Akebia Therapeutics Inc (AKBA) 2021 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Akebia Therapeutics' First Quarter of 2021 Financial Results and Business Update Conference Call. As a reminder, this call is being recorded.

I would now like to introduce your host for today's event, Kristen Sheppard, Senior Vice President of Investor Relations with Akebia.

Thank you, and welcome to Akebia's First Quarter 2021 Financial Results and Business Update Conference Call.

Please note that the press release detailing our results for the first quarter was issued earlier this morning and is available on the Investors section of our website. For your convenience, a replay of today's call will also be available on our website shortly after we conclude today's call.

Joining me for today's event is John Butler, our Chief Executive Officer; and David Spellman, our Chief Financial Officer.

Before we begin, I'd like to remind everyone that this 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. Additional information regarding these factors is described in the forward-looking statements section of the press release we issued earlier today, as well as in the Risk Factors and Management's Discussion and Analysis sections of our most recent annual and quarterly reports filed with the SEC. The forward-looking statements on this call speak only as of the original date of this call, and except as required by law, we do not undertake any obligation to update or revise any of these statements.

With that, I'd like to introduce our CEO, John Butler. John?

Thank you, Kristen, and thank you all for joining us today. Akebia is off to a great start in 2021, building positive momentum with solid execution on strategic priorities that set the stage for an exciting year. Most importantly, in late March, we submitted the vadadustat new drug application to the FDA. Our comprehensive NDA submission package includes compelling data from over 8,000 patients across 36 clinical trials of vadadustat, including our most recent global Phase III program. We remain confident in both the clarity and the quality of this data package.

Submitting the NDA has been our highest priority since reporting our top line results in 2020. It's a significant milestone for our company, our partner Otsuka, patients and the entire kidney community. Although our team and our colleagues at Otsuka have extensive experience with regulatory submissions and interfacing with regulatory authorities, this is the first NDA for Akebia as a company.

As an organization committed to bettering the lives of people impacted by kidney disease, we're excited to be advancing our lead product candidate and be one step closer to helping address the needs of people living with anemia due to CKD. On behalf of Akebia, I want to express our deepest appreciation to everyone involved in this program, including the physicians, investigators, site coordinators and most importantly, the patients. We look forward to engaging with the FDA on our NDA and plan to provide an update on our submission at the end of this month.

In addition to submitting the NDA, our team has also been hard at work supporting the independent executive steering committee for the vadadustat global Phase III program as they present and publish our Phase III data. Top line data has been presented at medical meetings, including ASN, and the methods papers for both programs have been published in peer reviewed journals: Nephrology Dialysis Transplantation, and the American Heart Journal.

On our last call, we shared our expectation that the results manuscripts for our Phase III program would be published in a top-tier journal. We are honored that the results of both INNO2VATE and PRO2TECT have been published in the New England Journal of Medicine. We believe acceptance and publication in the New England Journal reinforces the scientific rigor and quality of the development program as well as the clarity of the data for the broader medical community.

We're also proud as we believe these publications mark the first time that comprehensive Phase III efficacy and MACE safety results have been published in a peer-review journal for a product candidate in the HIF-PHI class. The lead authors of these publications are Dr. Glenn Chertow from Stanford and Kai-Uwe Eckardt from Berlin. We're also the co-chairs of the Independent Executive Steering Committee for both INNO2VATE and PRO2TECT. Doctors Chertow and Eckardt and the entire committee in collaboration with Akebia, designed the global Phase III program after extensive dialogue with the FDA and European regulators. This work included aligning with regulators on the details of our statistical analysis plan, the prespecified analyses and the non-inferiority margins.

Publication of both INNO2VATE and PRO2TECT efficacy and safety results in the New England Journal further demonstrates our collective commitment to transparency. And having recently submitted our NDA for vadadustat to the FDA, the timing of these publications could not have been better. Feedback and interest in these publications from key opinion leaders and the broader kidney community has been very positive. Subject to regulatory approval of vadadustat, we believe these publications will be highly informative for physicians, patients, dialysis providers and payers as they make important decisions about patient care, and potentially a key consideration when differentiating among HIFs in the class as well as differentiating vadadustat from treatment with ESAs.

Of course, these are the initial results manuscripts. Given the richness of the data set we generated across the program, we anticipate additional data publications will not only inform physicians but also have the potential to drive adoption of vadadustat, subject to FDA approval.

Having successfully executed on the NDA submission and peer-reviewed publications, let's turn to the next phase of our story. The opportunity ahead of us is very clear, and our goal is for vadadustat to become the oral standard of care for adult patients with anemia due to CKD. And of course, my comments regarding the launch of vadadustat, its adoption and use are all subject to its regulatory approval. We are progressing many exciting elements of our business plan towards ensuring the successful launch of vadadustat.

Now let me start with dialysis. We believe dialysis represents a potential $2 billion market opportunity in the U.S. alone. We're confident that upon approval, we'll have the potential to address the unmet needs of over 500,000 adult patients on dialysis in the U.S. and rapidly establish vadadustat as the new oral standard of care for the treatment of anemia due to CKD.

We anticipate that the consistency and clarity of our dialysis data bolstered by recent publications in the New England Journal will play a meaningful role in helping dialysis providers develop treatment protocols, which are critical to driving adoption in the dialysis market.

To further strengthen vadadustat's potential profile for in-center dialysis patients, we're conducting 2 studies, 1 led by our partner, Otsuka, to demonstrate that vadadustat can also be dosed 3 times a week. We plan to have data from these studies available at launch. And assuming the data are positive, use them to support a supplemental NDA for this dosing regimen post approval.

Although the significant majority of dialysis patients are cared for in center, several factors, including the COVID-19 pandemic, are supporting a growing shift towards home dialysis. Based on reports from the largest dialysis providers, home dialysis appears to be the fastest-growing segment of the dialysis population. These trends are exciting as we believe that as a convenient once-daily oral therapeutic, vadadustat has the potential to offer an important value proposition both through the growing number of home dialysis patients and to dialysis providers looking to better support these patients, simplify administration and grow their home programs.

In fact, data from our INNO2VATE program showed that the results in the subgroup of patients receiving peritoneal dialysis, the largest segment of home dialysis were similar to the overall population. We very much look forward to presenting these data at a future medical meeting and sharing, where appropriate, with dialysis providers.

With our planned commercial launch and strategic alignments, we believe that we can support rapid adoption of vadadustat in the dialysis market. We intend to leverage our existing nephrology-focused commercial organization, with our partner, Otsuka, sharing in the launch costs and responsibilities. Understanding the dynamics of the dialysis industry, we strategically positioned vadadustat for potential rapid adoption in up to 60% of the U.S. dialysis market via an exclusive distribution relationship with Vifor Pharma.

Adding to this is a unique reimbursement model in the U.S. dialysis market with TDAPA, an add-on payment to the bundle that's intended to encourage adoption of innovative therapies by clinicians and dialysis providers. We continue to believe that the commercial and operational advantages with this go-to-market strategy will be meaningful to both our near-term and long-term growth potential in this market.

We're also continuing to advance our launch preparedness activities. These activities include ongoing cultivation of key medical expert and patient advocacy relationships, development of the vadadustat brand, sales force optimization and market access activities. We're encouraged by the growing awareness at society and medical meetings, where HIF-PHIs potential in treating anemia are a focal point of both sessions and discussions. Again, there's a significant unmet need among patients with anemia due to CKD, and we see a promising opportunity in vadadustat to advance the standard of care for patients on dialysis.

Now turning to non-dialysis. As I mentioned earlier and consistent with our prior comments, we submitted our NDA for vadadustat, pursuing a broad label for both adult patients on dialysis and adult patients not on dialysis. While we remain cautious for approval in non-dialysis, we believe we've put forward a compelling and extensive NDA data package, and we look forward to working with the FDA in their review of the efficacy and safety data.

Now shifting gears to performance of our existing commercial product, Auryxia. Despite the ongoing negative impact of COVID-19 on dialysis patients, we're encouraged with Auryxia's performance in the first quarter. We continue to be pleased with how the market is viewing Auryxia's strengths. And importantly, our team continues to do a great job supporting our customers and patients, getting our therapies to those in need.

We're also proud that through our work with industry groups, including Kidney Care Partners, we were able to assist in helping the administration prioritize vaccines for these patients who are among the most at risk for COVID. We're hopeful that as the industry continues to focus on prioritizing vaccines for dialysis patients, COVID-related hospitalizations and mortality steadily decline.

In summary, we accomplished a great deal, both in the first quarter and more recently with the New England Journal of Medicine publications, setting the stage for what's shaping up to be an exciting year. Fundamental to our success is the team's ongoing execution of our strategic objectives. So I'd like to wrap up with an overview of potential catalysts we are executing on for 2021.

Based on standard FDA review time lines, the FDA has a 60-day period to determine whether the NDA is complete and acceptable for review. Given this, we'd expect to provide an update on our NDA submission at the end of this month. Outside the U.S., we're working in close collaboration with Otsuka on vadadustat's MAA submission to the European Medicines Agency, which is expected this year.

We continue to explore potential development opportunities for vadadustat and look to share more information on these efforts later this year. And where possible, any updates from UT Health regarding their ongoing investigator-sponsored study of vadadustat as a potential therapy to prevent and lessen the severity of acute respiratory distress syndrome, or ARDS, in adult patients who have been hospitalized due to COVID-19. With a recent $5 million grant from the Department of Defense, UT Health has expanded the study to target 400 patients and currently has over 220 patients enrolled.

As I mentioned, we also continued to execute on our publication strategy. We look towards additional presentations of our Phase III results and data, including oral presentations of the hematologic efficacy of vadadustat from both INNO2VATE and PRO2TECT at the upcoming ERA-EDTA virtual medical meeting in June and presentation of INNO2VATE's home dialysis data, among others, at future medical conferences and in peer-reviewed journals.

Lastly, as we move closer to the potential launch of vadadustat, we'll also look to share progress on our pre-commercial activities. We are pleased to be doing all of this from a place of financial strength, with a cash runway that extends beyond the expected U.S. launch of vadadustat, assuming timely regulatory approval and the receipt of associated regulatory milestones. And as Dave will discuss, we successfully executed on some key financial as well as operational priorities during Q1, and we remain committed to both maintaining a strong balance sheet and improving our cost structure moving forward.

We are excited about the future. And together with our collaborator, Otsuka, we look forward to bringing vadadustat for the treatment of anemia due to CKD to patients globally upon approval.

I'll now turn the call over to Dave, who will review our financial results. Dave?

Thank you, John, and good morning, everyone. As John mentioned, we are very excited to have submitted our NDA for vadadustat and look forward to engaging with the FDA on our now published global Phase III results in the New England Journal of Medicine. Having laid the groundwork for potential approval, we're continuing to focus on what's ahead. We're executing on key commercial, development and financial priorities and making good progress positioning Akebia to deliver on our strategy and build long-term value for our shareholders.

Turning to our financial results. Starting with revenue. Total revenue was $52.3 million for the first quarter of 2021 compared to $88.5 million for the first quarter of 2020, reflecting lower collaboration revenue consistent with successfully completing our global Phase III clinical development program for vadadustat. In terms of Akebia's commercial performance, net product revenue for Auryxia increased 4% to $30.4 million for the first quarter of 2021 compared with $29.2 million for the first quarter of 2020.

Despite the ongoing impact of COVID-19 on dialysis patients, we are encouraged by this growth. We believe this performance highlights Auryxia's favorable product profile and the critical nature of this therapy as well as our team's ability to execute at a high level. While we remain cautious due to COVID-19, together with our continued commercial efforts, we remain confident that Auryxia's positioning will drive product revenue growth for the year.

Turning to expenses. We continue to prioritize investments to support our business objectives and ensure a successful launch of vadadustat subject to approval, while also continuing to focus on growing product revenue, improving costs and advancing our pipeline of development opportunities, including potential label expansion opportunities for vadadustat after its potential approval.

Cost of goods sold was $34.6 million for the first quarter of 2021 compared to $27.7 million for the first quarter of 2020. The increase was driven by higher noncash purchase accounting adjustments as a result of the merger with Keryx and a $5.1 million noncash charge to inventory reserves related to a previously disclosed manufacturing quality issue related to Auryxia. These charges were partially offset by an $8.9 million noncash gain related to a reduction to the liability for excess purchase commitments of Auryxia drug product.

As you may recall, earlier this year, we successfully renegotiated certain supply agreements, reducing excess purchase commitments that predate the merger and provide us with additional manufacturing flexibility. We believe these modifications help better position the company moving forward. In addition, we have now fully expensed our inventory step-up from the merger accounting and now expect COGS to begin to normalize in Q2, which is about a quarter earlier than our previous expectation.

Research and development expenses were $40.6 million for the first quarter of 2021 compared to $81.2 million for the first quarter of 2020. The spending reduction was primarily driven by a decrease in cost consistent with completing the INNO2VATE and PRO2TECT programs. We expect that R&D expenses will remain significant as we continue to support ongoing planned clinical work as well as the cost of our supply chain and inventory build ahead of the expected approval of vadadustat.

Selling, general and administrative expenses increased to $41.3 million for the first quarter of 2021 compared to $38 million for the first quarter of 2020. As our commercial team is already in place, we continue to expect only a modest increase in SG&A from 2020 as we invest in vadadustat pre-commercial activities and continue to support Auryxia growth. For our bottom line, net loss was $69.6 million for the first quarter of 2021 compared to $60.7 million for the first quarter of 2020. The increase was primarily due to lower collaboration revenue and higher COGS, partially offset by lower operating expenses.

Turning to our capital position. We ended the first quarter with $272.8 million in cash, cash equivalents and available-for-sale securities. As previously announced, we strengthened our balance sheet in February with the completion of a non-dilutive transaction to monetize our royalties and sales milestones on vadadustat net sales under our collaboration agreement with Mitsubishi Tanabe Pharma Corporation, with an upfront payment of $45 million from HealthCare Royalty Management.

Our Q1 cash balance includes the impact of this transaction as well as $29.8 million in proceeds from sales under our ATM in the first quarter. These funds more than offset cash usage in the quarter, including approximately $30 million of planned consumption of working capital as timing of receivables and payables moved unfavorably from year-end.

As John mentioned earlier, as we move towards an expected vadadustat launch in the U.S. subject to approval, we continue to focus on improving our cost structure and maintaining a strong balance sheet to ensure the company remains well positioned. We're being disciplined in the investments we make and remain focused on quality, driving efficiencies and improvements in manufacturing and supply chain, managing costs and are committed to driving operating leverage from our existing commercial resources.

Wrapping up, we expect our cash resources to fund our current operating plan beyond the expected U.S. launch of vadadustat, assuming timely regulatory approval and the receipt of associated regulatory milestones.

With that, we'll open up the line for questions. Operator?

(Operator Instructions) Our first question comes from Chris Raymond with Piper Sandler.

This is Ally Bratzel on for Chris this morning. So first, congrats on the data publication in NEJM. Just wondering if there's any color on the kind of feedback you're getting from the nephrology community. We're specifically curious about the feedback on a couple of aspects of the data, the similarity of MACE data between incident and prevalent dialysis patients and also the geographic difference in the MACE hazard ratios from pre-U.S. versus ex-U.S. predialysis patients. So just wondering if you could characterize that feedback.

And then separately, just wondering if you could comment on your view of the likelihood of an Adcom in light of your -- the NDA submission and also the scheduling of a panel for roxadustat? And just when would you expect to know whether FDA plans to hold the line for vadadustat?

Okay. Thanks very much, Ally. So feedback. So the publication was a week ago. So it's still early, early days, but I have to say it's been It's been quite positive. I mean, publication, as you mentioned in the New England Journal is kind of -- is the pinnacle of where you want to have an innovative program data published. And the fact that they published quickly moved PRO2TECT through to publish both INNO2VATE and PRO2TECT together, I think, really does speak to how important the technology is. And again, I think that's generally reflected in the way physicians react to the data.

One of the things we have been hearing really since ASN is, as we talk about the consistency of the data and the clarity of the data and the straightforward design of the program, I mean that's what we're hearing that, right? People can understand program extraordinarily well, and they can assess it. And of course, the dialysis data, this is what physicians want to see, right? They want to see consistency of data. They want to be able to understand what they're seeing. And the fact that you have a hazard ratio in INNO2VATE, overall for MACE, MACE+, all-cause mortality, cardiovascular mortality, all basically the same incident prevalence, it is -- they can have a lot of confidence in that data.

Clearly, still questions to answer on the PRO2TECT studies. But again, a hallmark of what we've tried to do is to be transparent about -- with all of our data and allow physicians to have that conversation. And I think it's not the first time they've seen geographic differences in studies like this. And certainly, U.S. physicians are very focused on the effects of the drug in the U.S. population. And this is -- we're really expecting -- this is just the first publication, right? I mean this is an incredible -- incredibly rich data set. So we will have many more publications and many more opportunities to dig more deeply into the data. But so far, we're really very, very pleased.

Your second question, I think, was on the Adcom. Way too early, of course, for us to know. As we've said before, we would welcome an Adcom. We'd be excited about telling the story. We are very confident in our data in both dialysis and non-dialysis, and we look forward to being able to put that forward. to an Adcom. Just on the standard review process with FDA, we mentioned by the end of the month, we'd be 60 days post the submission, and that's when you'll hear about PDUFA dates and acceptance for filing, unlikely to hear about Adcom then, but that's the earliest you could. So we've just really excited about engaging with the FDA now in their review and working with them over the next 10 months or so.

Our next question comes from Alethia Young with Cantor Fitzgerald.

Congrats on the publication, that's a big deal. So I had a couple. One, I just wanted you to talk a little bit about like how you think your now dialysis -- non-dialysis data shapes up in light of what's been going on with like your competitor, roxadustat? Also, can we -- I was curious kind of, of the people who are like in the community, in that network, I think you had somewhat of an access to. I just wanted to kind of talk about how you get market share beyond potentially what would be contracted? And like I'm sure New England Journal is a big piece of helping that storyline strengthen. So just those 2 questions from me.

Alethia, thanks very much for the questions. So obviously not appropriate for me to comment on competitor data. But let me just remind you of kind of how we approached our development program. I mean we worked with the FDA and the EMA right from the beginning, talking through what was appropriate, what they wanted to see in an application. We wanted to design a program that was incredibly straightforward that could answer the questions that were being asked. And I think that the results of that are easier to see now in that you have this publication in New England Journal. And we're very, very proud of that, of the work that the team did.

Remember, we also engaged with an executive steering committee that helped us to design the program, the statistical analysis plan, all of the other pieces that we also engage with on -- with the regulators. So we have very strong independent review and oversight of the program which once again helps as you move out into the community. So we feel quite a bit of confidence in our data. Dialysis is incredibly straightforward. And as I mentioned previously, we're confident in the non-dialysis data here as well, though cautious.

But you really alluded to it with your second question. I mean, the -- when you have something like a publication in the New England Journal, that is an incredibly strong signal to the market about the drug. And we're obviously very excited about the relationship that we have with Vifor and access to 60% of the market. But the pull-through of that really will be done by Akebia, and there's no part of the market that we aren't focused on. We think that this product could be appropriate for a very large percentage of patients on dialysis. And again, potentially on -- who are not on dialysis as well.

So we think The New England Journal papers will help, we think that the subsequent publications, the robustness of this data, the clarity of the program, all of that will be incredibly important to driving share. Now there's also -- as you look at the market, you also have to look at what's growing in the dialysis market. Well, the home dialysis segment is growing. I mean COVID-19, I think put that on a very different plane, right? I mean everyone recognize that keeping these patients out of the dialysis center has great benefits. And it's a once-a-day oral product, for that population, that's a very straightforward population.

Now to be clear, I mean, we are not niching the product in that space. We think this can be an important product for the entire dialysis population. But when you look outside of the 60% covered by the Vifor agreement, those home in DaVita, for instance, that home population is growing quite quickly as well. And we're excited about the opportunity to potentially have those patients on therapy and others as well.

Our next question comes from Difei Yang with Mizuho Securities.

Just 2 questions. John, could you talk to us about how TDAPA process work? And how quickly can you get -- can you get the TDAPA approval after NDA approval? And then secondarily, what's the significance of 3x weekly dosing to the dialysis setting?

So TDAPA is a process. You have to remember, there hasn't been a product that's gone through it yet. So we're making some assumptions about that. I mean the key for us is to is to file for our what's called a HCPCS code as quickly as possible after approval, of course, you can't file until you have approval. And then there'll be a process once that's given that you then get your TDAPA reimbursement. So exactly how long that's going to take, depends on the timing of your approval and again, how quickly the government works towards that. So there's still a little bit of unknown here, but we're looking to move as quickly as possible. I mean the rule is really clear about the fact that we qualify and we'll get TDAPA. It's more in the execution of how quickly things will move.

And then the dosing.

Oh the dosing, 3 times weekly dosing. Yes. So obviously, our goal is to have the most flexibility possible for physicians and dialysis providers. So we believe having 3 times weekly will be important in the dialysis center. We've shown that in Phase II that we can dose 3 times weekly successfully, but we obviously need to generate more data to have that added to the label.

So our partner, Otsuka, is running the MODIFY trial. And then we're running focus, and we expect to have data available at launch. where we can quickly file a supplemental NDA and have that added to our label after that. But we do think that's important for us to maximize the value of the product in the market.

And just a quick follow-up with regards to the milestone and regulatory approval-related milestone payment. Would you remind us what -- how big is that payment?

It's Dave. So we haven't provided specific guidance on exactly what that would be. But they are significant, and they are time-driven based on how quickly we are approved subsequent to roxadustat, assuming that they are approved.

And Difei, if you notice, the disclosures in the 10-K in the Q that goes through some of the commercial milestones in totality, so you can kind of back into some numbers in those disclosures.

Our next question comes from Bert Hazlett with BTIG.

Congratulations on all the progress in a number of different ways. John, would you be so kind as to put just a little more meat on the bone with regard to what you think, with regard to home dialysis trends, kind of where they stand now? And what you might anticipate 12 and then 24 and 3 and 5 years from now? Again, just -- there's been a material change here. I just love your insights as to how you think that's going to translate over the next couple of years.

Yes. That's a great question, Bert. And it's one that I think you'll ask different people and they'll have different opinions. It's sub-20% of the market today. I think it's actually around 15% or maybe just a little short of that. But as I said, this is real desire to drive that. And even within CMS, they're putting payment models together that encourage driving this ETC model that encourages -- and this is a model that they have to be a part of, that encourages dialysis providers to push people, push people is the wrong words to use, but make sure people are moved to home dialysis.

There are clearly patients who just simply don't have the ability themselves or the care providers, et cetera, to do home dialysis. So again, from my perspective, you're not going to have half of the market at home. But it is -- at the end of the day, the most important thing is for patients to have choice and have that choice when they're starting, right? I mean right now, it's very easy to put someone on dialysis in the center, and it takes more work to put them on home dialysis. And I think that's one of the areas where I really see this changing is that -- because patients often crash and the hospital need to go on to dialysis, how can we enable them to go on to home?

I mean that is a focus for -- from many of the organizations that we work with and including the Kidney Care Partners, how do we provide patients the training? How do we make sure they have the choice? I think there can be very significant growth. And I think that's what patient groups want. That's what physicians want. And ultimately, that's what DaVita and Fresenius say they're moving towards as well. And so I think you have the whole community aligned towards that, it can be quite significant.

Okay. And then just a couple of nuts and bolts questions with regard to numbers. With regard to Auryxia, I think there was another inventory charge of $5.6 million, if I heard correctly in the comments. Are we cleaned up with that now, these inventory charges, with regard to manufacturing? And is that all shored up? Or are there still some remainders left to be worked through? And then just one more on R&D after that.

Bert, so on the inventory charges, we have taken all the charges that we are aware of. We've taken the huge steps in improving our culture of quality and been doing everything we can to make sure that we are fully on track there. I can't say that it's fully behind us because you don't know what you don't know. But we're really confident that what we've captured is everything that we're aware of.

And it's important to point out that this has never been a safety issue, Bert. I mean this is a manufacturing quality issue, but never a patient safety concern. And the thing is, as you improve your organization and you build those, that quality culture, these things have come to light, right? And then you deal with them. And moving forward, I have a lot of confidence in the team that we built that culture, and we're moving forward in a really positive way. But I think Dave is exactly right. You don't know what you don't know.

Okay. And then just one more on R&D spend. You mentioned that its level will still be significant as you're building inventory and doing other kind of prelaunch activities. How should we think about that assuming approval, again, sometime around year-end? How do we think about R&D spend as a steady-state number 1 year or 2 years or 3 years out?

Yes. So Bert, on the R&D spend, so we are continuing to invest in vadadustat label expansion, like John mentioned, especially with the TIW studies. Those are much less significant in magnitude than INNO2VATE and PRO2TECT were. And once we're able to capitalize inventory, you will see the R&D spend as a total shift down. Obviously, our inventory balances will move up.

Right. I mean then you have requirements like pediatric studies, you have the medical affairs support in the field. So there'll always be a level of R&D spending. And then beyond the TIW studies, we also want to explore expanding vadadustat's indications as well. And that's an assessment that's ongoing now. So it's hard to say what that level of spending would be. But to echo what Dave said, it's nowhere near what we spent on INNO2VATE and PRO2TECT. So it will get to a much more rational ongoing level of spend. But as we understand those opportunities better, we can come back and clarify that.

Okay. And just a follow-up, quickly. With regard to the expanding indications, are those all subject to the Otsuka agreement? Could you just remind us of Otsuka's role in that? Do they have a right of first refusal? Or how does the agreement contemplate additional indications?

Yes. So Otsuka does have a right of first refusal. So they would participate in the development spend as well as the commercialization costs, and we would obviously then share the profits of anything that we brought to [them].

Our next question comes from David Lebowitz with Morgan Stanley.

When you look at launching in the dialysis space, given the data that you have produced and the data that the competitors have produced, what's the argument now for the HIFs versus ESAs given that physicians have 20-plus years of experience with ESAs, and it really is changing the way they're treating patients for anemia and you don't really have the safety argument at this point to make. What's the argument to get them to switch?

So I think, again, when you look at the INNO2VATE data, you see this consistent result wherever you look with a hazard ratio that's below 1. When you have conversations with physicians who'll be doing the treating, I mean, they are extremely excited about the opportunity to use this product.

And beyond simply the convenience of giving someone a pill versus -- even though they're sitting in a center and you can easily give them the EPO, there's a lot of costs, et cetera, associated with that. But again, when you look at what matters to physicians, they equate risk with elevated EPO levels, given these super physiologic doses of the protein, which you do not do with vadadustat, the EPO levels are very physiologic. When you look at the data, you see that you have significantly fewer excursions of hemoglobin levels beyond the target range, you have fewer dose adjustments, you have less cycling of hemoglobin, the up and down. These are all of the points that physicians equate with safety and what they're looking forward to with using vadadustat if it's approved by the FDA.

So we think there are very significant reasons and physicians that I've spoken to certainly seem to agree that the opportunity to try something new certainly exists. And obviously, in the non-dialysis population, that becomes an even more powerful message.

(Operator Instructions) Our next question comes from Ed Arce with H.C. Wainwright.

Let me add my congrats on the recent publications on the pivotal studies. First question is just around understanding the perspectives of prescribing physicians today. Obviously, the publications have only been out for a week or so. But just generally, help us understand, if you could, from what you're hearing, what physicians -- how these physicians now view the HIF space broadly in terms of treating patients in non-dialysis setting, given some of the recent data, both yours and competitors? And then I have a follow-up.

Ed, thanks for the question. So I think it's a very important question. I'll use an example. We were on the phone with a group of physicians and Steve Burke, our CMO, was reviewing all of the data, INNO2VATE and PRO2TECT, and going through it in detail, in the detail that you see in the New England Journal. And this was a few weeks before the publication, though. But one of the physicians is very anecdotal, but one of the physicians talked about how she has to drive her mother to get her ESA injection every month, and it's very difficult for her. And please, could we make sure we get the approval in non-dialysis.

In other words, she saw the data, she saw the U.S. data, dug deeply into it and still wanted to literally treat her mother with the product. So I think that opportunity is there for us and that's the general perspective. And I said, you go back to other studies, and you've seen regional differences, you've seen those kinds of things. And the U.S. data is -- it's compelling, and it's very, very significant, more than 50% of the patients.

So we think that if we're looking forward to working with the FDA, working through this and if the FDA agrees and gives us an indication, we feel very strongly that we can be very successful in the market.

Okay. That's helpful. And in terms of the MAA submission later this year, just wondering if you could remind us, is there any significant differences there between that submission relative to the NDA, with any potential implications perhaps with labeling and other things that might differentiate the product slightly from in the U.S.?

So of course, Otsuka is leading the MAA process. We're working very closely. It's just kind of the reverse of what we did on the NDA. And much of the filing is the same, but obviously has to be in the European EMA format. There are parts that are different, and those are the things that we're working on. And of course, there's also -- we're still working through analyses of the European data, et cetera, for the kind of strategic approach to the indications we expect to file for both as we did in the U.S. And we expect to submit this before the end of the year or Otsuka will submit before the end of the year. But some of the details of that are still a work in process.

I see. Okay. And then lastly, if I may, John, is the expansion opportunities with vadadustat that you mentioned, and I think you also mentioned that perhaps, there might be an update in that regard later this year. Clearly, this is still early days. But I'm just wondering if you could just give us a little more detail on how you think about the product in related opportunities. I realize you may not be at a point where you can name specific indications. But how you view the opportunity set for that vadadustat? Just generally, in criteria that you look at as you examine the universe of potential applications.

Yes. Thanks, Ed. It's a good question. So I mean the one area, obviously, that we have spoken about in the past and we're excited about is the investigator-sponsored study that's ongoing with UT Health down in Texas on the use of vadadustat to lessen the severity of ARDS or acute respiratory distress syndrome in patients, hospitalized patients with COVID-19. This obviously is a very significant opportunity. I think the virus is going to be with us for a long time. There are over 220 patients in, 220 was the last that we had -- update we had from them. I'm sure they're higher than that now.

If you recall, they got a $5 billion -- $5.1 million grant from the Department of Defense. And that they decided to expand that study to 400 patients. So we should see a robust data set. Now we don't control that, but obviously, it's an investigator-sponsored study, but we do hope that we'll have data from that before the end of the year. And again, when you think about HIF and ARDS, I mean, that biology makes a lot of sense.

And then beyond that, I mean, there are kind of clearly other areas, you could probably tick them off, that our clear areas for where a new anemia treatment could be beneficial. And that's the assessment we're doing now. And again, looking at clinical probability of success. We know this drug increases hemoglobin, what the regulatory thresholds would be in the market opportunity. And that's ongoing now as well as kind of looking at what the clinical development program might be for each of these opportunities. And as we said, we'll update you later in the year as we've made decisions around them.

There are no further questions. I'd like to turn the call back over to John Butler for any closing remarks.

Actually, we do have one more question from Eric Joseph with JPMorgan.

This is on for Eric -- this is Hannah on for Eric. Just one from us. Given your comments on the compelling U.S. data and INNO2VATE, just wondering if you're not granted approval for a non-dialysis CKD, would you or Otsuka look to revisit the opportunity in [participating] in a follow-on Phase III study?

So way too early to say what we would do there. We are, obviously, it's in very early days of engaging with the FDA. Our engagement with them has been very transparent and collaborative and positive from our perspective. And as I said, we're still -- at the end of the month, we expect to hear from them around the filing, validation of the NDA. And then you really start to work more closely with them and understand how they're thinking.

Again, our perspective is that the quality and clarity of the data supports that there is a increased cardiovascular risk. But we have always said, let's be cautious about how we think about it. And we're simply reiterating that today. But what that would mean, if we weren't granted a label in this pass, it's way too early to say.

At this time, there are no further questions. I'd like to turn the call back over to John Butler for any closing remarks.

Thanks so much, Michelle, and thanks, everyone, for joining us on the call today. We look forward to continuing to update you on this very exciting year for Akebia on future calls. Thanks all. Take care.

Ladies and gentlemen, this does conclude the conference. You may now disconnect. Everyone, have a great day.