write-up for obsolete inventory, and whether that will be the last, whether there will be additional charges for obsolescence reserve, sorry, not inventory. So, I'll take the first two, Dave, and then I'll throw them to you.

Great. Thanks very much.

Taking my questions.

So I just I wanted to ask a couple of things first just on <unk>.

Any updates from any of your discussions that you have had with with your partners.

That as you start outside the U S.

And then with respect to the request for the FDA meeting.

Can you, maybe just walk us through the timeline of.

When you think your request and when do you think you'll ultimately have the meeting and then the last question.

I had was actually just.

On the.

The R&D.

R&D I'd, rather the write up for obsolete inventory and whether that will be the last whether there will be additional charges for obsolescence reserve sorry, not inventory.

So I'll take the first two David and then I'll throw it to you. So the first question Mara was on an update on conversations with our partners.

John Butler: So, the first question was an update on conversations with our partners regarding OUS, and, you know, obviously, we're in constant discussion with our partners. And I don't think anything has changed in our focus on OUS. And, you know, we're obviously, you know, quite active in the European review. At this point in time, Europe is quite independent in the way they look at, you know, reviewing products themselves, I think, evidenced by, you know, the fact that, in the same class, Roxas DoStats received the CRL in the US and has been approved in Europe for both dialysis and non-dialysis patients.

Regarding our U S and <unk>.

Obviously, where we are in pumps.

Constant discussion with our partners.

I don't think anything has changed in our focus O U S.

We're obviously quite active in the European review at this point in time.

Europe is quite independent and the way they are.

They look at reviews.

Reviewing products themselves I think evidenced by the fact that in the same class rocks do stats received the CRM in the U S and has been approved in Europe for both dialysis and non dialysis patients. So.

John Butler: So I think we are, you know, all kind of full steam ahead there, as well as the other markets that Mitsubishi is filing for and seeking approval for Bata DoStat in. So that's all good.

We are all kind of full steam ahead, there as well as the other markets that Mitsubishi is.

Filing in seeking approval for <unk>.

John Butler: The FDA meeting. So, as we said, we're putting the documentation together, and we expect to request that meeting with that documentation by the end of the quarter. And, you know, within submitting that request within 90 days, we expect FDA to grant us a meeting within 30 days. But, you know, obviously, we'll update as appropriate, as we, as we know more. And then, yeah, Mara, on the excess and obsolete inventory, we believe that this is a one-time charge within this quarter. You'll note that the excess purchase commitment was actually a slight reversal this quarter. We believe that we've got a good forecast on right now.

<unk> so.

That's all good.

The FDA meeting so as we've said, we're putting the documentation together we expect to.

To request that meeting with debt documentation by the end of the quarter.

Within submitting that request within 90 days, we expect FDA to grant US a meeting within 30 days.

But.

Obviously, we'll update as appropriate as we as we know more.

Okay.

And then.

Yes, Mark.

<unk> excess and obsolete inventory, we believe that this is a one time charge within this quarter.

You'll note that the excess purchase commitment.

Actually a slight reversal.

This quarter, we believe that that one Lee Scott.

Good forecast on right now.

Okay.

John Butler: Okay, and I hope you don't mind if I just wanted to ask another question, and it's really about this, about the pipeline. And, you know, at this point in time, how we should think about it. I mean, you obviously have a lot of pressing issues, but having mentioned sort of the idea of advancing an earlier stage pipeline, how should we think about that? Yeah, so, you know, as you said, we have pressing issues right now.

I Hope you don't mind, if I just wanted to ask another question and then should we think about this about the pipeline and.

At this point in time, how we should think I mean, you obviously have quite a pressing issues, but having mentioned sort of the idea of advancing in earlier stage pipeline and how we should think about that.

Yeah. So.

As you said, we have pricing issues right now so we are extremely focused as an organization.

John Butler: So we're extremely focused as an organization in, you know, identifying the cost savings. As Dave said, we haven't identified everything, but I'm incredibly pleased with the work that the team has done to identify clear cost savings. It allows us to feel confident in saying we expect to be able to operate the company on our current cash and cash from operations.

Identifying.

The cost savings as Dave said, we havent identified everything but.

Incredibly pleased with the work that the team has done too.

Identify clear cost savings that it allows us to feel confident in saying we expect.

To be able to operate the company on our current cash and cash from operations.

John Butler: And that being said, we do want and expect to be able to invest in a pipeline. Now, the nice thing is when you think about our earlier pipeline, our preclinical assets, those have very modest investments initially to keep them moving forward. And while we're doing very little there today, we'll be very thoughtful as we see the product progress in identifying cost savings and continuing to move those forward and add value. So right now, we really want to completely understand where we are, understand the trajectory of Erixia for maintaining the trajectory of the last six months, which is what we certainly hope and expect, and then make wise decisions about how to move forward with some of our pipeline programs.

And that being said we do.

<unk> and expect to be able to to invest in our pipeline now the nice thing is when you think about our earlier pipeline our preclinical assets those have very modest investments initially to to keep them moving forward and while where we're doing very little there today, we will be very thoughtful as we see the product.

Progress in identifying cost savings at continuing to.

To move those forward and add value so right.

Right now, we really want to completely understand where we are understand the trajectory of auryxia for maintaining the trajectory of the last six months, which.

Is what we certainly hope and expect.

<unk>.

Then make wise decisions about how to move forward with some of our pipeline programs and again. This is something we will we will talk more to you about once we've.

John Butler: And again, this is something we'll talk more to you about once we've established the first part of that pillar, really identifying those savings and driving Erixia. We do want to talk more about them, but we think we want to earn the right to do so by hitting that first pillar as hard as we can in the short term. All right, thanks. I really appreciate it.

Established the first part of that pillar really identifying those savings and driving Auryxia, we do want to talk more about those but we think we want to earn the right to do that by.

Hitting that first pillar as hard as we can in the short term.

Alright, Thanks, I really appreciate it.

Thank you.

Your next question comes from the line of Ed Arce from H C. Wainwright and company. Your line is open.

Operator: Thank you. Your next question comes from the line of Ed Arce from H. G. Wainwright and Company. Great. Thanks for taking my questions. A few for me.

Great. Thanks for taking my questions a few for me.

Ed Arce: Firstly, on the second pillar of your restructuring plan, I'm wondering if you could give us a little more detail on the opportunity with Vatadustat in Europe, assuming approval, you know, what different scenarios you could consider. You mentioned specifically the opportunity for non-dilutive capital. That's first. Secondly... I'm wondering about the BIFOR agreement, and um... What discussions are going on there in terms of forward scenarios, and are there any exit costs involved that we should know about?

Firstly on <unk>.

The second pillar of your restructuring plan.

Wondering if you could give us.

A little more detail around.

The opportunity to do that in Europe , assuming approval.

Hum.

Different scenarios could you.

Consider.

You mentioned, specifically the opportunity for non dilutive capital.

That's first secondly.

I'm wondering about the buy for agreements and.

What discussions are going on there in terms of.

Forward scenarios.

And are there any.

<unk> costs involved that we should know about.

If if indeed that is the decision.

Ed Arce: If, you know, if, indeed, that is the decision. And then finally, just wondering about, you've obviously gone over the... the additional cost reductions that are necessary throughout this year beyond what you've said today. But I'm sure there are.

And then finally just wondering about.

You've obviously gone over several times that the.

The additional cost.

Reductions that are necessary.

Throughout this year beyond what you've said today.

But.

Im sure there are at least some sort of committed contractual expenses that you have.

Ed Arce: Some sort of committed contractual expenses that you have. Obviously, given that you had been previously expecting a launch of How to Do Stat About Now. Um, and so wondering if, um, you could expand a little bit about what you have there and if there's any opportunity to restructure or eliminate those or reduce those. Thanks so much.

Obviously, given that you had been previously expecting the launch of outage instead about now.

And so wondering if.

You could expand a little bit about.

What what.

You have there and if there is any opportunity to restructure.

Eliminate those or reduce dose thanks, so much.

John Butler: Great, Ed, thank you. That was another one; there's a lot of pieces to that. So, some detail around Europe first. I mean, Europe is a large market opportunity, right? I mean, this is a market that's almost the size of the US market. And, you know, as you look at kind of the competition, Rastustat received approval for both dialysis and non-dialysis. And so, you know, we have significant expectations. Now, Europe, of course, there are a few things to know, right?

Great. Thank you that was another there's a lot of pieces to that so.

So detail around Europe first I mean, Europe is a large market opportunity right. I mean this is a market that's almost the size.

The U S market.

As you look at.

Kind of competitively <unk> received approval for.

For both dialysis and non dialysis and so.

We have we have significant expectations now.

Europe of course, a few things to note right I mean, most countries you have to go through the pricing approval process. So it takes more time before.

John Butler: I mean, most countries have to go through the pricing approval process, so it takes more time before you, you know, you start to be able to access that broad audience. So you go country by country, you know, after the first couple that you can launch in with free pricing.

You start to be able to access that broad audience, so you're you're going country by country.

After the first couple of that you can you can launch and with free pricing. So it does take some time.

John Butler: So it does take some time. But again, there is a significant opportunity to grow across Europe. And again, Otsuka has been, you know, clearly committed to the product in Europe. The European team is excited about it and is working hard.

But.

Again, there is significant opportunity to grow.

Across Europe , and again <unk> has been clearly committed to the product in Europe . The European team is excited about it and is working hard our.

John Butler: Our folks are working hard with our partners there, you know, to support the regulatory process. You know, when we talk about non-diluted capital, we talk about the milestones that are available to us. But we also have, you know, a quite a good agreement, royalty agreement for the royalties that we'll receive. I can't remember the numbers, Dave, if you have them. I don't want to give the wrong number.

Folks are working hard with our partners there.

To support the regulatory process.

When we talk about non dilutive capital and we talk about the.

The milestones that are available to us, but we also have.

<unk>.

Quite a good agreement royalty agreement for.

Royalties that will receive I can't remember the numbers, Dave if you have there I don't want to give the wrong number of things up to 30%.

John Butler: I think it's up to 30 percent royalty in Europe over time. So, you know, while it will take time for that to come in, there's significant capital that will come from that. The thing is, Dave reflected in the last question, I mean, that's not a driver of the plan that we're putting in front of you today. There's a minimal amount that we've included from that in this expectation.

If royalty in Europe over time, so while it will take time for that to come in Theres significant capital that will come from that I think is reflected in the last question I mean, that's not a driver of that.

The plan that we're putting in front of you today.

There is a minimal amount that we've included from that and and.

And this expectation.

John Butler: We're very much looking to stand on our feet without that. But, you know, we do think that there's significant opportunity. M. Now, you mentioned V4.

Very much looking to stand on our feet without that but.

We do think that Theres significant opportunity there.

Now you mentioned before you ask a question about before.

John Butler: Yes, a question about V4. I have to say, V4 has been a great partner through this. They are, you know, clearly with us, I think, in their surprise around the CRL. But also, they've been incredibly helpful as we pull the documentation together for Go Forward. They believe in the benefits of the product and, you know, feel that there should be a path forward with FDA. So we're working very closely together on that. You know, there certainly haven't been any discussions of exit.

I have to say before has been a great partner through this they are.

Clearly with us I think in their surprise.

Around the Crs, but also they've been incredibly helpful. As we pulled the documentation together.

Or go forward they believe in the benefits of the product.

Feel that there there should be a path forward with with FDA.

So we're working very closely together on that.

Certainly hasnt been any discussions of exit.

Believe there's any exit costs that was.

Where they are.

But but thats again, they've been an incredibly collaborative and helpful partner and Tim.

John Butler: I don't believe there's any exit costs if that's where they are. But that's, again, they've been an incredibly collaborative and helpful partner. And, you know, if we do end up having success with FDA, I credit them for standing alongside us. So, so V4, I think, you know, we're very happy with that. Dave, maybe you want to talk about committed expenses? Yeah.

If we do end up having success with FDA.

Credit them.

Standing alongside us so.

So before I think.

We're happy with that with where that is Dave maybe you want to talk about committed expenses yes.

Dave Spellman: So, Ed, I think, you know, again, I alluded to some of this in the prepared remarks, but if you just go through some of the key cost areas for us. So, a lot of the BataBoostAT external sales marketing expenses are already behind us. We structure the contracts in such a way that we could, you know, exit them quickly if we needed to.

So Ed I think again.

Alluded to some of this in the prepared remarks, but if you just go through some of the key cost areas for us. So a lot of the value set external sales and marketing expenses those are already.

Yes.

Dave Spellman: From a supply chain perspective, I think one of the big things that we just have to plan out with our partners is that we've got a global supply chain right now that we are partnered in with Mitsubishi, with Otsuka, with V4, and we want to make sure that we are able to support markets outside the U.S. while at the same time reduce the commitments that are needed for the near term for the U.S. market. And again, on things like clinical studies, things like the TIW studies will be winding down as just a natural course.

We structured the contracts in such a way that we could.

Exit them quickly if we needed to.

We also from a supply chain perspective, I think one of the big things that we just have to plan out with our partners is we've got a global supply chain right. Now that we are partnered with Mitsubishi without with before and we want to make sure that we are able to support the outside the U S markets, while at the same time.

Reduced the commitments.

That are needed for the near term for the U S market.

And again on the on things like clinical studies things.

Things like the TRW studies will be winding down is just a natural course.

Dave Spellman: And things you know, like the pediatric studies will be, we'll have to figure out, you know, what's going to go on there since those will, you know, we're on a partial clinical hold there. Okay, great. That's helpful. Thank you. I wish you good luck with your meeting with the FDA. Thanks so much, Ed. Once again, to ask a question, please press stars and then the number 1 on your telephone. Again, that's stars and the number. Your next question comes from the line of Rohit Basin from Needham. Your line: Hi, this is Rohit for Surge.

Things like the pediatric studies will be.

We'll have to figure out.

What's going to go on there since we're on the partial clinical hold there.

Okay great.

Thank you.

Just I wish you good luck with the meeting with the FDA coming up.

Thanks, so much Ed.

Okay.

Once again to ask a question. Please press Star then the number one on your telephone keypad again Thats Star then the number one on your telephone keypad.

Your next question comes from the line of Rohit <unk> from Needham Your line is open.

Rohit Basin: Thanks for taking my question. Are you able to provide some additional details on how you're currently supporting your international partners? And in terms of the new earlier stage pipeline assets, do you expect to stay in the kidney disease space or explore additional indicators? Thanks, Rohit.

Hi, This is Robert on for Serge Thanks for taking my question.

Just provide some additional details on how you are currently supporting your international partners and.

In terms of the new earlier stage pipeline assets do you expect to stay in the kidney disease space or explore additional indications. Thank you.

Thanks, Rohit, so we're supporting our partners.

John Butler: So we're supporting our partners across a number of different areas. Obviously, you know, on the regulatory side, the clinical folks are working closely with them. You know, one of the key areas I think is CMC and supply. Dave mentioned the supply chain is a global supply chain that we're managing. So, you know, that is, as we think about launch in Europe, you know, thinking about that supply chain, you know, there are on the quality side, inspection readiness, etc. I mean, there are just pretty much any area you can think of, we're helping to support our partners as they prepare for launch. And then the second question was on the pipeline.

A number of different areas, obviously on the regulatory side.

Clinical folks are working closely with them.

One of the key areas I think is on on CMC and supply.

Dave referenced the supply chain is a global supply chain that we're managing so.

That is as we think about launch in Europe .

Thinking about that that supply chain.

There are on the quality side inspection readiness et cetera, I mean, there are just.

Pretty much any area you can think of.

We're helping to support.

Our partners.

As they prepare for.

For launch.

And then.

The second question was on the pipeline so.

John Butler: So, you know, the way we're thinking about the preclinical stage pipeline is, you know, we have had our research organization, which has built expertise in hypoxia, induced olfactory, and HIF biology. And, you know, while we look for areas to leverage that within the kidney disease space, and we think we have in some ways beyond that of these data and anemia and CKD, we don't want to limit them there. I mean, there are other applications.

The way, we're thinking about the preclinical stage pipeline as we have had our research organization.

Has built an expertise in hypoxia inducible factor in here.

Iology and while we look for areas to leverage that within the kidney disease space and we think we have in some ways beyond that of these data in anemia, and CTD, we didn't want to limit them. There I mean, there are other applications. If you think about.

John Butler: If you think about, you know, our ARDS study for Vatadustat, right? I mean, this is a study that's being done now in hospitalized COVID-19 patients. But, you know, this isn't about COVID-19. This is about the impact on ARDS. And this could be applicable to any patient who is experiencing ARDS as an outcome of infection. So, you know, we obviously need to see this data to know how to move forward. But, you know, biologically, you know, this is a disease of hypoxia.

Our the Rds study for <unk> right I mean this is.

Study, that's being done now and hospitalized COVID-19 patients, but this isn't about COVID-19. This is about the impact on <unk> and this could be applicable to any.

Patient, who has experienced ards is a as in alkermes infection.

So we obviously need to see this data to know how to move forward, but biologically.

<unk> is a disease of hypoxia and we think that there is a role to be played here and that would then.

John Butler: And, you know, we think that there's a role to be played here. And that would then put us in a development area outside of strictly kidney space. And yet, these are patients that have a very significant unmet need, and it's a very acute use of the product. So an interesting way to look at it. And, you know, we've seen that in other areas as well, where, you know, we've really identified and outside collaborators have brought ideas to us that are outside the kidney space yet are looking at this histbiology as a, you know, kind of underlying why you can have an impact on patients. And, and, again, it's a little early to talk about them.

Put us.

In a development area outside of.

Strictly the kidney space and yet these are patients that have a very significant unmet need and it's a very acute use of the product. So an interesting way to look at it and we've seen that in other areas as well, where we've really identified an outside collaborators have brought ideas to us that are outside the kidney space yet or.

Looking at this biology is.

You know kind of underlying why you could have an impact on patients and again, it's a little early to talk about them.

But we're actually quite excited about some of the opportunities that are that are being presented to us and that we've pursued and we're pursuing it.

John Butler: But, you know, we're actually quite excited about some of the opportunities that are being presented to us and that we've pursued, and we've pursued, you know, in a very limited way earlier, and, you know, we're really pleased with the progress that we've made. So, I wouldn't say we're certainly as we think about kidney disease, that remains critical to us. But with early stage programs, we're quite willing to look at adjacent areas or areas where we think we can have a significant impact for patients.

Very limited way earlier and.

We're really pleased with the progress that we've made so.

So I would say, we're not certainly as we think about.

Kidney disease that remains critical to us.

But with early stage programs, we are quite willing to look at adjacent areas or areas, where we think we can have a significant impact for patients.

Great. Thank you.

Thanks Rohit.

John Butler: Great, thank you. Thanks for This is a reminder to ask, then the number one on your telephone keypad. Again, that's star, then the number one on your telephone keypad. Thanks, operator. As I said, we were surprised and disappointed to receive a CRL for Betadustat.

As a reminder to ask a question. Please press Star then the number one on your telephone keypad again, that's star then the number one on your telephone keypad.

There are no further questions at this time I would now like to turn the conference back to our CEO John Butler.

Thanks, operator, as I said, we were surprised and disappointed to receive a CRM for <unk> and we plan to evaluate and determine potential next steps for the product in the U S. But I'm very proud of the way our organization has quickly pivoted, our focus to driving auryxia and changing our cost structure and our goal is to be.

John Butler: And we plan to evaluate and determine potential next steps for the product in the US. But I'm very proud of the way our organization has quickly shifted its focus to driving Erixia and changing our cost structure. And our goal is to be able to manage the company with existing cash resources and ongoing cash from operations. We believe this is the best way for us to be able to continue to deliver on our purpose to better the lives of patients, as well as deliver value for shareholders. And I look forward to keeping you all updated on our progress. Thanks for joining us this afternoon. Ladies and gentlemen, this concludes today's program. Thank you for your participation, and have a nice day.

To manage the company with existing cash resources and ongoing cash from operations.

We believe this is the best way for us to be able to continue to deliver on our purpose to better the lives of patients as well as deliver value for shareholders and I look forward to keeping you all updated on our progress. Thanks for joining this afternoon.

Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.

Goodbye.

Okay.

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Okay.

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Thanks, Tom.

Absolutely.

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