Q2 2019 Earnings Call

Operator: And welcome to the Akebia Therapeutics second quarter, fiscal 2019. Financial Results and Business Highlights Conference. As a reminder, this call is being recorded. Later, we will conduct a question and answer session, and instructions will follow at. If anyone should require assistance during the call, please press star then zero on your touch tone.

<unk> financial results and business highlights conference call.

As a reminder, this call is being recorded later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone.

Kristen Shepard: I would now like to introduce your host for today's conference, Kristen. Thank you, and good morning. My name is Kristen Shepard, Vice President of Investor Relations with Akebia. Thank you for joining us to discuss Akebia's second quarter 2019 financial results and our recent business highlights. The press release containing the company's financial results for the second quarter was issued earlier this morning and is also available on our Investor Relations website. For your convenience, an audio replay of today's call will also be available on our website shortly after we conclude today's webcast. Joining our call today are John Butler, President and Chief Executive Officer, and Jason Imello, Chief Financial Officer. Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements.

I would now like to introduce your host for today's conference Kristen Sheppard.

Thank you and good morning, My name is Kristen Sheppard, Vice President of Investor Relations with the KBS. Thank you for joining us to discuss the caveat second quarter 2019 financial results and our recent business highlights.

The press release containing the company's financial results for the second quarter was issued earlier. This morning and is also available on our Investor Relations website.

For your convenience and audio replay of today's call will also be available on our website. Shortly after we conclude today's webcast.

Joining our call today are John Butler, President and Chief Executive Officer, and Jason Amello, Chief Financial Officer.

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

Kristen Shepard: Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information regarding these factors is described in the Risk Factors and Management Discussion and Analysis sections of our most recent quarterly and annual reports filed with the SEC. The forward-looking statements on this call speak only as of the original date of this call, and we do not undertake any obligation to update or revise any of these statements. With that said, I'd like to turn the call over to our CEO, John Butler.

Additional information regarding these factors is described in the risk factors and management's discussion and analysis sections of our most recent quarterly and annual reports filed with the SEC.

The forward looking statements on this call speak only as of the original date of this call and we do not undertake any obligation to update or revise any of these statements.

With that I'd like to turn the call over to our CEO John Butler.

John P. Butler: Thanks, Kristen, and good morning, everyone. We believe we have a great story to share with you. Throughout the first half of this year, we continue to make good progress against our strategic initiatives, and the headline continues to be solid execution. The commercial team delivered $29 million in Erixia revenue in the second quarter, the highest quarter since launch, 21% year-over-year growth, and 26% growth versus the first quarter of 2019.

Thanks, Christian and good morning, everyone.

We believe we have a great story to share with you. This morning.

Throughout the first half of this year, we continued to make good progress against our strategic initiatives and the headline continues to be solid execution.

The commercial team delivered $29 million in Auryxia revenue in the second quarter, the highest quarter since launch.

21% year over year growth and 26% growth versus the first quarter of 2019.

We reached a settlement with an anda filer for Auryxia that reinforces the strength of our Auryxia IP.

John P. Butler: We reached a settlement with an andophiler for Erixia that reinforces the strength of our Erixia IP. And with respect to Vatadustat, the clinical team continued to knock it out of the park with the first regulatory submission for marketing approval of Vatadustat, which was filed by our collaboration partner Mitsubishi Tanabe, or MTPC, in Japan. This JNDA submission is a significant milestone for both companies, and we believe this is just the beginning of an exciting lineup of announcements expected in 2020 and beyond. While there's still much work ahead of us, I believe we have tremendous opportunities to advance our mission to better the lives of people living with kidney disease and deliver significant value to all our stakeholders. We've been very purposeful in developing our strategy to achieve this mission, and it's great to see the benefits of our work coming to light as the team continues to systematically execute on our priorities.

And with respect to about to do staff. The clinical team continued to knock it out of the park with the first regulatory submission for marketing approval of attitude Stat, which was filed by our collaboration partner Mitsubishi Tanabe for MPC in Japan.

This JV a submission is a significant milestone for both companies.

We believe this is just the beginning of an exciting lineup of announcements expected in 2020 and beyond.

While there is still much work ahead of US I believe we have tremendous opportunities to advance our mission to better the lives of people living with kidney disease and deliver significant value to all our stakeholders.

We've been very purposeful in developing our strategy to achieve this mission and it's great to see the benefits of our work coming to light as the team continues to systematically execute on our priorities.

I'll start with progress in our phase III clinical program provided do set.

John P. Butler: I'll start with progress in our Phase III clinical program for beta-due staph. That, as you said, is our investigational oral HIF-PHI that's designed to stimulate endogenous epoproduction to a more physiologic level in adult patients with anemia due to chronic kidney disease, or CKD. Our JNDA filing is particularly impressive, not only because it's the first regulatory submission for marketing approval of Vatadustat, but also because we believe it may establish Vatadustat as the first oral HIF-PHI to file for approval for the treatment of anemia due to CKD in both dialysis-dependent and non-dialysis-dependent patient populations in a major market. Importantly, this submission was supported by positive top-line data from two phase three active controlled pivotal studies in Japan that we announced together with MTBC in the first.

But as you said as our investigational oral his PHR, that's designed to stimulate endogenous epo production to a more physiologic level for adult patients with anemia, due to chronic kidney disease or CKD.

Our JNDA filing is particularly impressive not only because its the first regulatory submission for marketing approval of Gotta do stat, but also because we believe is may establish better do stat as the first oral his ph eyes to file for approval for the treatment of anemia due to CKD in both dialysis dependent and non dialysis dependent patient populations in a major market.

Importantly, the submission was supported by positive topline data from two phase three active controlled pivotal studies in Japan that we announced together with MTBC in the first quarter.

John P. Butler: Turning to our Global Phase III Clinical Program, in April, we completed enrollment in INNOVATE, our global clinical studies designed to enable regulatory filings for Vatadustat for the treatment of anemia due to CKD in dialysis-dependent patients. We enrolled a total of nearly 4,000 patients across the two Innovate studies, and we continue to expect top-line data readouts in Q2 of next year, subject to accrual in May. With respect to PROTECT, our global clinical study is designed to enable regulatory filings for beta-DUSTAT for the treatment of anemia due to CKD in patients not on dialysis. Patient enrollment has continued to be strong, and I'm pleased to announce that, as we expect to complete enrollment shortly, we're no longer accepting new patients into screening. We continue to expect top-line data readouts in mid-2020, subject to accrual of MACE.

Turning to our global Phase three clinical program in April we completed enrollment in innovate our global clinical studies designed to enable regulatory filings for vetted do stat for the treatment of anemia due to CKD in dialysis dependent patients.

We enrolled a total of nearly 4000 patients across the two innovate studies and we continue to expect topline data Readouts in Q2 of next year subject to the approval of mace.

With respect to protect our global clinical studies designed to enable regulatory filings for vendors do stats for the treatment of anemia due to CKD in patients not on dialysis.

Patient enrollment has continued to be strong and I'm pleased to announce that as we expect to complete enrollment shortly we're no longer accepting new patients to screening.

We continue to expect topline data readouts in mid 2020 subject to the accrual of mace.

We have a tremendous amount of confidence in the program that we've designed provided do stat and believe we are well positioned for clinical regulatory and commercial success.

John P. Butler: We have a tremendous amount of confidence in the program that we've designed for Vatadustat and believe we are well positioned for clinical, regulatory, and commercial success. For example, both Innovate and Protect are designed to assess non-inferiority for efficacy and cardiovascular safety of Vatidustat using an active control, Darbopoetin Alpha, an injectable ESA, which is the current standard of care. We believe this structure will enable a straightforward collection and analysis of MACE across the relevant studies, and ultimately, a clear data readout.

For example, both innovate and protect our design to assess noninferiority for efficacy and cardiovascular safety.

Prevented do stat, using an active control Dart report now FHFA and injectable USA, which is the current standard of care.

We believe this structure will enable the street foreign collection and analysis of mace across the relevant studies and ultimately a clear data readout.

Importantly, our program includes multiple secondary efficacy and safety endpoints to assess other clinically and hence commercially important areas of differentiation the essays.

John P. Butler: Importantly, our program includes multiple secondary efficacy and safety endpoints to assess other clinically and hence commercially important areas of differentiation to ESAs, including the incidence of thromboembolic events, hospitalization for heart failure, and effects on blood pressure, and in non-dialysis dependent CKD subjects, the progression of kidney disease. If successful with these studies, we expect Vatadustat to be the first HIF-PHI We believe this data will be extremely relevant for physicians, patients, and payers as they make important decisions about patient care. I think it's important to note here that because our non-dialysis study was designed with active control, patients in this population that progress to dialysis during the study will be able to stay on study drugs.

Including the incidence of thromboembolic events hospitalization for heart failure and effects on blood pressure and in non dialysis dependent CKD subjects the progression of kidney disease.

If successful with these studies, we expect about a new staff to be the first his Phd in the us and new markets with data directly comparing its outcomes to the current standard of care in both dialysis and non dialysis patients.

We believe this data will be extremely relevant for physicians patients and payers as they make important decisions about patient care.

I think it's important to note here that because our non dialysis study was designed with an active control patients in this population that progressed to dialysis.

During the study we will be able to stay on study drug.

John P. Butler: As a result, we expect to be able to compare how these new-to-dialysis patients on either the control drug or Vatadustat do as they transition to dialysis and move forward. We will have data across that continuum of care for a large number of patients. We believe that this will be very valuable data from a regulatory and commercial standpoint, especially when paired with our incident patient study and innovation, as the new to dialysis patient population is of particular interest because the event rate in the first year of dialysis is generally much higher. It also makes our MACE analysis much more straightforward.

As a result, we expect to be able to compare how these new to dialysis patients on either the control drug or about to do stat do as they transition to dialysis and move forward.

We will have data across that continuum of care for a large number of patients.

We believe that this will be very valuable data from a regulatory and commercial standpoint specially when paired with our incident patient study and innovate as the new to dialysis patient population is of particular interest because the event rate in the first year of dialysis is generally much higher.

It also makes our mace analysis much more straightforward.

We believe another key advantage of our program as it was designed with the basic philosophy that not every patient's needs are the same.

John P. Butler: We believe another key advantage of our program is that it was designed with the basic philosophy that not every patient's needs are the same. As a result, we designed our clinical program with the potential for dosing flexibility, with once-daily dosing for non-dialysis-dependent CKD patients and daily or three times a week dosing for dialysis-dependent CKD patients. Lastly, we designed these studies after extensive dialogue with the FDA and European regulators. We prospectively defined and agreed to non-inferiority margins with the FDA and EMA, and we also agreed with the FDA on the key components of our statistical analysis plan. Turning to our commercial product, Erixia, the only oral iron tablet approved in the U.S. to treat both dialysis-dependent CKD patients for hyperphosphatemia.

As a result, we designed our clinical program with the potential for dosing flexibility with once daily dosing for non dialysis dependent CKD patients and daily or three times, a week dosing for dialysis dependent CKD patients.

Lastly, we design. These studies after extensive dialogue with the FDA and European regulators, we have prospectively defined and agreed to non inferiority margins with the FDA and the M&A and we also agreed with the FDA on the key components of our statistical analysis plan.

Turning to our commercial product Auryxia, the only oral iron tablet approved in the us to treat both dialysis dependent CKD patients for Hyperphosphatemia and non dialysis dependent CKD patients for iron deficiency anemia or Ida.

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John P. Butler: and non-dialysis-dependent CKD patients for iron deficiency anemia or IDA. For Q2, Erixia revenue increased 21% to $29 million, and total Erixia prescriptions increased 22% to $49,200. The team is doing a great job executing on our near-term growth initiative. We continue to see solid demand for Arixia within our hyperphosphatemia indication, which we believe represents most of our product revenue. In fact, the prescription demand we've seen in the first four weeks of the third quarter is the highest of any quarter since Erixia was launched, affirming our confidence that Erixia is on a growth trajectory. We believe continued execution on our growth initiatives and underlying market demand will drive increased revenue for Aurixia across the second half of the year. A favorable outcome from our continuing work with CMS to restore coverage for Eryxia's IDA indication would represent the opportunity for upside. We look forward to providing more specific revenue guidance for Eryxia early next year after we get a few more quarters of solid execution under our belt.

For Q2, Auryxia revenue increased 21% to $29 million and total auryxia prescriptions increased 22% to 49200.

The team is doing a great job executing on our near term growth initiatives.

We continued to see solid demand for auryxia within our Hyperphosphatemia indication, which we believe represents most of our product revenue.

In fact, the prescription demand we've seen in the first four weeks of the third quarter is the highest of any quarter. Since auryxia was launched affirming our confidence that auryxia is on a growth trajectory.

We believe continued execution on our growth initiatives and underlying market demand will drive increased revenue for auryxia across the second half of the year.

A favorable outcome from our continuing work with CMS to restore coverage for Auryxia is Ida indication would represent the opportunity for upside.

We look forward to providing more specific revenue guidance for Auryxia early next year. After we get a few more quarters of solid execution under our belt.

In looking further ahead, what I'm most excited about with respect to Auryxia is how we're continuing to advance its long term growth story.

John P. Butler: In looking further ahead, what I'm most excited about with respect to Erixia is how we're continuing to advance its long-term growth story and impact the lives of people living with CKD. We've always believed that Arixia can have a valuable role in treating patients beyond our current indication. We're encouraged by recent data published in the Journal of the American Society of Nephrology that we believe supports this potential. We've mentioned this study previously. It was an investigator-initiated study funded by Carex prior to the merger and conducted by Colorado Care with Dr. Jeff Block as the principal investigator and lead author of the publication in a single-site 203 patient trial that compared a fixed dose of ferric citrate or Erixia to standard of care in patients with advanced CKD.

And impact the lives of people living with CKD.

We've always believed that auryxia can have a valuable role in treating patients beyond our current indications.

We are encouraged with recent data published in the journal of the American Society of Nephrology.

That we believe supports this potential.

We've mentioned this study previously it was an investigator initiated study funded by Keryx prior to the merger and conducted by Colorado care with Dr., Jeff block as the principal investigator and lead author of the publication.

In a single site 203 patient trial that compared to fixed dose of ferric citrate auryxia to standard of care in patients with advanced CKD.

John P. Butler: The authors concluded that ferric citrate effectively managed multiple biochemical parameters and was associated with significant improvements in hemoglobin, TSAT, and ferritin and significant decreases in serum phosphorus and FGF23 compared to the standard of care. The encouraging finding was that in this small study, the investigator was able to show a statistically significantly lower incidence of progression to dialysis, transplant, or death, fewer hospital admissions, and fewer days in the hospital in those patients who received Ferric Citrin. No related serious adverse events occurred. And the most common related adverse event in ferric citrate-treated patients was gastrointestinal.

The authors concluded that ferric citrate effectively managed multiple biochemical parameters and was associated with significant improvements in hemoglobin T sat and ferret.

And significant decreases in serum phosphorus and FGF 23, compared to the standard of care.

The encouraging finding was that in this small study the investigator was able to show a statistically significantly lower incidence of progression to dialysis transplant or death.

Fewer hospital admissions and fewer days in the hospital in those patients who received ferric citrate.

No related serious adverse events occurred and the most common related adverse event in ferric citrate treated patients for gastrointestinal.

John P. Butler: These findings are very encouraging, and we agree with the author's conclusion that this pilot study warrants further investigation, which we are now exploring with a number of our KOL advisors who are also excited about the data and about Erixia's potential. It's great to see new policy initiatives, like the Advancing American Kidney Health Initiative, aligning with this vision and placing a priority on these outcomes, while at the same time seeking to reduce the more than $100 billion spent annually in the U.S. to treat chronic and end-stage renal disease. Although it's early, we believe this environment creates opportunities not only to improve patient care but also to enhance the value of Arixia for both prescribers and payers. As you know, we've been intensely focused on protecting the value of Erixis.

These findings are very encouraging.

And we agree with the authors conclusion that this pilot study warrants further investigation, which we're now exploring with a number of our KL advisors, who are also excited about the data and about auryxias potential.

It's great to see the new policy initiatives like the advancing American kidney health initiative aligning with this vision and placing a priority on these outcomes while at the same time seeking to reduce the more than $100 billion expense annually in the U.S to treat chronic and end stage renal disease.

Although its early we believe this environment creates opportunities not only to improve patient care, but also enhance the value of auryxia with both prescribers and payers.

As you know weve been intensely focused on protecting the value of Auryxia, we believe the and the settlement we announced earlier this week reinforces the strength of our Auryxia intellectual property and does not allow part to have a generic entry until March 20th of 2025.

John P. Butler: We believe the ANDA settlement we announced earlier this week reinforces the strength of our Arixia intellectual property and does not allow PAR to have a generic entry until March 20th, 2025. This was another great example of solid execution in the quarter that's well worth noting. We're very pleased with the outcome. Lastly, we're also pleased to see our collaboration partner, Japan Tobacco, and its subsidiary, Torii, who market Exitrate in Japan under the trade name RIONA, investing with the goal of adding a second approved indication for RIONA. Earlier in July, we announced that they reported positive top-line results from a pivotal phase three comparative study evaluating Riona for the treatment of They also stated that they expect to file for this additional indication upon the successful completion of their Phase III program. Wrapping up, we feel good about the opportunities we have today, and the team is thrilled with the prospect of continuing to advance Vatadustat and enhancing Arixia's potential. And with that, I'll turn the call over to Jason.

This was another great example of solid execution in the quarter, that's well worth noting.

We're very pleased with the outcome.

Lastly, we're also pleased to see our collaboration partner, Japan, tobacco and its subsidiary Torrey, who market ferric citrate in Japan under the trade name Riona.

Investing with the goal of adding a second approved indication for Riona.

Earlier in July we announced that they reported positive topline results from a pivotal phase three comparative study evaluating riona for the treatment of Ida in adult patients in Japan.

They also stated that they expect to file for this additional indication upon successful completion of the phase three program.

Wrapping up we feel good about the opportunities we have today and the team is thrilled with the prospect of continuing to advance vetted do stat and enhancing auryxias potential.

And with that I'll turn the call over to Jason.

Jason Imello: Thank you, John, and good morning. As John discussed, we delivered a solid quarter while making significant progress on our commercialization and development efforts. When looking at the components of the P&L, our product revenue continues to grow nicely. Net product revenue for the sales of Erixia for the second quarter of 2019 increased 20.7% to $29.1 million, compared to $24.1 million as reported by Carex Premerger during the same period in 2018. And this also represents a 26% increase over Q1 of 19. Cost of goods sold associated with the manufacture of Arixia was $9.6 million in the second quarter of 2019. To that, we add about $28.1 million for the non-cash purchase accounting effects of the Carras merger, including an inventory step-up charge of $19 million and $9.1 million of amortization of intangibles, bringing our total reported gap cost of sales to $37.7 million. As you know, our collaboration agreements are both highly strategic and important elements of our financial strength.

Thank you John and good morning.

As John discussed, we delivered a solid quarter, while making significant progress on our commercialization and development efforts.

When looking at the components of the piano our product revenue continues to grow nicely net product revenue for the sales of Auryxia for the second quarter of 2019 increased 20.7% to $29.1 million.

Compared to $24.1 million as reported by Keryx pre merger during the same period in 2018.

And this also represents a 26% increase over Q1 of 19.

Cost of goods sold associated with the manufacturer of Auryxia was $9.6 million for the second quarter of 2019.

To that we add about $28.1 million for the non cash purchase accounting effects of the carrot merger, including an inventory step up charge of $19 million and $9.1 million of amortization of intangibles, bringing our total reported GAAP cost of sales to $37.7 million.

As you know our collaboration agreements are both highly strategic and important elements of our financial strength.

Jason Imello: Collaboration and license revenue continues to be a significant source of revenue for us, reflecting the value we are creating as we continue to execute and advance our program. For the second quarter, we recognized $71.7 million of collaboration and license revenue compared with $48.8 million in the second quarter of 2018, the majority of which relates to our Otsuka Agreement. Historically, ARTUCA has funded 52.5% of our Phase III development costs for attitude style. And starting in Q2 2019, ARTUCA began funding 80% of those costs. Also, in connection with our MTPC agreement, the JMDA submission in July triggered a $10 million milestone payment from MTPC to Akebia, which we recorded as revenue in the second quarter as it was considered probable at that time.

Collaboration and license revenue continues to be a significant source of revenue for us reflecting the value. We are creating as we continued to execute and advance our programs.

For the second quarter, we recognized $71.7 million of collaboration and license revenue compared with $48.8 million in the second quarter of 2018.

Of which the majority for both periods it relates to our Super agreements.

Historically, our Super has funded 62.5% of our phase three development cost of attitude and starting in Q2 2019, so could begin funding 80% of those costs.

Also and connecting with our MPC agreement Ajay Andy a submission in July triggered a $10 million milestone payment from MPC to a caveat, which we recorded as revenue in the second quarter as it was considered probable at that time.

We continued progress future collaboration revenue would also come in the form of additional regulatory and commercial milestones and royalties.

Jason Imello: With continued progress, future collaboration revenue would also come in the form of additional regulatory and commercial milestones and royalties. Moving to our research and development expenses, R&D expenses were $85.7 million for the second quarter of 2019 compared to $71.9 million for the second quarter of 2018. The increase was primarily attributable to an increase in external costs related to the continued advancement of the Protect and Innovate Phase III studies of Vatidustat, including supporting clinical and preclinical activities as well as regulatory activities and ongoing enrollment. R&D expenses were also impacted by increases in headcount and consulting costs to support our expanding R&D program.

Moving to our research and development expenses R&D expenses were $85.7 million for the second quarter of 2019 compared to $71.9 million for the second quarter of 2018.

The increase was primarily attributable to an increase in external costs related to the continued advancement of the protect and innovate phase three studies that reduce debt, including supporting clinical and preclinical activities as well as regulatory activities and ongoing enrollment.

R&D expenses were also impacted by increases in headcount and consulting costs to support our expanding R&D programs.

Jason Imello: It is important to keep in mind that 80% of our Phase III costs are reimbursed by Otsuka, which gets recorded as collaboration revenue, as I mentioned earlier. Selling general and administrative expenses were $36.1 million for the second quarter of 2019, compared to $12.5 million for the second quarter of 2018. The increase was primarily attributable to commercialization costs associated with Erixia as there were no comparable commercialization costs in the pre-merger second quarter of 2018. As a result of the foregoing operating results, the company reported a net loss for the second quarter of 2019 of $58.2 million as compared to a net loss of $34.1 million for the second quarter of 2018. Again, I want to point out that the net loss for the second quarter of 2019 includes the impact of non-cash charges of $28.1 million related to the application of purchase accounting for the merger with Carex that I mentioned earlier.

It is important to keep in mind that 80% of our phase three costs are reimbursed by obstacles, which gets recorded as collaborator collaboration revenue as I mentioned earlier.

Selling general and administrative expenses were $36.1 million for the second quarter of 2019 compared to $12.5 million for the second quarter of 2018.

The increase was primarily attributable to commercialization costs associated with Auryxia as there was no comparable commercialization costs in the previous pre merger second quarter of 2018.

As a result of the foregoing operating results the company reported a net loss for the second quarter of 2019 of $58.2 million as compared to a net loss of $34.1 million for the second quarter of 2018.

Again, I want to point out that the net loss for the second quarter of 2019 includes the impact of a noncash charges of $28.1 million related to the application of purchase accounting for the merger with Keryx that I mentioned earlier.

Turning to our capital position.

We ended the second quarter with cash cash equivalents and available for sale securities of $136.8 million.

Importantly, as we continue to effectively manage and leverage our operations together with our partners resources, We continue to fund and advance our development efforts, we expect our cash resources, including the committed research and development funding from collaborators.

Jason Imello: Turning to our capital position, we ended the second quarter with cash, cash equivalents, and available for sale securities of $136.8 million. Importantly, as we continue to effectively manage and leverage our operations, together with our partners' resources, we continue to fund and advance our development efforts. We expect our cash resources, including the committed research and development funding from collaborators, to fund our current operating plan beyond the next 12 months into the third quarter of 2020. And lastly, we ended the quarter with approximately 118.8 million shares outstanding. With that, we'll open the line for questions. Operator?

To fund our current operating plan, but beyond the next 12 months into the third quarter of 2020.

And lastly, we ended the quarter with approximately 118.8 million shares outstanding.

With that well open the line for questions operator.

Thank you ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered you wish to move yourself from the queue. Please press the pound key again, that's star then one to ask a question.

To prevent any background noise and ask that you. Please please your line on mute.

What's your question has been stated.

Operator: Thank you. Ladies and gentlemen, if you have a question at this time, please press the star, then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, that's the star, then one to ask a question. To prevent any background noise, we ask that you please place your line on mute once your question has been submitted. Our first question comes from Eric Joseph with J.P. Morgan. Your line is now open.

Our first question comes from Eric Joseph with JP Morgan.

Line is now open.

Hey, guys. Thanks for taking the questions.

Just a couple from us.

John I guess regarding your comments.

The outcome studies conducted blocks group I'm wondering if you could elaborate a little bit on the types through this mill for these you are contemplating with care wells and specifically, whether the youre seeking opportunities to expand the label claims for.

Eric Joseph: Hey guys, thanks for taking the questions. Just a couple from us.

With a record year for later stage into the United follow.

John P. Butler: John, regarding your comments on the outcome study from Dr. Blox's group, I'm wondering if you could elaborate a little bit on the types of additional studies you're contemplating with KOLs, and specifically, whether you're seeking opportunities to expand label claims with the RICS-VIA for later stage CKDs.

Sure Eric Thanks, very much for the question that's exactly the way we're thinking about this and.

The FDA has a lot more interest in real world kind of outcome studies and when you look at the way that that Dr. block study was designed it really was a very straight forward outcome study and with very clear results. So what we are what we have been discussing is taking a very similar kind of design.

John P. Butler: Sure, Eric, thanks very much for the question. That's exactly the way we're thinking about it.

John P. Butler: You know, the FDA has a lot more interest in real-world outcome studies, and when you look at the way that Dr. Block's study was designed, it really was a very straightforward outcome study with very clear results. So what we've been discussing is taking a very similar kind of design and just expanding that to ultimately expand the label for Arixia. And of course, you know, when you think about having that kind of study ongoing and the kind of confidence that it demonstrates, we think that actually can impact the way physicians think about the product on a day-to-day basis, even before you see the data. So you know, this is just data that's just too exciting not to try to take advantage of. So this is very much in line with the long-term growth strategy that we've been thinking about since the merger.

And just expanding that to ultimately expand the label for Rem.

For Auryxia and of course, when you think about having that kind of study ongoing and the kind of confidence that demonstrates we think that actually.

Can impact the way physicians.

Think about the product on a day to day basis, even before you see the data. So this is just native is just too exciting.

Not to try to take advantage of and this is very much in line with the long term growth strategy that we have.

We've been talking about since the merger.

Got it and maybe just one on the product side product commercial side I guess, there's there seems to be a little bit of variability in cogs with a bit of a sequential step up.

This quarter on Auryxia can you just talk about some of the drivers behind the fluctuations in Cogs and just sort of how to think about.

Jason Imello: Got it. And maybe just one on the product side, the commercial side of products.

How they would smooth out over time thanks.

John P. Butler: I guess there seems to be a little bit of variability in COGS with a bit of a sequential step up this quarter on Erixia. Can you just talk about some of the drivers behind the fluctuations in COGS and just sort of think about how they would smooth out over time? Thanks.

Sure. This is this is Jason.

So when you look at the Cogs. If you look at the base level of Cogs, which is $9.6 million, that's really related to the manufacturer of Auryxia and Thats up from Q1, primarily due to the increase in sales. So that Representatively has the same when you look at the margin is around 67% at that level.

So thats just a volume driven increase.

Jason Imello: Sure, this is Jason. So when you look at the COGS, if you look at the base level of COGS, which is 9.6 million, that's really related to the manufacturer of Arixia, and that's up from Q1, primarily due to the increase in sales. So that representatively is the same. When you look at the margin, it's around 67% at that level. So that's just a volume-driven increase. The other two items that get added to that are purchase accounting related. So there's the step-up in inventory; that is part of the valuation that you do when you do the acquisition from the date of closing. That gets brought into the P&L as we sell units of Arixia. So that's the $19 million charge.

The other two items that gets added to that our purchase accounting related. So there has to step up on inventory that is out of the valuation that you do when you do the acquisition from.

From the date of closing.

That gets brought into the PML as we sell units of Auryxia, so that that 19 point.

So thats a reasonable benchmark to use in terms of what to expect for that.

Then there's the amortization of the license that we valued on Auryxia and Thats $9.1 million and that's the same number every quarter thats getting amortized over nine years.

Great Thats helpful. Thanks for taking the questions.

Thank you and our next question comes from Chris Raymond with Piper Jaffray. Your line is now open.

Jason Imello: We expect that to continue into the second half of next year. The way to think about that is, generally speaking, if you look at that $9.6 million in cost of sales, and if you projected what that would be in the future, that step-up portion is generally twice that per period. So that's a reasonable benchmark to use in terms of what to expect for that. Then there's the amortization of the license that we valued on Erixia, and that's $9.1 million. And that's the same number every quarter. That's getting amortized over nine years.

Good morning. This is nicole good brzeski on for Chris This morning.

Just on Auryxia on CMS is ideal coverage decision you mentioned the rule is overturned that it would be opportunity upside, but without the rule being reversed how should we think about this going forward and then you guys have also talk just about you know working hard to sort of reversed that decision can you talk about any progress made here.

Eric Joseph: Great, that's helpful. Thanks for taking the questions.

Operator: Thank you. And our next question comes from Chris Raymond with Piper Jaffray. Your line is now open. Good morning. This is Nicole Gabreski on for Chris this morning.

Sure. Thanks, Nicole for the question. So on the second question first I mean, we continue to have very good dialogue.

Nicole Gabreski: So just on Erixia, on CMS's IDA coverage decision, you mentioned if the rule is overturned, there would be opportunities for upside, but without the rule being reversed, how should we think about this going forward? And then you guys have also talked about, you know, working hard to sort of reverse that decision. Can you talk about any progress made here?

Everywhere in Washington, I think even at the part D level. There is a clear understanding of the value that auryxia brings and I remain very confident in our ability to.

Got to change that that Noncoverage determinations.

On the other side of that of course. This is the federal government. We're working on so from a timing perspective.

John P. Butler: Sure. Thanks, Nicole, for the question. So on the second question first, I mean, we continue to have very good dialogue everywhere in Washington. I think even at the party level, there's a clear understanding of the value that Erixia brings, and I remain very confident in our ability to change that non-coverage determination. On the other side of that, of course, this is the federal government we're working on. So from a timing perspective, they're not on my calendar, unfortunately. But as I said, there's every single meeting we've had has been positive, and when you pair that with, you know, I was down in Washington a few weeks ago when the president launched this initiative from the administration on improving kidney care and delaying progression, etc., and, you know, when you pair, you know, Rixie's IDA indication and the Dr. Block data that we just talked about, you know, we're proving that we can delay progression, and, you know, that's in line, and to not be covering the drug, I think, is inconsistent with what the administration's goals are.

They are not on my calendar. Unfortunately.

So, but as I said there is.

Every single meeting we've had has been positive when you pair that with that I was down in Washington, a few weeks ago. When the precedent launch this initiative from the administration on improving kidney care and delaying progression et cetera, and when you pair.

Auryxias Ida indication and the Doctor block data that we just talked about and we're proving that we can delay progression.

And that's in line and to not be covering the drug I think is inconsistent with what the administrations goals are so these are the things that give me great confidence that we're going to get to a positive resolution now and before we get to that resolution.

As Weve said.

Most of the growth that we've been driving is coming out of Hyperphosphatemia indication and our market share Hyperphosphatemia is just over 7% theres tremendous room for growth there.

As you think about things like the the Kigo guidelines moving people away from calcium we continue to see that.

Play through the way physicians think about prescribing.

Drugs here and so.

With great confidence that we can continue to grow in the Hyperphosphatemia space and even as you think about iron deficiency anemia fully half of the.

John P. Butler: So, you know, these are the things that give me great confidence that we're going to get to a positive resolution. Now, before we get to that resolution, you know, as we've said, most of the growth that we've been driving is coming out of a hyperphosphatemia indication. I mean, our market share in hyperphosphatemia is just over 7%. There's tremendous room for growth there. You know, as you think about things like the KDEGO guidelines moving people away from calcium, we continue to see that play out in the way physicians think about prescribing drugs here. And so, you know, we have great confidence that we can continue to grow in the hyperphosphatemia space. And even as you think about iron deficiency anemia, fully half of the patients, the CKD patients, have commercial coverage or Medicaid, where they still have access to Erixia. So there's still significant opportunity to grow within that space. We won't be able to maximize that without CMS coverage, but we can certainly have very robust growth from where we are, and we're seeing that in the prescriptions to date.

They still have access to auryxia, so there's still significant opportunity to grow within that space, we won't be able to maximize that without the CMS coverage, but we can certainly have very robust growth from where we are and we're seeing that in the prescriptions to date.

Great.

And then sorry, if I missed it.

But for that to do that and the Jan da submission.

I guess I just wanted to clarify his that submission been accepted for review.

And if not we'll that decision be communicated in some way.

So Japan doesn't have a process like the FDA does where they formally notify you of acceptance, it's generally they'll they'll send questions.

That would indicate there not accepting it within a few weeks of the filing we're well past that point now so when.

I think Mitsubishi and we believe that we're on the way to a full review.

Okay, great. Thanks, so much.

John P. Butler: Great. And then, sorry if I missed this, but for Vatidustat and the JNDA submission, I guess I just wanted to clarify, has that submission been accepted for review? And if not, will that decision be communicated in some way?

Thank you.

Thank you.

And our next question comes from David Lebowitz with Morgan Stanley . Your line is now open.

Thank you very much for taking my question.

I guess since competitive data came out earlier this year.

John P. Butler: So, Japan doesn't have a process like the FDA does, where they formally notify you of acceptance. You know, it's generally, you know, they'll send questions that would indicate they're not accepting it within a few weeks of the filing. We're well past that point now, so I think Mitsubishi and we believe that we're on the way to a full review.

I guess, what positive takeaways can you.

Do you have from.

What you read out from their data that might extrapolate.

To your upcoming studies and on what differences.

Can you also extrapolate.

That you would want to highlight to us regarding your studies and how we should think about things.

Nicole Gabreski: Okay, great. Thanks so much. Thank you. Thank you. And our next question comes from David Lebowitz with Morgan Stanley. Your line is now open.

When we compare and contrast.

David Thanks for the question so.

There are a number of things in the release on Roxadustat that.

That gives us greater confidence in Invitae do stat, I mean, certainly the fact that there there didnt seem to be certainly to report any overt safety issues at all which would or could be categorized as class related so when.

Operator: Thank you very much for taking my question. I guess since competitive data came out earlier this year, I guess what positive takeaways can you have from what you read out from their data that might extrapolate to your upcoming studies, and what differences can you also extrapolate that you would want to highlight to us regarding your studies and how we should think about things when we compare and contrast.

There was.

That gives me confidence.

On top of that when you look at the press release from Astrazeneca. It talks about confirming cardiovascular safety.

I think thats, a very important comment I mean, we haven't seen any data of course, so it makes it hard to draw too many conclusions.

David Lebowitz: David, thanks for the question. So there are a number of things in the release on Roxas DoStat that give us greater confidence in Vatidustat. I mean, certainly the fact that there didn't seem to be, or it certainly didn't report any overt safety issues at all, which would or could be categorized as class-related. So, you know, that gives me confidence. On top of that, you know, when you look at the press release from AstraZeneca, it talks about confirming cardiovascular safety. I think that's a very important comment.

But.

It certainly suggests that there was no negatives that we're seeing from a cardiovascular standpoint, and I think that again from a class perspective.

Is quite encouraging.

And.

Then when I think about our program vis-a-vis their program I really feel like our program is very much set up for success.

Success, both from a clinical perspective from a regulatory perspective, and ultimately from a commercial perspective from a from a clinical perspective again, we've we've got a and active controlled comparator in both our non dialysis study as well as our dialysis study and and.

With a non inferiority endpoint.

We think this gives us.

Very strong opportunity for a very positive result from that perspective.

It also allows us to do multiple comparisons versus the standard of care, which is an essay and that from a commercial perspective gives us opportunities to compare remember the $7 billion of revenue.

John P. Butler: We haven't seen any data, of course, so it makes it hard to draw too many conclusions, but it certainly suggests that there were no negatives that were seen from a cardiovascular standpoint. And I think that, again, from a class perspective, is quite encouraging. And, you know, then when I think about our program vis-a-vis their program, I really feel like our program is very much set up for success. You know, success both from a clinical perspective, from a regulatory perspective, and ultimately from a commercial perspective. From a clinical perspective, again, we've got an active control comparator in both our non-dialysis study and our dialysis study. And, you know, with a non-inferiority endpoint, we think this gives us, you know, a very strong opportunity for a very positive result from that perspective. It also allows us to do multiple comparisons versus the standard of care, which is an ESA. And, you know, that from a commercial perspective gives us opportunities to compare. Remember, the $7 billion of revenue that's being generated today in this market is being generated by ESAs.

That's being.

Generated today in this market is being generated by USAID to take that market you have to be able to compare directly to the drug to physicians are used to using we'll have much more of an opportunity to do that particularly in the non dialysis segment, which we all recognize is the opportunity to grow.

More than in the dialysis segment, but of course, you've got to get to the market first and that you want to have the right regulatory strategy and.

I sat across from the FDA and they said in the non dialysis segment. They wanted to see an active control. That's what we're going to give them. We think that gives us a significant advantage.

From that perspective.

And.

Beyond that we have an agreed to non inferiority margin for mace and we sat with them I guess with just over a year ago now.

And agreed on the key elements of our statistical analysis plan. So we think are very very well set up as we as our data comes in less than a year from now.

And.

Set up for success not only from a regulatory perspective, but from a.

Commercial perspective as well.

Thank you for that and just jumping over to Auryxia.

And following up on a prior question.

I know that certainly.

Medicare.

It was not going to reimburse for I'd.

And there were some form that was imposed there was also going to affect the hyperphosphatemia.

John P. Butler: To penetrate that market, you have to be able to compare directly to the drug that physicians are used to using. We'll have much more of an opportunity to do that, particularly in the non-dialysis segment, which we all recognize is the opportunity to grow more than in the dialysis segment. But, of course, you've got to get to the market first, and you want to have the right regulatory strategy. I sat across from the FDA, and they said in the non-dialysis segment they wanted to see active control. That's what we're going to give them. We think that gives us a significant advantage from that perspective. Beyond that, we have an agreed-to non-inferiority margin for MACE. We sat with them, I guess it was just over a year ago now, and agreed on the key elements of our statistical analysis plan. We think we're very, very well set up as our data comes in less than a year from now and set up for success, not only from a regulatory perspective but from a commercial perspective as well.

At least for a temporary period of time has that more or less worked its way through.

So yes. It was a very unusual situation at the beginning of the year, where every patient on the drug has to go through a prior authorization process and that's why you saw the pressure on prescriptions in Q1. The team has done a great job of working through that incredibly solid execution by the folks in the field.

We've put some tactics in place.

Around our hub et cetera to help.

Physicians and patients.

Get through the prior authorization process, it's not as if physicians aren't used to that process. They are very much used to having to go through prior authorizations, we simply a volume of patients who have to go through in Q1. So we've really worked through that we're now seeing clear growth.

As I said, we see that certainly in the Q2 number and we're continuing to see growth in Q3. So I think working through it is the right way to say it and.

John P. Butler: Thank you for that and just jumping over to Arixia and following up on a prior question. I know that certainly Medicare was not going to reimburse for IDA, and there was some form that was imposed that was also going to affect the hyperphosphatemia, at least for a temporary period of time. Has that more or less worked its way through?

While we are confident in resolving the CMS issue. We're also.

Working very hard so that at the beginning of the year next year, we'll be very prepared not to see the same kind of pressure on on prescriptions and I'm very confident that we are.

We're set up to do that.

Thanks for taking my questions.

Thank you.

John P. Butler: So yeah, it was a very unusual situation at the beginning of the year where every patient on the drug had to go through a prior authorization process. And that's why you saw the pressure on prescriptions in Q1. The team has done a great job of working through that incredibly solid execution by the folks in the field. We've put some tactics in place around our hub, etc. to help physicians and patients get through the prior authorization process. It's not as if physicians aren't used to that process. They are very much used to having to go through prior authorizations. It was simply a volume of patients who had to go through prior authorizations in Q1. So we've really worked through that, and we're now seeing clear growth.

And our next question comes from Bert Hazlett with BTIG.

Your line is now open.

Thank you David just asked my question when you were very clear in answering them.

I'll just ask one on cash.

Needs and expectations going forward.

Could you just repeat the.

The guidance with regard to the cash runway and.

And and thoughts on capital structure going forward broadly thanks.

Sure.

So.

As we disclosed we have cash beyond 12 months so.

And we're into Q3 2020 with that.

John P. Butler: As I said, we see that certainly in the Q2 numbers, and we're continuing to see growth in Q3. So I think working through it is the right way to say it. While we're confident in resolving the CMS issue, we're also working very hard so that at the beginning of the year, next year, we'll be very prepared not to see the same kind of pressure on prescriptions. And I'm very confident that we're set up to do that.

So thats, we are affirming our previous guidance.

Going forward, where we look at the.

Where we are on the horizon of our phase three program, we wrote one year away from that.

Reading out so that those costs will stop.

Wind down.

At the same time, we believe the commercial business will be on Auryxia will be increasing and contributing more cash so.

Our needs going forward a much more manageable in the next near term horizon versus what we've had done historically, where we had a large phase three program going on all cylinders.

While we are enrolling so we think that we're now in a very good position from a capital position and also having flexibility with a commercial product to look at other non dilutive types of sources as well.

David Lebowitz: Thanks for taking my questions.

Yes, let me, but let me just kind of.

Operator: Thank you. And our next question comes from Bert Haslett with BTIG. Your line is now open.

Put an exclamation point on on Jason's points. There I mean, we have more than 12 months of cash today. So there is no.

Bert Haslett: David just asked me questions, and you were very clear in answering them. I'll just ask one on cash needs and expectations going forward. Could you just repeat the guidance with regard to the cash runway?

Urgent need, but we're always looking for.

Opportunities too.

To enhance our capital structure and as Jason said post the merger when we were working through the merger we talked about the fact that having a commercial product gave us so many more.

Jason Imello: and thoughts on capital structure going forward broadly. Thanks.

Options versus simply selling equity and we're exploring all of those and we have a product commercial product thats moving towards profitability and that's an important component of of the long term.

John P. Butler: Sure. As we disclosed, we have cash beyond 12 months, and we're into Q3 2020 with that. So, that's reaffirming our previous guidance. Going forward, we're, you know, we look at where we are on the horizon of our phase three program. We're one year away from that, reading out, so those costs will start to wind down. And at the same time, we believe the commercial business will be on Erixia will be increasing and contributing more cash. So our needs going forward are much more manageable in the next near-term horizon versus what we've had done historically where we had the large phase three program going on all cylinders while we're enrolling. So we think that we're now in a very good position from a capital standpoint and also have flexibility with a commercial product to look at other non-dilutive types of sources as well.

Opportunity to put capital on the balance sheet.

But there are multiple non dilutive options as well and we're exploring all of those and we have time to do that given the cash position that we have today. So.

We feel we feel very good about about where we are.

Use of cash and as Jason said.

As important as what our balance sheet has today is what do you need and when we look at the revenue growth, we're seeing from Auryxia and continue we expect to continue to see from Auryxia.

That has a significant impact on what our ultimate need is and Jason used the right word it's very manageable compared to what we have to raise at too.

To fund this clinical program over the last few years.

Thank you for the color. Thank you for taking the question. Thanks.

Jason Imello: Yeah, let me, let me just kind of put an exclamation point on Jason's points there. I mean, we have more than 12 months of cash today, so there's no urgent need, but we're always looking for opportunities to enhance our capital structure. And as Jason said, after the merger, when we were working through the merger, we talked about the fact that having a commercial product gave us so many more options versus simply selling equity. And we're exploring all of those. And we have a product, a commercial product, that's moving towards profitability, and that's an important component of the long-term opportunity to put capital on the balance sheet. But there are multiple non-dilutive options as well, and we're exploring all of those.

Thank you.

And our next question comes from Difei Yang with Mizuho. Your line is now open.

Hey, good morning, guys.

This is Alex on for Difei. Thank you for taking the questions.

I have one on vetted do stuff.

When you think about commercialization of fed is done initially in the dialysis setting how long do you think it would take for physicians to become comfortable with.

That it is in the non dialysis setting a much physician education do you think will be required there.

Thank you.

Alex Thanks for the question so in the dialysis setting of course, you've got.

It's a very they're two very different markets right and one of the reasons that we completed the transaction with before.

John P. Butler: And we have time to do that given the cash position that we have today. So we feel very good about where we are vis-a-vis cash. And as Jason said, as important as what our balance sheet says today is, "what do you need?" And when we look at the revenue growth we're seeing from Erixia, and we expect to continue to see from Erixia, you know, that has a significant impact on what our ultimate need is. And Jason used the right word. It's very manageable compared to what we had to raise to fund this clinical program over the last few years.

Was the opportunity to accelerate the adoption of the product within the within the dialysis market and I mean, if you use mircera from before as a.

As a comp.

In nine months, they had 90% of patients had for Sydney is on.

And your Sarah now.

The way it works basically is they do pilot studies they understand what the protocol is and then they push that through and we're already in conversations that before about the strategy too wet to make that happen. So when we do believe that you can have a very quick adoption of a vet to do that within the dialysis population.

The non dialysis market of course is.

Bert Haslett: Thank you for the color and thank you for taking the question.

It does take more.

Education on the product and more time.

Operator: Thank you. And our next question comes from Di-Fei Yang with Mizuho. Your line is now open.

To move adoption and that's one of the reasons why ironically, its nice that another company might be out there talking about the benefits of here for a year before and we bring out what we think is.

Di-Fei Yang: Hey, good morning guys. This is Alex on for DFAY.

Alex: Thank you for taking the questions. I have one on Vatadustat. When you think about commercializing Vatadustat initially in the dialysis setting, how long do you think it would take for physicians to become comfortable with Vatadustat in the non-dialysis setting? And how much physician education do you think will be required there? Thank you.

A.

A superior product, we'll see what the data says, but that's our belief and that allows us to take advantage of the work that they've done.

Thank you.

And our next question comes from Chad Messer with Needham and company. Your line is now open.

John P. Butler: Alex, thanks for the question. So in the dialysis setting, of course, you've got, you know, it's a very, they're two very different markets, right? And one of the reasons that we completed the transaction with V4 was the opportunity to accelerate the adoption of the product within the dialysis market. And I mean, if you use Mercera from V4 as a, you know, as a comparator, in nine months, they had 90% of patients had Fresenius on Mercera. Now, you know, the way it works basically is they do pilot studies, they understand what the protocol is, and then they push that through. And, you know, we're already in conversations with V4 about the strategy to make that happen. So, you know, we do believe that you could have a very quick adoption of Vatadustat within the dialysis population.

Great Good morning, and thanks for taking my question.

This March 25 date on this the settlement with par that's.

That's good it's actually you know a year or so out from from what we had been modeling based on patents.

What do you think the odds are you'll have to you know you'll have other people you have to defend your patents against and if so would that you know the 2025.

Kinda stick I know this is a settlement nada judgment.

Right John Thanks for the question, we were very very pleased with that.

That settlement with par.

And there are five other anda filers.

And you know given that we are.

In litigation with them and we don't comment specifically on it but we believe the par was the first filer.

John P. Butler: The non-dialysis market, of course, does take more education on the product and more time to move adoption. And that's one of the reasons why, ironically, it's nice that another company might be out there talking about the benefits of HIF for a year before we bring out what we think is a superior product. We'll see what the data says, but, you know, that's our belief. And that allows us to take advantage of the work that they've done.

Par believes there the first filer, we don't know that for a fact until then.

Until the FDA publishes the list, but we think that.

Has the potential to positively influence.

Where this lands and.

As you said quite rightly.

You know in our modeling we had been looking at 2024 were very.

I'm pleased with them a March 25 date.

Operator: Thank you. And our next question comes from Chad Messer with Needham & Company. Your line is now open. Great. Good morning, and thanks for taking my questions.

Yes, no that's great and then I know the the Japanese have a less defined process regulatorily than the FDA, What's typical review time.

Chad Messer: This March 25 date on the settlement with PAR, that's, That's good. That's actually, you know, a year or so out from what we've been modeling based on patents. What do you think the odds are you'll have to, you know, you'll have other people you'll have to defend your patents against, and if so, would the 2025 kind of stick? I know this is a settlement. Judgement.

Or range of technical review times.

Yes, they actually it's just a little bit of a different process. Its pretty well described it's it's about them about a year and I think thats the right way to think about it they do have approvals in batches, which is a little bit different but.

You are talking about about a year for for the review.

John P. Butler: Right, Chad, thanks for the question. We were very, very pleased with that settlement with PAR. There are five other ANDA filers, and given that we are in litigation with them, we won't comment specifically on it, but we believe that PAR was the first filer. PAR believes it was the first filer. We won't know that for sure until the FDA publishes the list, but we think that has the potential to positively influence where this lands. And, you know, as you said quite rightly, in our modeling, we had been looking at 2024. We're very pleased with a March 25 date.

All right Great and then.

Just wanted to ask a little bit about the three time per week.

Dosing that you got into it.

In to protect.

To trying to harken back to when you when you added that.

Is that you know is that flexibility is the benefit that meet mainly just to give a different dose or is it supposed to be.

A complimentary adherence a benefit as well normally you think of less than daily is.

Sometimes problematic for freight hearings.

Yes, so just to clarify the forward to study has three times weekly dosing after daily dosing.

John P. Butler: Yeah, no, that's great. And then I know the Japanese have a less defined process regulating medicines than the FDA, but what's the typical review time or range of typical review times?

That was an ongoing study of course, we had the phase two dialysis study that we published a few years ago that had a three times weekly arm in it as well and then we're planning for.

John P. Butler: Yeah, they actually have just a little bit of a different process. It's, it's, it's pretty well described. It's, it's about, about a year. And I think that's the right way to think about it. They do approvals and batches, which is a little bit different, but you know, you're talking about, about a year for the review.

A registration study.

With three times weekly dosing also and and the rationale there is really around the dialysis segment in the fact that patient stylized three times a week and then.

The fact that that to do that would be part of the bundle. It would certainly be purchased by the dialysis providers, even with the T. dapa.

John P. Butler: All right, great. And then, um, I just want to ask a little bit about the three-times-per-week doses that you got into Protect. We're sort of trying to harken back to when you added that. Is that, you know, that flexibility, is the benefit of that mainly just to give a different dose, or is it supposed to be, you know, a compliance or adherence benefit as well? Normally, you think of, you know, less than daily as sometimes problematic for adherence.

Rule that allows for payment outside the bundle and the dialysis providers want to ensure their patients are compliant and so they can deliver the drug to the patient in the chair and sure 100% compliance and that's their preference so.

From our perspective, and when you look at the the initiatives that the government has to move people out of the dialysis center onto home dialysis parent Neal dialysis, having a once a day option for those patients is ideal there will be patients that will still be in the dialysis center, many thousands of them and them, having a three times weekly option for them.

John P. Butler: Yeah, so just to clarify, the 4-2 study has three times weekly dosing after daily dosing in it, which is an ongoing study. Of course, we had the phase 2 dialysis study that we published a few years ago that had a three times weekly arm in it as well. And then, you know, we're planning for a registration study with three times weekly dosing also.

His ideal as well and so that's the.

Thinking about it from a commercial perspective, the idea is to to have physicians and patients have choice and how the drug is delivered.

John P. Butler: And the rationale there is really around the dialysis segment and the fact that patients dialyze three times a week. And then, you know, the fact that Vatadustat would be part of the bundle, it would certainly be purchased by the dialysis providers, even with the TDAPA rule that, you know, allows for payment outside the bundle. And the dialysis providers want to ensure their patients are compliant, so they can deliver the drug to the patient in the chair, ensure 100% compliance, and that's their preference. So, you know, from our perspective, you look at the initiatives that the government has to move people out of the dialysis center onto home dialysis, and peritoneal dialysis, having a once a day option for those patients is ideal. But there will be patients that will still be in the dialysis center, many thousands of them, and having a three times weekly option for them is ideal as well. And so, you know, that's the thinking about it from a commercial perspective. The idea is to have physicians and patients have choice in how the drug is delivered.

Okay and I appreciate you taking me through that and then with my apologies to Jason because I know I know you went through this with an earlier question just on.

Cost of goods I get that there is a a flatline that 9100, but how how how long is this.

Accounting.

How long we effected by that other non cash.

Item on.

On the Cogs.

Sure no problem, Chad so again keeping them remember both of these are non cash.

So the amortization is nine years from the date of the acquisition. So that's the same number $9.1 million per quarter.

So if you factor from from December of a of 18 nine years on a quarterly basis for that number.

On the on the step up to fair value step up for the inventory.

We expect that we say.

By the second half of next year, probably around this time Q3 or so.

We think that will be fully depleted.

Chad Messer: Okay, yeah, and I appreciate you taking me through that. And then, with my apologies to Jason, because I know you went through this with an earlier question, just on the cost of goods, I get that there's a flat line at $9,100, but how long is this accounting cycle? How long were we affected by that other non-cash item on the cards?

And the way to think about that is if you just projected normal margin.

Without these charges, so in this quarter or $9.6 million or 67% margin.

If you are forecasting that that that fair value step up charge.

It would be twice that.

Two times that number on a quarterly basis generally speaking given take.

And we again, we think that will be finished by by this time Q3.

Jason Imello: Sure, no problem, Chad. So again, the key thing to remember is that both of these are non-cash. So the amortization is nine years from the date of the acquisition. So that's the same number, $9.1 million per quarter. So if you factor in December of 18, nine years on a quarterly basis for that number. On the step up, the fair value step up for the inventory, we expect that, we say, by the second half of next year, probably around this time, Q3 or so, we think that will be fully depleted. And the way to think about that is if you just project the normal margin without these charges, so in this quarter, $9.6 million or 67% margin, if you're forecasting that, that fair value step-up charge would be twice that, two times that number on a quarterly basis, generally speaking, give and take. And again, we think that will be finished by this time, Q3, second half next year.

Second half next year.

Great. Thanks.

Okay.

Thank you.

And our next question comes from Kennen Mackay with RBC capital markets. Your line is now open.

This is Justin on for Ken and Thanks for taking my question and congrats on all the progress this quarter a question from us on event rate expectations for the Phase three program, just wondering where that guidance is coming from and how it changes the hemoglobin goals initial or enough publications that the mace event rate predictions, so essentially with the new hemoglobin goals have there been any changes to your expectations for event.

Chad Messer: All right, great. Thanks. Thank you. And our next question comes from Keenan McKay with RBC Capital Markets. Your line is now open.

Thank you.

Yes so.

When you are projecting event rates when you're designing a study I mean, you look at all of the available literature.

And project based on that if you think about studies like treat I mean really what you're you're use you're not really using the arent as freight you've really thinking about the placebo rate and.

Operator: This is Justin on behalf of Ken, and thanks for taking the question, and congratulations on all the progress this quarter. A question from us on event rate expectations for the Phase 3 program. Just wondering where that guidance is coming from and how it changes the hemoglobin goals since the initial ARINES publications affected the MACE event rate predictions. So, essentially, with the new hemoglobin goals, have there been any changes to your expectations for event approval? Thank you.

That's kind of informed.

You kind of the way, we think about it obviously we are.

Deeply into the trial now innovates fully enrolled protect will be very shortly and so we have a very good sense of how events are coming in and and.

Keenan McKay: Yeah, so when you're projecting event rates, when you're designing a study, I mean, you look at all of the available literature and project based on that. If you think about studies like TREAT, I mean, really what you're using, you're not really using the RNS-free, you're really thinking about the placebo rate. And that's kind of the informed way we think about it. Obviously, we are deeply into the trial now, Innovate is fully enrolled, and Protect will be very shortly. And so we have a very good sense of how events are coming in, and I think we have a lot of confidence in the timing now of when data is gonna be available.

I think we have a lot of confidence in the timing now of when data is going to be available.

Great. Thank you very much.

Thank you.

As a reminder, ladies and gentlemen, that's star then one to ask a question.

Our next question comes from Ed Arce with HC Wainwright. Your line is now open.

Hi, everyone. Thanks for taking my questions most have been.

Asked and answered already pretty thoroughly, but I did want to.

Ask one around this new policy advancing American kidney health.

And the goals of reducing the risk of kidney failure and improving access to quality care.

John P. Butler: Great, thank you very much.

Justin: Thank you. As a reminder, ladies and gentlemen, that's star number then one to ask a question. Our next question comes from Ed Arce with H.C. Wainwright. Your line is now open.

In particular around the sort of payment.

Incentive plans that they have.

Operator: Hi, everyone. Thanks for taking my questions. Most have been asked and answered pretty thoroughly already, but I did want to ask one around this new policy advancing American kidney health and the goals of reducing the risk of kidney failure and improving access to quality care. In particular, around the sort of payment incentive plans that they have, could you share with us sort of your thoughts and perspectives going forward as that's being implemented and how, in particular, you think that could ultimately benefit HIFS and BataDoost?

Could you share with us sort of.

Your thoughts and perspective going forward is that being enrolled and how in particular do you think that could ultimately benefit hips and back to do that in particular.

Thanks.

Yeah. Thanks for that question.

This is an initiative that obviously is positive for everyone in the.

Kidney care industry.

Frankly and.

I recently was was elected chair of the kidney care partners, which is the lobbying organization for the community and.

Antonio Eduardo Arce: Yeah, thanks for that question. This is an initiative that is obviously positive for everyone in the kidney care industry. And, you know, I recently was elected chair of Kidney Care Partners, which is the lobbying organization for the community. And, you know, that really does give Akebia a unique opportunity to be kind of at the head of the table as we work with the government on some of these policy initiatives going forward. So, you know, I think people are still trying to understand some of these, the different payment schemes that they are proposing, both the ones that are mandatory and optional. I think very important, of course, is the Tdapa rule. And, you know, when you think about Akebia and Vatadustat, Tdapa is, you know, that transitional drug add-on payment adjuster that allows for payment of Vatadustat out of the bundle for two years and really does encourage innovation.

That that really does give a TV a unique opportunity to be kind of at the head of the table as we work with the government on some of these policy initiatives going forward. So when.

I think people are still trying to understand some of these.

The different payment schemes that they are proposing both the ones that are are mandatory and the optional.

I think very importantly of course is the T. dapper rule and when when you think about a key being about to do stat.

Yep.

Is that transitional drug add on payment adjuster that allows for payment.

I've got to do that out of the bundle for two years and really does encourage innovation.

And and.

There are still certainly improve as we'd like to see made to happen again being part of K CP.

Ill helps us to drive our agenda forward with the rest of the community and but I think Pete App is the one that really has the biggest impact on us today on route to do stat. When you think about Auryxia, we've kind of had that near term opportunity to grow its really that focus on outcomes. That's that's key for us and a lot of the payment schemes that they put out there are really around.

Antonio Eduardo Arce: And, you know, there are still certainly improvements we'd like to see made to Tdapa. And again, being part of KCP helps us to, you know, drive our agenda forward with the rest of the community. But I think Tdapa is the one that really has the biggest impact on us today in Vatadustat. You know, when you think about Erixia, which kind of has that near-term opportunity to grow, it's really that focus on outcomes that's key for us. And, you know, a lot of the payment schemes that they put out there are really around dialysis, whereas, you know, it's these initiatives to keep people off of dialysis that are, you know, much more interesting when you think about Erixia, particularly given the block data that we referenced earlier. So, you know, we are absolutely kind of right in the middle of finding every opportunity to take advantage of that and help that drive our strategic initiatives for Erixia and Vatadustat.

Dialysis, whereas it's these initiatives on.

Keeping people off of dialysis that are.

Much more interesting when you think about auryxia, particularly given the block data that we referenced earlier. So we are absolutely kind of right in the middle of finding every opportunity to take advantage of that and help that drive our strategic initiative for Auryxia end VAT to do that in the future.

That's great color. Thanks, John .

Congrats on the continued progress.

Thank you.

Im not showing any further questions at this time I would now like to turn the call back over to John Butler for any closing remarks.

John P. Butler: That's a great color. Thanks, John, and congrats on the continued progress.

Antonio Eduardo Arce: Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to John Butler for any closing remarks.

Thanks Joel.

We're very pleased with the progress that the team has made in both driving auryxia revenue and executing on Nevada do step program and we really do look forward to updating you on our future progress. Thanks very much for joining the call today have a great day.

John P. Butler: Thanks, Joel. We're very pleased with the progress that the team has made in both driving Erixia revenue and executing on the Vatadu Stat Program, and we really do look forward to updating you on our future progress. Thanks very much for joining us on the call today. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude todays program and you may all disconnect everyone have a wonderful day.

And.

Operator: Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all have a wonderful day.

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