Akebia Therapeutics Inc (AKBA) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Akebia's fourth-quarter and FY16 financial results conference call.

(Operator Instructions)

As a reminder to our audience, this conference is being recorded for replay purposes. It is now my pleasure to hand the conference over to Ms. Theresa McNeely, Senior Vice President, Corporate Communications and Investor Relations. Ma'am, you may proceed.

Thanks, Brian. Good afternoon, everyone, and thank you for joining us today to discuss Akebia's fourth quarter and full-year 2016 financial results. Today's call will be archived and a replay will be available after the call.

Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. Each forward-looking statement contained in the call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Additional information regarding these factors appears under the heading Risk Factors in our annual report for the year ended December 31, 2016, and in our press release which we issued a few minutes ago, both of which are available on our website, at www.Akebia.com.

The forward-looking statements in the call speak only as of the original date of this call and we undertake no obligation to update or revise any of the statements. I would now like to turn the call over to John Butler, CEO of Akebia. John?

Thanks, Theresa. Good afternoon, everyone, and thanks for joining us today to review our 2016 financial results and corporate progress. During today's call, I will review the major accomplishments over the past year. Jason Amello, our Chief Financial Officer, will review then our financials, and I'll close with our outlook for 2017 before opening the call for questions.

Joining us for Q&A will be Nikki Hadas, our General Counsel, and Michael Rabinowitz, our VP of Research. Michael is joining us remotely from a hypoxia conference in Canada. You may recall, Michael joined Akebia a few months ago, after a long career at J&J, where he led the HIF program and helped build the library of HIF compounds that Akebia recently licensed.

2016 was another year of major accomplishments for Akebia. Over the past year, we launched our global Phase 3 development program for vadadustat and established two major development and commercial collaborations, one with Otsuka, where we will share the US market, and a collaboration with Mitsubishi Tanabe for Japan and certain Asian territories. Together, these collaborations provide capital to fund our trials and the commercial strength that will position vadadustat for successful market introduction, contingent, of course, upon approval by the regulatory authorities in those regions.

In addition, we recently expanded our HIF portfolio through a research and license agreement with Johnson & Johnson for an extensive library of well characterized HIF compounds and associated intellectual property. This significantly accelerates our research efforts and builds upon our understanding of the potential of the HIF pathway, as we continue to develop treatments for patients with renal anemia and other serious diseases.

As many of you know, vadadustat is a small molecule inhibitor of hypoxia-inducible factor prolyl hydroxylase, or HIF-PH, which we're developing as an oral once daily or three times weekly treatment for anemia associated with chronic kidney disease, or CKD. We believe that by managing anemia through the HIF pathway, vadadustat has the potential to set a new standard of care in renal anemia.

Current treatment for anemia of CKD is injectable erythropoiesis stimulating agents, or ESAs, which have been associated with increased cardiovascular events. In clinical studies to date, vadadustat has been shown to restore normal physiologic levels of erythropoietin, or EPO, allowing a gradual and controlled hemoglobin response. We believe that by restoring the natural diurnal rhythm of EPO, vadadustat may offer an attractive alternative to ESAs, as well as other HIF compounds in development.

This past year, we initiated our global Phase 3 development program which is designed to build on the positive results of 15 prior clinical studies of vadadustat to support registration in major markets worldwide and collect data required to establish a new standard of care for patients with anemia associated with CKD. The Phase 3 vadadustat program consists of the PRO2TECT program in non-dialysis CKD patients and the INNO2VATE program in dialysis dependent CKD patients.

The trials are open label active control non-inferiority designed, and the primary efficacy endpoint is change in hemoglobin level from baseline. The primary safety endpoint is an assessment of cardiovascular safety, as measured by major adverse cardiovascular events, or MACE. The global trials are designed to enroll approximately 5,700 patients; although, as I've stated before, we plan to continue enrolling patients to increase exposure and reach the required MACE event number as quickly as possible.

We initiated PRO2TECT enrollment at the end of 2015. The independent data monitoring committee held its initial meeting and recommended continuing the studies without modification. We began our global INO2VATE program in August of 2016. Enrollment in the trials remain on track.

In 2016, we presented positive results from our Phase 2 studies at the major kidney disease meetings, including the NKF and ASN meetings. In addition, at the ERA-EDTA meeting last May, we presented data from our drug-drug interaction study, which demonstrated that vadadustat does not inhibit the liver cytochrome P450 HIP 2C9 isoenzyme, which metabolizes many commonly prescribed drugs for the CKD population, including the major statins and angiotensin receptor blocker drugs, for example, rosuvastatin and losartan.

Another important milestone for Akebia last year was a peer reviewed publication of our positive Phase 2b results in non-dialysis dependency kidney patients in Kidney International. We were also pleased to support a study published last year emphasizing the need for new treatment options for CKD patients who are currently being treated with the SAs. The study, published in the American Journal of Kidney Diseases, highlights the inadequate response to BSA, or hypo responsiveness, continues to be a key prognostic marker for the increased risk of death, even after the advent of bundled reimbursement, which saw significant decreases in ESA doses overall. The HIF mechanism of action suggests that vadadustat may be an option for these patients, allowing for an adequate hemoglobin response without the excess doses of ESAs.

We're initiating a Phase 2 trial to assess vadadustat in hypo responders in the next few months. Hypo responding patients represent about 10% to 15% of the dialysis market, but account for 30% to 40% of the ESA use. Importantly, hypo responders have a persistently greater risk of morbidity and mortality and are clearly in need of new treatment options.

In addition to the hypo responder study, we plan to begin a Phase 3 trial of vadadustat evaluating a three times weekly administration to dialysis patients. This study is designed to build upon the positive results that we observed in our Phase 2 trial of this dosing regimen. We believe that a flexible dosing schedule will benefit physicians and patients in the dialysis setting and, combined with once daily treatment in non-dialysis, offer a potential competitive advantage for vadadustat in the market.

The mounting clinical evidence supporting the potential of vadadustat in the treatment of anemia of chronic kidney disease was further substantiated by our ability to secure another major strategic collaboration last year. In December of 2016, we established the collaboration with Otsuka Pharmaceutical for the US market, which represents approximately $3.5 billion of the $7 billion total global ESA market. The collaboration provides for the companies to share equally in development costs and ultimately, in the profits in the US, if vadadustat is approved by the FDA.

Importantly, Akebia maintains control of the ongoing global development program for vadadustat and Otsuka will reimburse Akebia for its share of global development costs. Akebia will receive $265 million or more in committed capital for the global development program from Otsuka. This includes $125 million that we received upon signing and another $33.8 million that we received this quarter as reimbursement for Otsuka's share of development costs at Akebia incurred in 2016.

As we prepare for market launch, the companies will contribute equally to commercial and medical affairs efforts. We don't anticipate that this will be a significant expense this year, but in 2018 and beyond, as we ramp up for a potential launch, this cost sharing benefit will provide the kind of sustained support that we believe is required to optimize vadadustat's full potential upon approval by the FDA.

Under the terms of the agreement, Akebia is also eligible to receive an additional $765 million in development and commercial milestones, for a total transaction value in excess of $1 billion. Otsuka has invested extensively in the cardio renal area and shares our commitment to helping change the standard of care for patients with chronic kidney disease. Vadadustat is a natural fit for their product portfolio. With an established commercial infrastructure, they have the commercial muscle to help ensure the successful launch of a product with vadadustat's market potential. We couldn't be more pleased with this collaboration.

Another positive development from vadadustat in 2016 was the successful outcome in two patent disputes in the European market. The Opposition Division of the European Patent Office confirmed that two of FibroGen's HIF-related patent claims failed to meet the requirements for patentability and revoked these patents. We were pleased to prevail in both cases. Our success in Europe follows on the heels of a similarly positive outcome in Japan in 2015. We believe these decisions by multiple patent offices bode well for any future challenges.

Of course, we've always believed that HIF is an under appreciated pathway for developing innovative therapeutic products addressing multiple indications, such as other anemias and indications related to inflammation. Last month, we announced a licensing deal with J&J Innovation that greatly accelerates our strategy to build out our pipeline with other product candidates leveraging HIF biology. This agreement provides us with a comprehensive library of hundreds of HIF compounds for our continued research, including the rights to AKB5169, a preclinical asset for the treatment of inflammatory bowel disease, or IBD.

Multiple peer review publications have illustrated the potential for IBD to be the next indication for leveraging the HIF pathway to reduce inflammation. AKB5169 is a particularly attractive compound, given the fact that it is non-absorbed and thus has the potential to avoid the unwanted systemic effects potentially associated with HIF-PH inhibition, as well as the systemic toxicity of current IBD treatments. Preclinical endoscopy results of 5169 and its disease model of ulcerative colitis are encouraging, and we expect to conduct further preclinical research on 5169 and submit an IND to the FDA in the next 12 to 18 months.

In addition to the immediate positive impact to our pipeline, we believe that this transaction with J&J is fiscally responsible. We paid $1 million upfront to gain access to the HIF library and related IP, and we're also pleased that J &J will have the opportunity via a common stock warrant to take an ownership stake of approximately 500,000 shares in Akebia for a payment of up to $5 million. We believe that this licensing transaction is a testament to their belief in the potential of the HIF pathway and their confidence in our expertise and ability to move these HIF compounds forward.

As we advance through the pivotal phase of development for vadadustat, while at the same time accelerating our research efforts, we've also strengthened Akebia's senior leadership team with two key hires. We brought Karen Tubridy, PharmD, on board as our Senior Vice President and Chief Development Officer. Karen has more than 20 years of global drug development experience, including translational research.

And we also hired Michael Rabinowitz, PhD, as Vice President of Research at Akebia. Michael, who I mentioned, is on our call here today, has dedicated the bulk of his career to advancing HIF biology and at Akebia, is responsible for advancing our recently expanded HIF portfolio from J&J.

In addition to Karen and Michael, we strengthened our Board of Directors by appointing Scott Canute, former President of Global Manufacturing and Corporate Operations at Genzyme Corporation. Scott's experience will be particularly important to Akebia as we prepare for potential commercial launch of vadadustat. And now I'll turn the call over to Jason to review our financials.

Thank you, John, and good afternoon, everyone. Akebia's financial position reflects our progress in vadadustat's clinical development and the success we've had securing two collaborations. The Company reported a net loss of $37.9 million, or $0.99 per share, for the fourth quarter of 2016. That compares to a net loss for the fourth quarter of 2015 of $19.9 million, or $0.66 per share. For the full year, net loss was $135.7 million, or $3.60 per share in 2016. That compares with a net loss in 2015 of $60.7 million, or $2.29 per share.

These quarterly and full-year results correlate with our having two Phase 3 studies up and running concurrently in 2016. As a reminder, and as John mentioned, our PRO2TECT study in non-dialysis patients began at the end of 2015 and our INO2VATE study in dialysis patients commenced in August of 2016.

Looking at the components of the P&L, on the revenue side, we now have two collaboration arrangements. It's important to point out that both of these collaborations are considered multiple element arrangements under the complex revenue recognition guidance. This generally means that fixed and non-contingent payments will be recognized over the life of the arrangement, based on how activities under the arrangement are performed or delivered versus when the payments are actually received.

Our collaboration agreement with Otsuka Pharmaceuticals, which was executed just before the end of the year, on December 18, provides $265 million of committed funding, of which $125 million was received prior to the end of the year. In accordance with this revenue recognition methodology, we recognized approximately $1.5 million in collaboration revenue for the last two weeks of December in 2016.

Collaboration revenue in connection with our agreement with Mitsubishi Tanabe, which was executed at the end of 2015, is expected to commence in the second half of 2017, following the results of our Phase 2 studies being conducted in Japan. As such, the $40 million upfront payment we received back in 2015 remains in deferred revenue at the end of 2016.

On the expense side, research and development expenses were $33.4 million for the fourth quarter of FY16, compared to $14.2 million for the fourth quarter of FY15. Full-year R&D expenses were $115.8 million in FY16, and that compares to $43.0 million in FY15. The increase in both periods is primarily attributable to the external costs related to the global PRO2TECT Phase 3 program, as well as initiation costs of the global INO2VATE Phase 3 program, which again, commenced in August of 2016. Research and development expenses in both periods were further increased by headcount and compensation-related costs.

We expect R&D expenses to increase significantly in 2017, as we continue to enroll, accumulate and follow patients in both the PRO2TECT and INO2VATE Phase 3 studies, as both studies will have been active concurrently for a full 12 months in 2017. In addition, we'll be initiating our hypo responder NTIW studies in 2017. Despite this expected increase in R&D, it is important to keep in mind that a portion of these costs is reimbursable through our collaborations with Otsuka and Mitsubishi, which does get recorded as collaboration revenue, as I mentioned earlier.

On the G&A side, G&A expenses were $6.1 million for the fourth quarter of FY16, compared to $5.8 million for the fourth quarter of FY15. And on a full-year basis, G&A expenses were $22.2 million for FY16 and $18.5 million for FY15. The increase for both periods is primarily due to an increase in costs to support the global Phase 3 program, including headcount and facility-related costs. We do expect G&A costs to increase modestly, as our studies continue to enroll and we advance our commercial planning activities.

Turning to our cash position, we raised approximately $61 million net in a public offering at the beginning of the year, issuing 7.3 million shares of common stock, and we also received $125 million upfront payment from Otsuka in December of 2016. We ended 2016 with cash, cash equivalents and available for sale securities of $260.3 million. The Company expects cash resources, together with the timing of amounts expected to be received from our collaboration agreements, including $33.8 million that was received this month from Otsuka, to fund our current operating plan into mid-2018.

Lastly, we ended the year with approximately 38.6 million shares outstanding, or 42.2 million shares on a fully diluted basis, inclusive of outstanding options and RSUs. With that, let me turn it back to John for closing comments.

Thanks, Jason. At Akebia, we are building the leading company in HIF biology and developing novel therapeutics for the treatment of renal diseases. We think vadadustat has the potential to set a new standard of care for anemia of CKD and, in doing so, make a meaningful difference in the lives of these patients. And with our recent licensing agreement with J&J that significantly expands Akebia's pipeline, we're even better positioned to deliver on our mission to develop new HIF-based treatments for a variety of other indications.

2017 is off to a great start and we expect a year of continued progress. In support of our Phase 3 vadadustat program, we'll conduct a hypo responder study designed to assess vadadustat in the subgroup of patients who do not respond to ESAs. We anticipate beginning this Phase 2 trial in the first half of this year, with results expected in 2018. We also plan to initiate a Phase 3 study of vadadustat with three times weekly dosing, the results of which are also anticipated next year. Data from our own ongoing vadadustat Phase 2 Japanese dosing studies will be available before the end of 2017.

With respect to a European collaboration for vadadustat, our discussions for the EU and surrounding territories took a brief pause in order for us to complete the Otsuka deal. Now having established two major collaborations for vadadustat within 12 months, we're confident in our ability to establish other valuable collaborations that also reflect the enormous potential of vadadustat.

Turning to our pipeline, as I mentioned, we expect to file an IND for AKB5169 for IBD in the next 12 to 18 months. And you may recall that we also have a second compound, AKB6899, which is in preclinical development. We'll now evaluate 6899 in light of the new portfolio of preclinical compounds from J&J, with the aim of selecting the best compounds for the right indication as we advance towards the clinic.

And we will accomplish all of this from a position of financial strength, with over $260 million on our balance sheet, another $200 million plus in committed R&D payments from our collaborators over the course of the Phase 3 development program, and the opportunity to secure additional funding from potential future commercial collaborations. Akebia has a strong track record of execution and we fully expect to continue to deliver in 2017 and beyond. And now we'll open the line for questions. Brian?

Thank you, sir.

(Operator Instructions)

Mike King, JMP Securities.

Good afternoon, guys. Thanks for taking the question. John, you referenced some of the FibroGen development compounds, and I'm just wondering, their call last week had indicated that they are increasing the size of some of their studies, not totally clear on why that is, both in the CKD and non-CKD population. So I'm just wondering if you could care to comment about if there's any read-through to Akebia study designs and implementation and whether you feel that a larger data stat on roxadustat puts you at any competitive disadvantage or not? Thank you.

Thanks, Mike. Thanks for the question. So I can't really comment on roxadustat's clinical trials and what they're doing. As I mentioned in my comments, we're targeting 5,700 patients between our non-dialysis and dialysis programs, and that's really based on driving to a number of MACE events.

And as I also mentioned, we will clearly continue to enroll parents. This really is about driving event numbers. And so we've done the calculation, the 5,700 patients is what we need to drive those events. But as long as enrollment is going well, we'll continue to enroll patients, as well. So I do expect, at the end of the day, that we'll enroll more than 5,700 patients. But we'll update you on that as we need to, as we move forward.

And I was wondering if you could -- sorry, go ahead, finish up.

Yes, you had made the comment about a competitive disadvantage. And I really think that competitive differences are based on the data, not the number of patients in the study. And we obviously have to see, we all have to complete our Phase 3 trials. So we'll see the data at the ends. But when you look at vadadustat and the data that we've generated to date, I think we're extraordinarily well-positioned, both against ESAs as well as against the other HIF compounds in development. So that different size of the program doesn't really bother me at all.

Remember, our program is a very simple, straightforward design. Four studies, two in the non-dialysis, two in dialysis, that are designed to be very similar, so that you can -- we have the same CRO, we have the same sponsor, we have the same design, same comparator, darbepoetin, for each, so that the statistical analysis is as straightforward as possible and we think that's really going to serve us well.

Right. I'm just wondering about if any thoughts about -- I know you guys now have the relationship with Mitsubishi and whether you're contemplating matching them, so to speak, on the China studies, or whether you feel like the other studies that you're undertaking are sufficient to serve the purpose of filing in China, or is China not a market you're contemplating right now?

So China is a market that clearly is an interesting market. China is not part of the Mitsubishi deal. So we still own the rights in China. We have not started development there. We do expect to do that through a partner, and that is part of the ongoing discussions, European and other rest of world discussions, that we have ongoing now.

Okay. Great. Thanks very much.

Thanks, Mike.

Jonathan Aschoff, Opus National Capital Markets.

Thanks. Hi, guys. I was wondering if there's any read-through for Akebia's ongoing trials regarding the FibroGen's superiority testing of its primary endpoint in its China trial in which the mean hemoglobin levels observed with rox was higher than what the curing [depo], that was [CFO-37], or is that just some sort of population difference so you wouldn't expect to see something like that, or maybe different dosing there versus here, or any difference with the [curing depo] used or does it have to do with the 8-week endpoint?

Yes. Thank for the question, Jonathan. So obviously, all the data I have is what they had in their press release. So it's limited to really comment on that data. I think what clearly is a positive read-through is that this is another study that shows that the HIF class works to increase hemoglobin levels in these patients. And that's quite a positive read-through.

When you think about the nature of these studies and you think about our Phase 3 program, you're working to titrate hemoglobin response into quite a narrow range. In the US, we're looking to titrate hemoglobin into a range of 10 to 11, and outside the US, into a range of 10 to 12.

So in all of these cases, the drugs are being titrated into a range. So looking for that kind of superiority in the trial is really not what our Phase 3 is designed to do at all. We're very, very comfortable showing that it's non-inferior, that we can manage hemoglobin into as tight a range as darbepoetin can.

Okay. And so FibroGen is still talking about IP a lot, because they're appealing judgements against them. So the basic question I had is, can you tell us how confident you are in your IP? Because if you talk to them, it still sounds like it's anyone's call, and they point to how in Europe, the four active oppositions, two are under appeal, two are ongoing, but that it will be three to four years until the appeals will be heard, during which time they still had their patent in full force.

Nikki, do you want to take that?

Sure. Yes, you're correct in that the appeal process is quite long. It is a two- to three-year process. But given that they raised no new issues on appeal, we are very confident of our chances of success on appeal.

And anything with their patents and the in-license J&J portfolio?

No, I don't think there's any kind of overlap there. I think, Jonathan, it's important to recognize also that when you look at the European outcomes, this is consistent with the outcome that we saw in Japan back at the end of 2015, where they narrowed their patents to allow them to [save], so that vadadustat doesn't infringe. And they've been working towards getting these patents, this anemia patent in the US, for years and haven't been able to do that. So when you look at the totality of the results that we've seen over the last year-plus in these oppositions and in validity proceedings globally, we feel very, very confident in our patent state and in our ability to commercialize globally.

All right. Thanks, guys.

Thanks, Jonathan.

Kennen MacKay, Credit Suisse.

Thanks for taking my question. John, you mentioned the hypo responder study could read out in 2018, and we'd also get data from the three times weekly dosing. Is that something that could be added on to regulatory submissions from INO2VATE and PRO2TECT, or would you need separate Phase 3 studies there? And is that something that you had discussed with regulatory authorities prior to getting study designs approved?

So the hypo responder is a Phase 2 study. Certainly, obviously with the data in hand, it will be part of our regulatory filings, because all of the data that you generate is part of your regulatory filings. But we don't expect at this point to -- this is not a study we're doing for registration. Let's see the outcome of the study and then we'll decide how to proceed from there.

The three times weekly, on the other hand, is very much a part of our registration strategy. And it's a Phase 3 study that we expect to have, obviously, as I said, we'll have the data, top line data from that, before the end of next year and expect to include that in our regulatory filings.

Got you. Thank you. And then you'd mentioned the enrollment for INO2VATE and PRO2TECT were on track. Can you remind us of those time lines?

I'm sorry, I lost the last.

Sorry. You've mentioned the INO2VATE and PRO2TECT Phase 3 studies were on track. Can you remind us of the goals to have enrollment completed by?

Sure. So PRO2TECT is scheduled to enroll 3,100 patients. And we're targeting enrollment in that trial by the end of this year. And again, as I said before, I'm not saying complete enrollment, I'm saying targeting getting to 3,100, because our expectation is as long as enrollment is going well, we'll continue to enroll in the trial.

And then INO2VATE started six months, roughly, after PRO2TECT. And so we expect that to be six months or less behind PRO2TECT in full enrollment. And then of course, at that point you're looking to, the trial will complete when you see the number of events that we need to read through.

Got you. Thanks so much for taking my questions.

Sure. Thanks, Kennen.

Ed Arce, H.C. Wainwright.

Hi, guys. Thanks for taking my questions and congrats on all the recent progress. Just a couple questions on the studies that you're planning, the hypo responders and the three TIW. I think you had mentioned earlier that there is a part of that, one or the other or both, that is under your contracts with your partners. Could you elaborate a bit more on that?

Well, recall, the Otsuka transaction, they are reimbursing us for their share of the entire global development program, and so both of those studies are included under that. So their share of the R&D costs will be, for those programs they'll be contributing their share. So I think what I mentioned was one of the reasons we chose to start the hypo responder trial a little later than we had originally said was given the fact that we were completing the transaction, we thought it made sense to share that protocol with them, both of the protocols, both for hypo responder, as well as three times weekly, before we initiate those trials.

We're much on track to do it as we outlined today. We'll start hypo responder in the second quarter and TIW in the second half of the year. We're just at the very early stages, obviously, of developing our alliance with Otsuka and that development plan, talking to them about the development plan is just at its early stages. But we're still quite confident in the timing.

Okay. Great. Just a couple more follow-ups. On PRO2TECT and INO2VATE, how is your enrollment going? I know you mentioned it's on track, but if you could give us perhaps a little bit more detail on what you're hearing from your trial investigators.

And then lastly, on your recent deal with J&J, if you could just discuss how that fits with your in-house expertise in HIF biology and physiology, in particular with your preclinical asset for IBD? Thanks.

Thanks, Ed. So the enrollment remains on track, and we won't go into any other detail than that. I've been to a number of investigator meetings and I can say that the investigators we've spoken to really like the protocol, the active control. They know that their patients are going to be treated. We've made it as straightforward and streamlined a protocol as possible. So the feedback I've heard has been quite positive and we're really excited about continuing it. And since we have Michael on the line, maybe I'll ask Michael, if you'll jump on and answer Ed's second question about the J&J transaction and our new HIF portfolio.

Happy to, John. Hi, Ed. I think your question was around how the J&J compounds fit in with current Akebia expertise in biology and background that we have. Well, of course, Akebia has a number of compounds from its earlier research program that stemmed out of Procter & Gamble. But the HIF-PHT compounds that come in from Johnson & Johnson are very, very structurally distinct and very distinct in their physical chemical properties and really augment the compound collection that was already present at Akebia, allowing us to access potentially many more disease indications and targeting other therapies that perhaps we couldn't entirely address with the previous existing portfolio. And as these compounds come out of research that I had done with my team at Johnson & Johnson, I would have to say this is a very good fit.

Great. Appreciate it. Thanks again.

Thanks, Ed.

Chad Messer, Needham & Company.

Great. Thanks for taking my question and congrats on a great year of execution, both operationally and on the business development side. I was hoping you'd talk a little bit more about the three times per day Phase 3 that you're going to initiate. Maybe just tell us what that study looks like and what the real importance and need is here. Do you just want to show that three times works as well to give patients more options, or is there something beyond that?

No, you're quite close. It is, in today's environment, in the US particularly, with reimbursement being bundled for, and our expectation is that we will be part of the bundle, the dialysis providers are responsible for the compliance of their patients. And so they prefer to be able to deliver the drug to the patient in the dialysis unit and not give the patient the drug to take home where the patient has to -- they have to rely on the patient to be compliant. So as I mentioned, with that as a backdrop, we added that arm to our Phase 2 trial to show that you can dose the drug three times weekly.

And we really just, the Phase 3, and I won't talk in detail about the protocol design at this point, because we are just in the early stages of sharing it with our partner. We want to make sure they have a chance to comment. But we want a design that looks quite a bit like our other Phase 3 trials, so that there is real consistency in our ability to analyze that data in comparison to the once daily data out of INO2VATE. So we'll have as many common elements to the design of the trial as possible. But we'll be able to come back to you after we've had the opportunity to speak to Otsuka with more detail about the design of both trials.

And can you maybe just comment on what we know about the pharmacokinetics of vadadustat and half licensings that make you confident in [three] dosing?

Yes, yes. No, thanks for that. As I think I've mentioned in the past, we have the half life in the CKD population is in the seven- to eight-hour range. And in the dialysis population, because there's some renal clearance, it is extended to about 10 to 11 hours. And that's one of the things that gives us confidence that we'll be able to deliver the drug successfully three times a week,. And that's what gave us confidence to initiate that arm in our Phase 2 trial and the Phase 2 data does support moving into Phase 3 with that as a dosing administration option for patients.

And what's also important to dialysis providers, we've done a Phase 1 that looks at the PK of the product in the dialysis population, and what you see there is the drug isn't dialized out. And that also is important for the dialysis providers from a convenience standpoint, that they can deliver the drug before dialysis, after dialysis, and they don't have to worry about the drug being dialized out.

At the end of the day, it really is about offering as much flexibility as possible for the physician. For instance, 10% of the patients in the US are peritoneal dialysis patients. For them, having a once a day option is exactly what they want. For the incent, or hemodialysis patients, three times weekly is what the provider wants. And in the non-dialysis population, once daily treatment is the most convenient dosing regimen. And we're going to be able to offer all, if we're successful in our Phase 3s.

All right. Great. Thanks. Thanks for that additional information.

Thanks, Chad.

Difei Yang, Aegis.

Hi. Good afternoon. Thanks for taking my question. Just a couple. The first one is on IP litigations. Are there only four patents being involved? And so I'm trying to think through the implication on these litigations. So my understanding is that these litigations will go in parallel paths, and at the end of the day, neither Akebia nor FibroGen will actually be hindered from commercialization if they able, if both of you are able to get your products approved.

Sure. So there are four, a total of four FibroGen patents that we challenged. The three that we most recently challenged are all in the iron, what we call the iron family. One was heard back in December and the remaining two will be heard later this year. So there's a total of four that we're challenging in Europe. And one, the equivalent to one of those patents we challenged also and were successful in Japan. Does that answer your question?

Yes. So I'm looking -- I'm trying to look, let's say three years down the road, when both of you have your product approved. Will these patent litigation in any way hinders the ability to commercialize, or it's really just a parallel fight?

We do not believe that these litigations will inhibit our ability to commercialize vadadustat.

Okay. Okay. Thank you. So another question is on commercialization that even how this drug works is, the mechanism of action is so different from the current standard of care. And we knew from maybe for about seven or eight years now, the usage of ESA has gone down. So do you think for this drug, it will -- it might potentially have a quicker uptake, only because there are so many patients out there who should have been treated but yet they're not being treated because of the safety concerns?

So of course, the Phase 3 data ultimately determines the uptake, but it is very much our contention that using this different pathway, where we're able to restore this normal daily rhythm of EPO and not expose patients to those extremely high EPO levels, that we have the opportunity to show a differential profile of vadadustat to the ESA.

So we certainly think, particularly, and you really have to think differently about the dialysis population versus the non-dialysis population. Dialysis patients are being treated. 85% plus of dialysis patients in the US are being given ESAs. The doses have come down in the last few years, post the inclusion of ESAs in the bundle. That's very much stabilized. You saw iron doses go up, you saw ESA doses go down.

But you've really seen that stabilize to actually, I think last year, you even saw them increase a little bit, which really does make sense. And so those patients are being treated. But if we show a differential profile for vadadustat, very much we do expect that that shift in usage from ESAs to a product like vadadustat will occur.

The non-dialysis population, where you saw the TREAT trial and the CHOIR trial showed this increased cardiovascular risk, which was much clearer in the non-dialysis population, in the US, these patients are no longer, are frequently not being treated chronically. Very few patients are treated chronically who are non-dialysis patients in the US. And that's where the opportunity really does exist to change that treatment and have these patients treated chronically and have their anemia managed more effectively. And that's where having the kind of commercial strength, the muscle, I always call it, that Otsuka brings, will be quite helpful for us.

And frankly, that's a situation where, with multiple products on the market, when you're changing treatment paradigm -- remember, the ESAs have been available in the US since 1989 -- and when you're looking to, you have a new class of drug that has a different profile, hopefully an improved profile, having more than one company out there talking about that difference, sharing that heavy lifting, is actually quite important to the speed of adoption that you see for the product.

Ed Arce, H. C. Wainwright.

Hi. Thanks for taking my follow-up. I just wanted to ask you if you could give us an update on any progress on the study in Japan which you expect to read out by the end of the year and remind us there what the goal is with that study? Thanks.

Yes. So these are Phase 2 studies. There's two studies, one in dialysis, one in non-dialysis patients. Dose escalation trial. It's very straightforward study, much like a 2a trial. And that will read out by the end of the year. Again, very much on track from an enrollment standpoint. And the goal with the outcome of those studies is to go back to PMDA and get confirmation on inclusion of Japanese subjects into the global Phase 3. So those are quite important from that perspective. And again, we're very much on track to have that data before the end of this year.

Great. Thanks. Thanks, John.

Thanks, Ed.

Thank you. There are no further questions. So now it is my pleasure to hand the conference back over to Mr. John Butler, Chief Executive Officer, for closing comments and remarks. Sir?

Thanks, Brian. And thanks to everyone for joining us today to discuss Akebia's results. We look forward to updating you again in the future. Thanks for joining. Have a great day.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and you may all disconnect. Everybody have a wonderful day.