ChemoCentryx Inc (CCXI) 2020 Q4 法說會逐字稿

Good afternoon, and welcome to the ChemoCentryx Fourth Quarter and Full Year 2020 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call will be recorded.

I would now like to turn the call over to Mr. Lee Roth of Burns McClellan. Mr. Roth, please go ahead.

Thank you, Jeff. Good afternoon, and once again, welcome to the ChemoCentryx Fourth Quarter and Full Year 2020 Financial Results Conference Call.

Earlier this afternoon, the company issued a press release providing an overview of its financial results for the fourth quarter and full year ended December 31, 2020. This press release, along with a few slides that you may find helpful while you listen to this call are available on the Investor Relations section of the company's website at www.chemocentryx.com.

Joining me on the call today is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will review the company's recent business and clinical progress. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer of ChemoCentryx, will provide an overview of the company's financial highlights for the quarter before turning the call back over to Tom for his closing remarks.

During today's call, we will be making certain forward-looking statements as explained on Slide 2. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause our actual results to differ materially from those contained in the forward-looking statements. These risks are described in the company's filings made with the SEC, including the company's annual report on Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements.

In addition, this call contains time-sensitive information accurate only as of the date of this live broadcast, March 1, 2021. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call.

With that said, it's now my pleasure to turn the call over to Thomas Schall. Tom?

Thank you, Lee, and good afternoon, everyone listening. Thank you for joining us on our fourth quarter and full year 2020 conference call.

As I set out on Slide 3 today, I will review 3 areas. First, our vision for the future as we capitalize on a stellar year of execution in 2020; second, our progress in making avacopan, a pipeline in a drug; and third, how we are pushing the frontiers of our science to broaden our scope into additional very high-value areas with highly innovative approaches in, for example, oncology.

I'll start by reviewing progress on the goals we set at the start of 2020, as shown on Slide 4. The achievements of ChemoCentryx in 2020 were considerable. Our NDA for avacopan was accepted for review with a PDUFA date in July of this year. We have made major advancements with avacopan in 2 orphan diseases beyond ANCA vasculitis and plan to start human trials in a third new indication. Also, we have promising in vivo data on our small molecule checkpoint inhibitor, CCX559, and we have further strengthened our financial position to allow us to fully execute on our future plans as we scale up our organization and begin the transition to a commercial stage company.

Moving on to Slide 5. Let me articulate for you how we see ChemoCentryx as we enter a new era of growth. We expect in 2021 to complete the transition to a fully integrated biopharma company as we add a commercial launch in the U.S. to our already acknowledged expertise in discovery and development.

In our medical innovations, we always strive for landscape changing therapies rather than incremental benefits. Launching avacopan and ANCA vasculitis will bring to fruition the first example of this, but others will follow. As we continue our drive to create significantly better lives for patients in some of the most serious areas of unmet need and with commensurate rewards for our investors.

Slide 6 explains the attractiveness of our orphan disease strategy for a company of our size. Why orphan disease? As the graphic on the right indicates, successful orphan drugs can become blockbusters with avacopan and ANCA vasculitis alone carrying the potential of $1 billion per year plus in revenue just in the U.S. alone, before we even consider international sales by our partner, Vifor. Secondly, clinical development and marketing in orphan diseases are eminently tractable and scalable efforts for a company such as ChemoCentryx.

As already exemplified by our building a global clinical trial capability that is characterized by an uncompromising focus on rigor and quality, without requiring the level of investment associated with more prevalent disease areas. Our forays into orphan disease provide true innovation for otherwise neglected patient populations and provide a real springboard for ever more impressive valuations. In short, this is an area where everyone can win.

Now as I turn to Slide 7, I'll talk about how we are turning our lead program avacopan into a potential pipeline in a drug with the prospect of multiple orphan indications. There are a number of autoimmune diseases where complement activation and C5a generation drives neutrophils through the C5a receptor to destroy the body's own tissues. Such is the case with anti-neutrophil cytoplasmic auto-antibody-associated or ANCA-associated vasculitis shown on Slide 8. This is an orphan disease affecting approximately 65,000 people in the United States, which over time progresses from vascular inflammation to vascular death, to the failure of such highly vascularized organs as the kidney.

Current therapy is inadequate, even toxic. And consists of daily doses of steroids, such as prednisone, glucocorticoid, coupled with another broad immunosuppressant such as cyclophosphamide or alternatively, prednisone combined with the anti B-cell antibody, rituximab.

The aim of current prednisone-based therapy is to attempt to stop the autoimmune process in the short term, but the therapy itself causes other illnesses and can even lead to therapy-related deaths, for example, from prednisone-induced lethal infections. By selectively targeting the C5a receptor to block the flow of inflammatory neutrophils and their activation, avacopan was designed to stop the autoimmune destruction without immunosuppression and without the need for daily prednisone dosing. Avoiding daily steroids and letting the immune system do the rest of its beneficial work offers big advantages for the patients, which should obviously translate into big pharmacoeconomic benefits as well.

To illustrate this with an example, let's turn to Slide 9. One slice of the ANCA vasculitis burden pie is represented here. There are almost 14,000 hospitalizations every year in the U.S. involving ANCA vasculitis. These are not short hospitalizations, about 9 to 11 days on average. And even in this most closely monitored setting, a hospital, there is an alarming incidence of serious infections approaching 40%. This is largely a consequence of the steroid therapy for ANCA. And these all too often are lethal infections. Depending on the type of ANCA they have, up to 7% of these ANCA patients die in hospital. Imagine the human burden here and imagine the costs to the health care system.

We believe avacopan, by eliminating the need for daily prednisone therapy and markedly reducing the need for glucocorticoids and ANCA overall, could revolutionize the treatment paradigm for ANCA sufferers. I will remind you that the ADVOCATE trial, please see Slide 10, demonstrated that avacopan achieved statistical superiority of sustained remission at 52 weeks over the traditional prednisone-based therapy and did this while eliminating the need for daily oral prednisone. And by thus, eliminating the need for daily prednisone therapy with avacopan, avacopan therapy was also associated with a statistically significant reduction in steroid-related toxicities referred to in the green box on that slide.

Moreover, as you can see from the light blue box just below, the avacopan therapy actually led to a significant improvement in kidney function compared to the standard prednisone-based therapy. Finally, as alluded to in the orange box, patients themselves reported feeling and functioning better on avacopan than they did on standard prednisone-based therapy, better able to live, happy and productive lives.

Results of the ADVOCATE Phase III pivotal clinical trial and ANCA vasculitis, shown on Slide 11, were published in the February 18 edition of the New England Journal of Medicine, highlighting the importance of avacopan's trailblazing role. There was an accompanying editorial written by Dr. Warrington of the Mayo Clinic entitled avacopan, time to replace glucocorticoids, that concluded with the following sentence.

The ADVOCATE trial is a milestone in the treatment of ANCA-associated vasculitis. Complement inhibition with avacopan has glucocorticoid sparing effects and results in superior disease control.

The ADVOCATE data formed the core of the regulatory submissions have been filed on 3 companies. Our PDUFA goal date is July 7 here in the United States. And we are preparing for an FDA advisory committee meeting, which would create an important opportunity for patients' voices to be heard. Decisions from the European Medicines Agency and in Japan are expected by the end of the year.

So what does the prescribing market look like and how are we preparing? Slide 12 reveals that the market in the U.S. for ANCA is fairly concentrated. Our latest and updated primary research suggests fewer than 400 top prescribers write 30% of the scripts in this country, and fewer than 3,000 health care professionals account for 80% of the total prescriptions. Accordingly, we calculate that a field force of some 75 individuals, comprising both medical science liaisons as well as classic sales reps can cover more than 80% of this market opportunity in the U.S., and that is what we are building now. We are on track to complete this effort and launch very soon after the July 7 PDUFA date.

To contribute to that, I'm delighted to say that Tausif "Tosh" Butt who most recently was at AstraZeneca, has joined us as Executive Vice President and Chief Operating Officer. Tosh brings more than 20 years of operational management expertise in roles with global pharmaceutical companies, such as GSK, Sanofi and AstraZeneca. You will have the opportunity to hear from Tosh and other members of our team during our virtual R&D Day on April 14.

Outside the U.S., our partner, Vifor, will pay us royalties in the teens to the mid 20s percent and on net sales off 1 aggregate net sales line as well as potential milestones linked to ANCA regulatory successive events in their territories. The first of these milestone payments of $10 million was triggered by the filing of the Japanese New Drug Application, which has just taken place. But the opportunity for avacopan, substantial as it is in ANCA vasculitis, does not end there since we believe that avacopan is truly a pipeline in a drug.

Even with considering just other kidney diseases, the therapeutic and commercial potential of avacopan is remarkable. For example, let's turn to Slide 13 for the next stop in avacopan's pipeline in a drug journey, the quite rare kidney disease of C3 glomerulopathy, or C3G.

Starting at Slide 14, let's briefly discuss C3G and our recent results from the ACCOLADE clinical trial of avacopan in this disease of very high unmet need. This disorder would more accurately be called complement dysregulated glomerulopathy because while complement fragment C3 is present in the kidney, it may merely be an upstream marker, a signpost, if you will, of the real problem ahead, that of C5 and C5a, which are also clearly present in the kidney in this disease. We believe that C5a, binding to the C5a receptor is the key driver of the kidney destruction in C3G, which, of course, opens the therapeutic door for avacopan with its ability to block the C5a receptor. And so we launched the largest and longest randomized, blinded, controlled trial in C3G to date, the ACCOLADE trial of avacopan in this very rare disease.

In ACCOLADE, we collected and measured kidney fine needle biopsy data with biopsies taken at baseline and after 6 months of therapy. We also collected more routine clinical specimens and lab measurements to assess kidney function over the 6 months randomized blinded period of the ACCOLADE trial, and we reported top line data from that period in December. And the results of the trial to date are of note.

Turning to Slide 15, you see what most nephrologists would say is the gold standard for measuring kidney function, which is the cumulative assessment of all 1 million or so glomeruli functioning collectively in the kidney, as measured by eGFR or estimated glomerular filtration rate.

Avacopan showed significant improvement in eGFR when compared to the background medication placebo group, a finding which has never previously been shown in a randomized, blinded, controlled trial of C3G. Many consider this to be a remarkable finding in this disease area of C3G and perhaps the most significant finding of this ACCOLADE trial. We plan to discuss the evidence of avacopan's clinical benefit in eGFR with the FDA. It is also very important to note here that the eGFR data with avacopan and C3G are consistent with what avacopan showed in ANCA vasculitis patients, as shown on Slide 16.

In ANCA vasculitis as well, renal function was improved in a way that was qualitatively and temporally similar separation over 26 weeks. And perhaps even similar in absolute magnitude of separation in both of these kidney diseases. Also, this eGFR improvement in C3G correlated with some beneficial changes in the fine needle biopsy data, histology readings, especially as assessed using the C3G histology score for disease chronicity, turning now to Slide 17.

While on the left side of that slide, you can see that on average, there appeared to be a reduction that is a betterment with avacopan using the histology activity score, which measures mostly acute inflammation in and around the glomeruli, variability prevented a clear statistically significant result.

By contrast, on the right side of that slide, the data shows significant improvements with avacopan in the C3 HI disease chronicity score, which measures the progression of kidney fibrosis. And again, with a lower score being better, that is lower score indicating less fibrosis. Avacopan therapy seems clearly associated with slowing the progression of kidney fibrosis in C3G. And experts speculate that this slowing of kidney glomerular scarring may well be part of the cellular underpinning of avacopan's beneficial clinical effect on kidney function.

So you may now note that we have 2 examples to date of improving eGFR and renal function in ANCA vasculitis and in C3G, and this may indeed bode well for future indications for avacopan in diseases of the kidney where complement regulation has been firmly implicated in progressive kidney decline.

One such example is referred to on Slide 18, lupus nephritis. LN is poorly controlled with broad immunosuppression, reminiscent of ANCA vasculitis. It is characterized by uncontrolled complement system activation, is the progressive disease implicated ultimately in kidney destruction and end-stage renal disease. Does all that sound familiar?

LN is a major unmet need with a large commercial opportunity, where innovation to date has been real but limited arguably to incremental improvements as opposed to transformational treatment. We intend to initiate clinical development and definitive trials of avacopan in LN in the third quarter of this year in the belief that avacopan could improve renal function rather than simply slow the rate of decline.

Let's move to Slide 19 to look at the data for today's last stop in the pipeline in a drug journey for avacopan, that of the dermatological indication of severe hidradenitis suppurativa or HS. As shown on that slide, HS is a strikingly underserved area with enormous potential. This is a debilitating skin condition where complement driven neutrophils attack hair follicles and sweat glands in the skin with patients suffering from unremitting, painful, running stores and pustules in the groin, the arm pits and related areas of the body. This all approved therapy, the injectable anti-TNF antibody adalimumab is widely regarded as being only marginally effective. Yet, it sells over $1 billion per year in HS alone. We can do better. An orally active drug that actually blocks the tissue damaging effects of complement driven neutrophils could be of enormous value.

Slide 20 confirms that our in-house research at ChemoCentryx in collaborations with leading academic centers, such as the lab of Dr. Kavita Sarin at Stanford, show that complement is activated broadly across the HS patient population, that it may increase as disease severity score increases and that neutrophil activating C5a is significantly higher in HS patients than in healthy people.

And, in fact, as shown in Slide 21, the AURORA trial of avacopan in HS showed that in the most severe form of hidradenitis suppurativa in the Hurley Stage III patients for whom almost no effective therapies exist, that avacopan could provide a significant improvement in clinical response at the primary assessment time of 12 weeks of therapy, and it did so with a clean safety profile.

In short, the AURORA trial was successful, giving us in the HS community, 3 things: One, a clear evidence of the effective dose of avacopan in HS; two, establishing safety; and three, defining precisely the Phase III patient population that is the Hurley Stage III. But some ask why Hurley Stage III? What's the biology behind that?

We have done a lot of new science on this question at CCXI. Slide 22 helps us recall that with the most severe form of the disease, particularly the most severe form, Hurley III, that pus filled tunnels are extensive, these being an intense active subsurface inflammatory amelia that connects the surface boils and lesions. The orange bracket on that same Slide 22 rather crudely shows that the area that is examined grossly in the clinic and which is accessed -- assessed rather using the so-called hidradenitis suppurativa clinical response score or HI score, it's fairly straightforward to envision that the worse the roiling route foundation is under the skin the more the surface will look corrupted. Alternatively, if the pus tunnels were drained, the surface too would be more healthy. Accordingly, it is this [suppurating superhighway, this pustulating pike way] that we wish to drain, divert or repair with avacopan. And our evidence indeed suggests that's where avacopan has its effect.

For example, slides 23 and 24 show some of our in-house histology work, where neutrophils, yes, bearing the C5a receptor, which is the target of avacopan, are found deep in the dermis, lining the side of the tunnels and within those tunnels that make up the pus tracks. Moreover, new science shows that the dermal fibroblast can be activated, indeed are activated in HS and express abundant C5a receptor as well.

These observations support John Frew and colleagues' findings that Hurley III is more than just a shade of severity in HS. It is a different very active immunological and inflammatory environment in constant stress between damage and scarring. We believe avacopan calms that process overall by inactivating the C5a receptor on neutrophils and other cells that are most prevalent in Hurley Stage III HS, as summarized on Slide 25.

And here also is a subtle but important point. The presence of the C5a receptor on the cells involved in the HS lesions that are deep in the tissue offers a likely advantage to a small molecule such as avacopan over large molecules, such as protein or potential antibody therapeutics.

In any case, we believe now that we have a clear clinical development path to registration via a Phase III pivotal study in this most severe Hurley Stage III patient population and the opportunity is large. If we consider that there are some 50,000 or so Hurley Stage III HS patients in the U.S. alone, and we apply the same orphan drug pricing corridor as discussed in the previous slide, and with only a modest market penetration, this leads to a striking potential return for investors as we fulfill our mission of providing patients with a groundbreaking new therapy.

I will finish now by very briefly turning to oncology. Please see Slide 26. Using our in-house medicinal chemistry expertise and our deep expertise in pharmacology, we have created an entirely new class of orally administered small molecule checkpoint inhibitors for cancer indications.

Checkpoint inhibitors have revolutionized cancer care, as referred to in Slide 27, and we intend to take that revolution to the next level with CCX559. Dispensing with the need for injections or infusions, CCX559 holds the promise of convenient oral dosing, the flexibility and control over drug levels in order to modulate potential autoimmune complication as well as lower cost of goods and better penetration into the tumor microenvironment. Thus, with orally administered CCX559, we believe there is a real opportunity to open up anti checkpoint therapy for cancers that have been otherwise intractable to anti-PD-L1 or anti-PD-1 antibody approaches. We envision avacopan being in use in combination with other therapies or even as monotherapy.

As shown on Slide 28, preclinical data presented at AACR with CCX559 showed marked inhibition of PD-1, PD-L1 interaction consistently outperforming antibody therapy in tumor shrinking and tumor remission in our in vivo models. We plan to advance CCX559 into the clinic in the first half of this year. This represents another step in our approach dedicated to maximizing patient value and maximizing shareholder value.

I will now turn the call over to Susan to outline financial results before coming back to summarize what we see ahead in this year of 2021. Susan?

Thank you, Tom. Our fourth quarter and full year 2020 financial results were included in our press release today and are summarized on Slide 29.

Revenue was $4.4 million for the fourth quarter of 2020 compared to $10.1 million for the same period in 2019. For the full year, revenue was $64.9 million compared to $36.1 million in 2019. Revenue was recognized based on actual costs incurred as a percentage of total budgeted costs as we complete our performance obligations under our alliance agreement.

The quarterly decrease in revenue was primarily attributable to lower costs incurred in 2020 due to the completion of the avacopan ADVOCATE Phase III pivotal trial. Year-over-year, revenue was higher in 2020, driven by the acceleration of revenue recognition associated with the CCX140 agreement with Vifor. Following the decision to discontinue development of CCX140 in focal segmental glomerular sclerosis, $46.7 million of deferred revenue was recognized as revenue. This was partially offset by the impact of completing the avacopan ADVOCATE trial in 2020.

Research and development expenses were $21.2 million for the fourth quarter of 2020 compared to $19.2 million for the same quarter in 2019. Full year 2020 R&D expenses were $77.9 million compared to $70.3 million in 2019. The increases from 2019 to 2020 were primarily attributable to professional fees associated with the preparation of our NDA submission for avacopan for the treatment of ANCA vasculitis and higher research and drug discovery expenses including those tied to the advancement of CCX559, our orally administered checkpoint inhibitor. These increases were partly offset by lower expenses due to the completion of the ADVOCATE trial and the CCX140 LUMINA Phase II trial in 2019.

General and administrative expenses were $12.7 million for the fourth quarter of 2020 compared to $7 million for the same quarter last year. Full year 2020 G&A expenses were $42.2 million compared to $24.2 million in 2019. The increases from 2019 to 2020 were primarily due to higher employee-related expenses, including those associated with our commercialization planning efforts and higher professional fees. These results produced a fourth quarter 2020 loss of $29.9 million compared to a net loss of $15.1 million (sic) [$15.5 million] for the same period in 2019. For the full year 2020, our reported net loss was $55.4 million, in line with the 2019 net loss of $55.5 million.

Total shares outstanding at December 31, 2020, were approximately 69.5 million shares. Lastly, we closed 2020 with $460.4 million in cash, cash equivalents and investments. And for 2020, we expect to utilize cash investments in the range of $145 million to $155 million. Tom?

Thank you, Susan. To summarize, 2020 was a year of very strong execution for ChemoCentryx. We will build on that strong base in 2021, as you can see from Slide 30. We have the potential launch of avacopan for ANCA this year in the U.S. We believe that we have identified a clear development path to making avacopan a pipeline in a drug via 2 additional orphan indications, those of C3G and severe hidradenitis suppurativa as well as the imminent expansion of our scope for both avacopan and lupus nephritis and onward to entirely new efforts with orally administered checkpoint inhibitor CCX559 in cancer.

Our ChemoCentryx enterprise continues to make important advances at the very frontiers of medical science. With each of these advances, we get closer to our long-stated goal of becoming a self-sustaining, indeed profitable, fully integrated enterprise, creating not only better lives for patients but significant rewards for investors. Our momentum at ChemoCentryx grows stronger by the day and we do not intend to slack in the pace until a better future is ours together.

Please all of you join us to hear more at our virtual R&D Day next month, April 14. And with that, I will now turn the call back over to the operator and look forward to your questions. Operator?

(Operator Instructions) Your first question comes from the line of Ted Tenthoff from Piper Sandler.

Great. I appreciate the updates on avacopan in AAV, and looking forward to the preparations ahead of the PDUFA date. I'm wondering if you pick up with respect to C3G and the data that you reported, what are your plans in terms of communicating with the FDA regarding potential registrational path?

Ted, thank you for the question. Yes, as I mentioned in my remarks, this is really the largest and longest ever randomized controlled trial in C3G. What we -- and obviously, C3G is a kidney disorder, declining kidney function is the problem, eventually leading to end-stage renal disease dialysis or need for transplant. But even those are not -- do not solve the problem, obviously.

So I will also stress again, though I didn't mention it today, there are no approved therapies for C3G. So fundamentally, I think we're going to go to the FDA and say, we believe we've improved kidney function as evidenced by the strongest evidence that one could present, which is glomerular filtration rate. And I think we're going to ask them what they think about that data and frankly, see if we can get a conditional approval based on the data to date from the ACCOLADE trial, which again is the most extensive data set in existence as far as I can tell.

Good. Thank you. Look forward to hearing more about that.

Your next question comes from the line of Steve Seedhouse from Raymond James.

Tom, there was a lot of data in the New England Journal paper comparing steroid use between arms in the ADVOCATE study. And the various reasons clarified for steroid using avacopan arm.

So a couple of questions that ensue from that are, first, what do you anticipate is going to be specified in the avacopan label with respect to either background or loading dose use of steroids? And then second, with respect to just how this is going to play out in the real-world versus how it played out in the clinical trial, given you had the randomization and the screening period where patients were on steroids, do you think the real-world steroid use would be even lower than the clinical trial? And are you going to work to gather any real-world data, et cetera, to establish potentially even better safety in the real world?

Great. Great questions. Steve. Start from the basic message and what was accomplished and then everything kind of flows from there, I think. So we wanted to totally get rid of what patients complained about most and what physicians tend to hate as well, that daily oral prednisone, the need for daily oral prednisone is something that everyone hates. We designed the trial to do just that, and that was the blind double-dummy trial. One arm got avacopan the other arm got active prednisone in their daily schedule, right?

And so we showed really in the simplest incarnation that with avacopan, you can eliminate the need for daily prednisone dosing upon which most of the therapy is centered in ANCA vasculitis today. So I think that's major. And I think that's the message that is sinking in.

Now you're right, there's all -- there's piggyback prednisone that comes in with concomitant dosing with rituximab, for example. That was not insignificant, the balance between the 2 arms, of course. When people come in, in crisis, they can get bolus IV prednisone, and they did in our trial again balanced between the 2 arms before they were randomized. And so that had to be tapered because as most of you know, you can't just give people prednisone, and then the next day, stop it. It has to be tapered carefully, so you don't run into renal insufficiency problems and other problems.

So there is piggyback prednisone, but again, balanced between both groups. I think that the idea that, again, getting rid of this massive long-term chronic daily prednisone and virtually eliminating the need for oral prednisone to get not only equivalent effects, but in fact better effects, is the message that's really hit home in this community.

So in the real world, how will this play out? I hear lots from both clinicians and patients, how quickly they can get access to avacopan so that they can avoid prednisone dosing as much as possible, full stop.

So I think that, that is a sentiment that we're hearing more and more. Will we collect real world evidence? We've already started to collect evidence about prednisone use in the world. It's actually oral prednisone is a lot more prevalent than some of the literature might suggest. And we think, again, that just creates a bigger opportunity for people to get away from that with avacopan.

But lastly, will we collect real-world evidence going forward after the presumed license? Yes, of course, we will. And we'll try to bring that evidence, obviously into the sphere of clinical practice by showing why the advantages of being on avacopan exist and what those advantages are.

In fact, even as we speak now, as we've looked more closely at the data and, in fact, looked at inquiries coming as a consequence of questions from the New England Journal report, we've learned new things, important things that we're going to write up for subsequent publications that show the power of daily dosing of avacopan and staying away from prednisone and indeed other immunosuppressants.

Okay. And just real quick, last question for me. The dose selection in the lupus study, I just wanted to ask about your confidence and the read-through that you have from ANCA vasculitis and C3G, I guess, and any necessary modeling that you've had to do with respect to dose selection in lupus. Are you confident with where you're at?

I think we're very confident in kidney disease that the 30 mg dose that worked in ADVOCATE should really be very similar in the lupus population. And obviously, with C3G, we have additional confidence in that. Every patient population is a little bit different in their PK profiles. But from what we can tell for lupus, I think we're pretty optimistic that it's going to look a lot like the ANCA vasculitis population in terms of the drug coverage.

Your next question comes from the line of Michelle Gilson from Canaccord.

I was hoping to dig a little bit more into the ISPOR data that you guys have on Slide 9 here. I know we've spoken about this before, Tom, but can you help us understand this 14,000 hospitalizations annually for ANCA-associated vasculitis. Are those all patients with active disease or in a flare? Or would patients in remission still be coded with AAV?

Yes. It's a really good question, Michelle. And so the answer is this is anytime ANCA showed up in the code, I think the finer breakdown, which is important, we don't have access to immediately. But we do have some information that most of those folks were hospitalized, not just because they had a condition of ANCA, but ANCA was part of the causative factor. So I would say that was the majority of these people. But I don't have the stats right here with me.

So -- but I think what we see is certainly most people had some sort of active disease because the rate of infections and when one digs down into those, those certainly look as infections as a consequence of immunosuppression or as a consequence, obviously, of the prednisone, which is onboard most of these people, that's what some of the data show. So I don't have a precise breakdown for you.

I would say that the majority of the folks in the ISPOR data, they're in hospital, at least in part because the ANCA contributed to that. They may well also include some people newly diagnosed now that they are hospitalized because, as you know, the first diagnosis sometimes involves a very tortuous journey, and eventually ends up in hospital where that first diagnosis is made. So that may contribute to this as well. But I guess it's a long way of me saying, ANCA is not just incidental to their record, and the large majority of the cases are reported on this chart.

Got it. And also, if I can sneak in a follow-up. Do you have any update on the status around your expectation for an AdCom? Are we past the point where 1 will likely get called, I guess, in your view?

Yes. Thank you, Michelle. I think I started saying a little while ago that we're -- we will have an AdCom. We're preparing for an AdCom. And so yes, we don't have any special topics for the AdCom. So all I can say is that we are prepared for a wide-ranging, potential wide-ranging set of discussions and the ability to make the patients' view known as well at such AdCom. So I believe that, that will happen, and we're preparing very carefully for it.

Your next question comes from the line of Yanan Zhu from Wells Fargo Securities.

So first, I have a couple of question on the lupus nephritis trial. Could you walk us through the gating factors perhaps for initiating the trial? And could you also talk about how do you anticipate the role of avacopan in this indication? Would it be a steroid-sparing role? And therefore, it will be on top of other therapies versus steroid on top of other therapies? Or perhaps you're going to explore a different kind of role for avacopan warranting a different combination approach? And how long do you anticipate the trial to run?

Yes. Yanan, these are very important questions. I will not divulge all the details today, but it will occur to many, and I'm sure you're well versed in this as well, that what's been shown so far even with the most recent approvals, they're real contributions to be sure, but they're added to already significant con medications and already used therapies, including fairly hefty doses of daily prednisone. So while great advances have been made in reducing prednisone, most of these agents are used on top of prednisone-based therapy in addition to mycophenolate and so on.

And so while the ability to get responses, and responses have been measured in different ways in lupus nephritis trials, usually combinatorial responses are measured with different features weighing into the combinatorial response endpoint. They are -- they have really still topped out at maybe 40, 4-0, percent or so or low 40% response rates, even with today's very best therapy that includes things that have been approved in the last couple of months, frankly.

So you've got 2 issues with lupus to my mind. One is, yes, good progress has been made, real contributions, which is wonderful for patients. But they're still being used. These new combinations are against heavy backgrounds of prednisone and other immunosuppressants, which are still rather limiting by toxicities. And then even with all these combinations, we're still peaking out at, what, somewhere in the 40% of benefit for patients. So that's the backdrop against -- with which we are working.

I fundamentally would like to do something a little bit more progressive with the avacopan program in lupus nephritis. For example, wouldn't it be wonderful if we could more mirror what we achieved in ANCA vasculitis? So that is the crux of our plan, and it also may reveal why it's not a terribly straightforward way to describe it at the moment because we're still working out some of the details. But let's face it, avacopan has shown some really interesting findings.

It's notable that we can eliminate the need for daily prednisone in ANCA vasculitis. And I think very few people would have thought that was likely indeed even possible a few short years ago. And in so doing, we've been able to not just stabilize eGFR or indeed stabilization would be a great victory, in most cases, for most drugs, slow the rate of decline of eGFR has been the goal on kidney therapy typically. But not only have been able to do that, we've been able to improve eGFR. And it's been done in ANCA vasculitis. It's also been done in C3G. So I think those are all features that are playing into the design of our approach in lupus nephritis.

But as you know, there's clinical -- there are entrenched practices in different fields of medicine. And it is important to make sure that those entrenched practices are understood and valued for what they are. And to try to see if we can get to another step that might illuminate new areas of therapeutic benefit.

So I hope to be able to shed some more light on this and pull up more details around the answer to your question soon. But suffice it to say, our aspiration is to try to do more for lupus than just be incremental or additional to current therapies, and if we model what we did in ANCA vasculitis on what could be done in lupus, that probably mirrors our aspiration, and that's what we're trying to realize in the design of our developmental path for LN.

Great. Thanks, Tom, for that detailed answer. Then maybe another -- 1 more question on the AURORA study in HS.

So thanks for the new interesting new science presented today, the Phase II study AURORA is still ongoing with -- after the 12 weeks for the randomized 3-arm data readout. You still have the trial blinded and going for another 6 months.

So just wondering, what do you think we could learn? Could there be an opportunity for a finding that can strengthen your theory of the Stage III being an appropriate target population here? In particular, I'm thinking the 10 mg arm, for example, can serve as a placebo arm because 10 mg is essentially placebo. So that can be compared with a 30 mg arm for the longer term. And also, interestingly, that placebo -- the old previous placebo arm has now been randomized -- re-randomized to 10 mg versus 30. Could there be some kind of a signal coming out of it in the Stage III subset, 30 mg versus 10 mg that can strengthen your theory about avacopan's role in HS?

Yes. That's one of the reasons we designed the trial the way we did, Yanan, and you summarized it beautifully. It's kind of a complicated trial design.

But the reason we did it the way we did is, one, to very firmly established dose. And in dermatology, especially in younger people, knowing the minimum effective dose is just as important as finding the effective dose, if you will, because the FDA certainly insist on knowing what is the lowest effective dose. And they want to establish safety, of course, and you're absolutely right.

So we have the advantage, and then there's maybe a counter challenge, which I'll allude to in a moment. But the advantage is, yes, no one knew what they were originally on. So no one knew their original dose condition and still don't, neither the physicians, the patients, or frankly, the sponsor, we don't either. So one would love to see maybe a continuation and reinforcement of the high score result, if you will, in the people that were on the active 30 mg dose from the outset, maybe a deepening would be great.

And you're absolutely right. Perhaps we can use the 10 mg group as a defacto placebo control, if you will, because it is essentially inert. And we saw that clearly in the period one, the week -- the first 12 weeks of the study. And it would be interesting if there were any kind of inflections or crossovers from those that were previously on placebo and then going over to, say, the 30 mg. So there's a rich possibility of understanding additional data in the trial.

Now the issue may well be on the challenge side, and I want to just say at the outset here, I have no additional data, and I'm not unblinded to any additional data. So I'm completely speculating at this point.

Other than knowing that the safety and the blinded safety database is still very pristine, and I don't think we'll have any safety findings in the trial, I have no additional information beyond what I reported in the late part of last year. But it would be interesting, as I said, to see if we get any kind of inflection or crossover from that previous placebo patient population. Of course, the challenge is we don't have -- the data integrity is not perfect anymore because let's face it, high score is semi subjective, maybe very subjective. And there is some word out. I mean, obviously, we released the top line 12-week data results.

So who knows. People will either have made -- they may have made a subjective judgment that they were either benefiting or not benefiting. They either had a 2 in 3 chance of not having been on the effective dose from the outset, that could affect dropout rates, et cetera, et cetera, could affect the way the physicians also look at the high score, maybe they're going to be more beneficial with the score. We just don't know. So that's why that first 12 weeks of pure randomization and blinding so ultra important.

But I agree with you, we ought to get some more information out of this follow-on period of 24 weeks of active dosing. And don't forget, there was an additional 8-week off-study drug period as well that will tally up.

So I like to think there's lots of data richness to be yet had from that study. We'll just have to see where it comes out. And I don't have any of those data yet. So I don't know. I can't make any prediction beyond what I just speculated.

Your next question comes from the line of Ed White from H.C. Wainwright.

So Susan, you had mentioned that with the Japanese New Drug Application being accepted, it's triggered a $10 million milestone payment. On a dollar basis, what's left for potential milestones from Vifor and what are the triggers for other milestone payments?

Ed, thanks for the question. Actually -- I'm not sure if it was my telephone, but you faded out partly in your question. So I only heard something in reference to the $10 million milestone, but I can answer the second half of your question first, if you don't mind, in that what would trigger additional milestones. In the past, we have referenced to ANCA-related regulatory milestones up to $75 million. And today, we announced $10 million of that. The other $65 million would be tied to further regulatory successes i.e. approval in other territories and Vifor territories. And I apologize that I missed the other part of your question.

That you hit it, Susan. I was wondering how much is left and what are the triggers for the milestone payments. You got it.

Great. All right.

And Tom, just a question on CCX559. I was wondering if you could share with us anything about the design and the size of the Phase I trial that's going to start in the first half of this year? And then also, with the potential for such a large market that could be addressed here, are you looking for partnering the drug for development down the road?

Thank you, Ed. We'll talk a lot more about the details of the design at our R&D Day. Suffice it to say, it's a Bayesian trial design when we'll first look for tolerability of our drug in people with active oncology conditions. Although we wouldn't necessarily be looking at the oncology outcomes, we will definitely look at tolerability as we dose up in a Bayesian design. So as you may well know, that can start -- it's a range of folks that you will use based on the results of the first steps of the trial. So low end of a couple of dozen of the high end of maybe 6 or sevenfold that depending on how we step through the trial design. More to say about that on April 14, partnering always open to the right kind of partnership with the right kind of economics and the right doctrine guiding principles adhere to. So at this point, we've developed this on our own. We'll do our studies so far on our own. But we don't necessarily need to shoulder all of the investment of the long-term development on this if we can find the right kind of structure for a partnership.

It's gratifying to know that because our balance sheet has been bolstered considerably and because we've already planned for the early phases of development, we have the financial wherewithal to bring it to certainly the next value inflection point or perhaps even beyond, but always open to the right deal with the right terms. That's for certain.

Great. And perhaps just a last question from me. You had mentioned that the launch is progressing and you're building up and getting ready for the commercial launch, and you would be ready by approval on the PDUFA date of July 7. I'm just curious, would you be ready beforehand in case you'd had an early approval?

Yes. We've worked very hard. Our Head of Commercial has worked very hard to make sure she and her team are prepared, in fact, for a potential of an early approval. So I think that without saying too much, we won't be caught flat-footed. And we'll certainly -- our goal is to be absolutely ready by the PDUFA data. But obviously, to be ready by the PDUFA date means you've got to be absolutely prepared. So I don't -- while I don't necessarily anticipate in this era of an overwhelmed agency early approval, if it happens, we won't be delayed too much in getting our drug launched.

Your next question comes from the line of Joseph Schwartz from SVB Leerink.

I don't want to steal the thunder from the flashes of insight that you might share with us at your upcoming R&D Day, but I was hoping to just ask if you could paraphrase your hypothesis in lupus nephritis, given what is known in the state of the art about complement -- various complement targets in that disease. It's my understanding that the classical pathway components tend to be downregulated in lupus nephritis, although some alternative pathway targets might be upregulated. So given where C5a sits, I was wondering if you could address this, and I realize it might be simplistic, and I'm sure you have some more thoughts. So feel free to share those with us as well.

My thoughts have become very complicated than simplistic, probably now to the point of heretical and maybe therefore, useless, I'm not sure. But the more I look at all of these markers in these various diseases and the more we do our own research in our shop, I just I frankly don't -- I think the textbooks are grossly oversimplified.. And in fact, I think we tend to make pathways artificially, where it's really more networks and more cycles, if you will.

So I continue to be both in, in vivo models in small animals, but even in the human data. I am just constantly shocked how little the classical ideas of what happens down the mannose-binding pathway versus what happens on the classical versus what happens on the alternative. If you really look at all these markers, supposedly all cleanly feed into reinforce and regulate all these different distinct pathways, it's a complete mishmash. And I think that probably we've created diagrams and textbooks, which in the real-world are not that relevant if you want my absolutely honest opinion.

So I think, ultimately, when you have destruction, downstream of complement activation, you have to ask what is the destroyer? Ultimately, what's the terminal effector of destruction?

And time and time again, you come back to those cells that have the fragment receptors on them, and they're usually granulocytes, not always, but usually granulocytes, eosinophils, basophils, neutrophils, especially, certainly, macrophages have these receptors, including C5a receptor.

So I don't know. I just -- I've begun to -- about a year or 2 ago, I started to abandoned hope that I could understand complement in terms of classical, lectin versus alternatives. And I just started looking for the culprit that I think can do damage and whether that C3a receptor on a macrophage or even on a neutrophil versus C5a receptor that ultimately activates these things. Then I start there with the biology and I work backwards to see if there's a therapeutic intervention point.

And that's kind of how we're thinking about lupus nephritis. We know you get destruction. You know there's -- look, it's just there's so many parallels with ANCA vasculitis. You have autoantibodies in lupus, you have autoantibodies in ANCA. You've got deposition of complement in the kidney. You've got kidney destruction, which looks for all the world when you get closed, looks inflammatory damage and around the glomerulus. It's like, wow, it just really looks very similar. And in fact, for how many years did we treat those 2 diseases almost identically, prednisone, chronic prednisone plus cyclophosphamide. So there's just so many parallels that I've stopped worrying about what part of complements going up and going down. And if I see evidence of activated granulocytes and the presence of complement fragments anywhere down the C5 pathway, however, they got there, I'm all for it.

So one of the reasons I also gave kind of a little snapshot, I mean, preliminary as it was on hidradenitis suppurativa. I mean people have just said (inaudible) involved. You follow C5 in hidradenitis, whether it's in the blood or at the site, you're going to find it. So if C5 is there, C5a is notoriously difficult to measure accurately but not impossible. But if you find that, then you have to ask the question, is that driving neutrophils? And the answer is, it likely is. So I think the same is true in lupus nephritis.

Sorry for the maybe less than precise answer, but I really think that, that's -- the culprit is a cell that does destruction in the presence of activated complement, and I fundamentally believe C5a is the most potent of that part of the destruction pathway.

Your next question comes from the line of Anupam Rama from JPMorgan.

Just 2 quick ones for me. What does your physician market research suggest about the types of AAV patients that might be early adopters of avacopan, whether it's elderly patients or maybe patients with more severe renal dysfunction at baseline? Any pockets of patients that might be more rapid adopters?

And then a second question, which is a little bit more confirmatory in nature to a previous question, which was around an AdCom. So Tom, you said that you're preparing for an AdCom. Is that just you're preparing for an AdCom because it may come? Or is it being confirmed that you will have an AdCom?

Sure. I'll go to the first question first. Anyone -- the early adopters, in theory, early adopters would be anyone who has organ-threatening or life-threatening disease, which is of the type of person we put in the ADVOCATE trial. And that's -- these are folks that have to be on some prednisone load or they're going to be in jeopardy of losing their kidney, losing a lung potentially or worse, losing their life. So in theory, that should be early adopters.

But there's -- our primary research out there with patients and physicians reveals that there's a -- there's a lot -- much larger population of people that never get off prednisone. And it's not just 2.5 or 5 mgs a day, bad as that is. And frankly, the literature tells us that could predispose even those "low doses" or rheumatologists would say it's a non dose predisposes people to cardiovascular disease is a threefold risk year-on-year, anything above 2.5 mg, even down to 2.5 mg. And up to 20 mg a day, is a sixfold increase in cardiovascular risk. And that's some really interesting and good data that's been published recently.

So anyway, we find shockingly, you talk to the experts and they're like, oh, very few people are greater than -- maybe just these whispering doses of 2.5 or 5 mgs, not true. There's lots of people on 10, 15, 20 mgs a day and they never get off. So those folks, when you talk to the patient, the patient groups, they're saying, I can't -- tell me when this is available. I won't -- we had -- for Rare Disease Day, the other day, we had a patient representative in from one of the foundations. And I guess I shouldn't quote someone, but I'll paraphrase. But this person who is really well placed in the vasculitis community said this should take off like a rocket ship because we all hate prednisone, we got to get off steroids.

So again, looking at it very conservatively and rationally, first, anyone with organ or life-threatening disease for whom there is no choice, you're on prednisone plus something. But then there's this other pretty big population. I think there's eager -- anyone who's on prednisone daily, even if for whatever reason, they're "on these "longer-term doses" or maintenance doses where their disease is "under control," I think there's a real demand from that sector to get them off. And the health care professionals understand that as well.

AdCom. No, we've talked now with the agency. They had their mid-cycle meeting, and we -- they said, let's have an AdCom. Interestingly, again, we don't have any topics. So -- but we're preparing for that. We think we understand generally what their interests might be. And so we're planning for that AdCom to occur. And we'll keep you posted on how that's proceeding and exactly when it will occur.

Your next question comes from the line of Dae Gon Ha from Stifel.

I just wanted to follow-up on the commercial question one, and then maybe for hidradenitis suppurativa on the second question.

So Tom, sorry if I missed this in your prepared remarks, but as we think about July 7 PDUFA, you mentioned your commercial team is getting ready for a potential early approval in a best case scenario. But when you look at the market now, I guess, COVID seems to be receding, knock on wood, but how should we think about sort of the dynamic of people coming back in for a standard of care that requires immunosuppressive regimen? So I guess, any kind of sense as to -- will be more sort of a gradual buildup towards the year-end when more people would be COVID vaccinated? Or could we anticipate more of a bolus even at the beginning part?

And then secondarily, on the HS part, recognizing you looked at these various histologies. Just wondering is there some kind of a pair diagnostic or assay that you're kind of coming up with in preparation for your Phase III such that you could perhaps enrich patients that could be more likely to benefit from the biological mechanisms you've identified?

Yes. So let's first go to the PDUFA date launch and uptake, et cetera. Dae Gon, I'll stress that in the age of COVID, what people are freaked out about is their current regimen of rituximab, which is widely used here in the United States about in combination with steroids, typically, what, 2/3 of the patient population will be on Ritux at some point and maybe even on long-term Ritux. They're absolutely upset about the idea that they -- they're on rituximab because obviously, rituximab's whole purpose is to shut down the B cell's ability to make immunoglobulin to make antibody. So boy, how is that going to work in a vaccine era?

So that's one thing we hear a lot. Now you use the word immunosuppressant, yes, rituximab is an immunosuppressant, cyclophosphamide is. Prednisone, although people technically don't throw it in immunosuppressant class. Of course, it causes immunosuppression. Avacopan is not an immunosuppressant, it's an anti-inflammatory. The neutrophils that we inactivate with respect to C5a receptor engaging C5a are fully functional. So that is really a big point of differentiation with avacopan. And in fact, it was subtle at first, but I think the patient community has understood this fundamentally as well.

So they're, again, saying, boy, we would love to maybe have an opportunity to get on avacopan in this era of COVID and maybe get protection against our disease and still be able to mount responses to coronavirus. So I think that, that's actually a boost.

Now the practicality of a launch in era of COVID, much more hybrid approach. You're absolutely right, as you alluded to in your remarks. Some of it will be electronic, a lot will be in person from our field force, but we're preparing for that as well. And we're studying other drugs that are launching during this pandemic. And it's a mixed bag depending on -- are they for orphan drug? Are they more specialty? Are they follow-on drugs? And it's all over the map.

Some of the marketing or launch is almost entirely virtual. And yet then there's others where even recent launches in kidney disease, it seems like 80% of it is actually in person, even in the pandemic era. So I think we'll still be pretty heavily in-person, but we are absolutely preparing for a hybrid approach, virtual and in-person.

Now you just talked about HS Hurley III and how will we enrich our patient population. We'll be presenting more data that we're analyzing from the AURORA trial. I think it's pretty clear that we're going to be able to get the right patients pretty readily in this trial. And yes, we've developed some very straightforward ways of thinking about that in terms of baseline criteria.

There are no more questions at this time. Turning the call back over to Mr. Thomas Schall.

Well, thank you very much, and thanks, everyone, for participating in this call today. Thanks to all for the insightful questions. And again, I urge you all to mark your calendar for April 14 and participate in our virtual R&D Day. With that, again, thanks very much and wishing you all a pleasant afternoon and a pleasant evening. Goodbye now.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.