FibroGen Inc (FGEN) 2014 Q4 法說會逐字稿

Welcome to the FibroGen Q4 2014 financial results conference call. My name is Leslie and I will be your operator for today. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Mr. Greg Mann of FibroGen. Mr. Mann, you may begin.

Thank you, Leslie. Good afternoon and thank you all for joining our call. With us today are Tom Neff, Chief Executive Officer; Dr. Peony Yu, Vice President of Clinical Development; Dr. Frank Valone, Chief Medical Officer; and Rod Fuhrman, Executive Director and Controller. Unfortunately, Pat Cotroneo, our Chief Financial Officer, is unable to participate today as he is recovering from a minor orthopedic medical procedure.

On this call we expect to make forward-looking statements regarding our business including our collaborations with AstraZeneca and Astellas; financial guidance; the initiation, enrollment, design, conduct, and results of clinical trials; research and development activities; and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes that are difficult to predict, and many of which are outside of our control.

We refer you to the risk factors section of our financial registration statement for risks and uncertainties regarding our business, as well as the statements made on the call today. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments, or otherwise.

The webcast of this conference will be available for replay on the investor relations page of FibroGen's website, www.FibroGen.com. I will now hand the call over to Tom Neff.

Thank you, Greg. Thanks to everyone on the phone for joining us this afternoon. We are excited and honored to hold our first quarterly conference call since becoming a publicly-traded company on NASDAQ.

For those of you on the line today who do not know FibroGen, we have four distinct programs in the clinic: anemia, fibrosis, cancer, and corneal implants. In anemia today, we will be providing updates on roxadustat, our lead compound, based on hypoxia-inducible factor science, we discovered and developed. Roxadustat is in Phase 3 in the United States and in Europe, on the verge of Phase 3 in China, and is just completing Phase 2 in Japan. As noted in today's press release, we remain on track to file regulatory submissions in China in 2016 and in the United States in 2018.

2014 has been an important year for the anemia program. We reached agreement with the FDA on full protocols for a total of seven pivotal studies. Four of these studies are in dialysis, enrolling just over 3,500 patients; three of these studies are in non-dialysis, enrolling approximately 3,800 patients. Working closely with our partners, AstraZeneca and Astellas, we have now launched all of the seven studies.

Of these seven studies, three are being run by FibroGen, enrolling about 25% of the patient total, with the remainder consisting of two run by Astellas and two run by AstraZeneca. The FibroGen studies are focused in the US, while the Astellas studies are focused in Europe.

AstraZeneca studies are global and much larger than the other studies, accounting for more than half of the entire program, with a target enrollment of more than 4,000 of the approximately 7,300 patients we need to complete Phase 3.

In the fall of 2014, we completed two carcinogenicity studies: one in rat and one in mice. Since then there have been two formal audits of these studies and the reports are clean. In connection with these carcinogenicity studies, we expect to receive a milestone payment from AstraZeneca.

In our trials we are seeing that there are a couple of aspects of roxadustat's clinical profile that are unique compared to previous anemia therapies. Evidence shows that roxadustat is able to suppress the iron regulatory hormone hepcidin and roxadustat up-regulates iron transport factor transferrin. Hepcidin has up-regulated inflammatory conditions and blocks access to iron and macrophages that is used to make red blood cells; thus, interfering with anemia therapies. Transferrin is the main protein that binds to iron and transports it through the body.

Perhaps as a result of these unique actions, our Phase 2 studies have shown roxadustat's ability to correct anemia does not appear to be impaired by inflammation. As a result, we are seeing increasing evidence that roxadustat may now be able to overcome inflammation to treat anemia and diseases where anemia is now treatable, such as treatment hypo response in dialysis, as well as other categories where use of products have never received a label such as inflammatory bowel disease, ulcerative colitis, and lupus nephritis. We are continuing to evaluate these possibilities.

Fibrosis, our second major clinical program, was started when one of our ex-employees was a co-discoverer of CTGF and FibroGen has since proven that CTGF is a central mediator in all forms of fibrosis. As a result, we hold extensive proprietary positions around the blockade of CTGF to treat fibrosis. We focus on the development of FG-3019, a fully human [mederex] antibody that blocks and cleaves CTGF.

Exploration of FG-3019 using human fibrotic diseases has been informed by our preclinical results in which we saw a post-treatment reversal of severe fibrosis induced 16 weeks after radiation exposure. The reversal of fibrosis occurred two weeks after the antibody was injected and did not come back, even after the antibody was stopped, while in the control arm the fibrosis accelerated to the point the untreated animals died.

Subsequently, we have tested the ability of FG-3019 to reverse fibrosis in idiopathic pulmonary fibrosis patients where we have employed high-resolution computed tomography, or HRCT, the tool that is used to first diagnose IPF patients, to image the growth of scar tissue in the whole lung. The results of this first HRCT study show that FG-3019 may improve fibrosis in a subset of IPF patients and stabilize others. To our knowledge, FibroGen is the only company to have reported such reversal data with HRCT and IPF.

We are now conducting a placebo-controlled trial in IPF patients in the US, EU, and former Commonwealth countries to evaluate further the safety and efficacy of FG-3019.

In another area of fibrosis, we are very excited about our Duchenne muscular dystrophy program. We have been working on this program for several years to validate CTGF's mechanism of action in the disease and to test FG-3019 in traditional DMD models. As a result, collaborating investigators have published over 20 papers in peer-reviewed journals.

Over the past five months our work and proposed protocols have been reviewed by the international review committee of the TREAT-NMD neuromuscular network, or TACT, and more recently a US advisory board of senior key opinion leaders, and they have encouraged us to move into human studies. Dr. Frank Valone will provide further updates on the muscular dystrophy program later in this call.

Our third program is in cancer, where we are exploring the impact of altering or reducing fibrotic extracellular matrix on tumor growth and metastasis. Results from one of our clinical trials has shown that achieving higher circulated blood levels of 3019 is associated with an improvement in survival in pancreatic cancers. The efforts to explore the meaning of this result in pancreatic patients continue both on a clinical and a molecular level. We are conducting a Phase 2 study in Stage 3 inoperable pancreatic cancer patients to see if FG-3019 treatment can convert their tumor status to resectable. If that occurs, the prospect for patients is much improved.

Our fourth platform is the use of recombinant human collagen for corneal implants that address corneal blindness. FibroGen has developed the unique capability to make human collagens of many different types. Early on in that program, we realized we could fabricate type III collagen into a corneal implant that forms a clear crystalline structure. In a human pilot study now entering its seventh year, corneal implants made of our material were shown to restore sight successfully in patients with corneal blindness.

In the pilot study, the collagen implant integrated well with native tissue with nerve regrowth and touch restored and no tissue rejection. We are now seeking expedited approval pathway in China, where the grafting of human cadaver tissue, which is the procedure used in the US and Europe, is not widely accepted and thus there are estimated 4 million to 5 million people with corneal blindness in China. Currently, we are applying for priority status and defining the pathway for approval with the CFDA officials.

Finally, let me say it is both a source of honor and pride for us here at FibroGen that we successfully completed our IPO on November 14, 2014. We raised a total of $187.5 million and of that amount the net proceeds were $171.8 million. As a result, we ended fourth quarter of 2014 with approximately $347 million of cash, cash equivalents, investments, and receivables.

In terms of the financial outlook, FibroGen expects to receive approximately $200 million in milestone and non-contingent license payments over the next 15 months. In addition, we expect to reach the cap for the AstraZeneca 50/50 cost share agreement by the end of 2015. Thereafter, our partners reimburse the costs that we incur in CKD anemia, except in China. Taking into account all the factors that I just described, we expect we will have the resources to advance our programs for sometime in the future.

For those of you on the call who participated in the IPO, I wanted to convey my personal thanks and appreciation for supporting our efforts in FibroGen.

Now we will turn this call over to our lead clinicians, Dr. Peony Yu in the global anemia program and Dr. Frank Valone, who leads the fibrosis and cancer programs, for some more detail on the trials. Then Rod Fuhrman, our Corporate Controller, will go over the numbers and we will conclude this session with some questions. Peony?

Thank you, Tom. I would like to comment briefly on the profile of roxadustat and its potential for treating patients with anemia and then describe the Phase 3 safety design. Roxadustat is our first-in-class prolyl-hydroxylase inhibitor for activating the hypoxia-inducible factor system and is being developed for the treatment of anemia in patients with chronic kidney disease.

In response to hypoxic settings, such as high altitude or blood loss, our body naturally makes more red blood cells to carry oxygen. Roxadustat pharmacologically turns on that response system to make red blood cells. Roxadustat's mechanism of action includes mobilizing iron availability, reducing hepcidin, and stimulating only a modest amount of body's natural erythropoietin.

We believe our novel approach with roxadustat leads to a differentiated profile and potential advantages over the class of injectable erythropoietin-stimulating agents, or ESAs, that are currently used in anemia of CKD. This includes the potential to overcome the safety issues with ESA, treat anemia effectively in the presence of inflammation where ESAs do not work so well, and potentially eliminating the need for IVR and supplementation.

We have studied roxadustat in over 1,100 subjects in completed Phase 1 and 2 studies. In addition to the potentially differentiated therapeutic profile versus ESA, roxadustat as an oral agent, with no requirement of stocking in doctor's office, has the potential to expand treatment access to CKD patients not on dialysis. And these patients are under the care of non-nephrologist physicians such as endocrinologists, cardiologists, and internists, who will be able to provide roxadustat for anemia while caring for other concomitant medical problems like diabetes and hypertension, which are the leading cause of CKD anemia, before they will be -- have a chance of being referred to nephrologists, which generally happens at very late stage of CKD progression.

Turning now to the roxadustat Phase 3 program, with guidance from the US FDA, our Phase 3 program is power to demonstrate cardiovascular safety using major adverse cardiac events, or otherwise known as MACE. As primary safety endpoint, MACE is being evaluated in two separate patient study pools: the dialysis and the non-dialysis trials. In the non-dialysis Phase 3 studies, where roxadustat to be non-inferior in placebo in MACE endpoint for safety and superiority in efficacy.

In dialysis, roxadustat is compared to epoetin alfa. The regulatory approval requirement is efficacy and safety non-inferiority to epoetin alfa, but we are powered to target for safety superiority over ESA.

An independent data safety monitoring board has been assigned to oversee all of the roxadustat Phase 2 studies since 2009 and now all the Phase 3 roxadustat studies. The DSMB consists of independent experts who review the safety data periodically and has recommended continuing timely execution of the roxadustat Phase 3 studies. And we are on track.

I will hand the call back to Tom now and will be happy to address questions at the conclusion of the call.

Thank you, Peony. Dr. Valone, would you like to start, please?

Thank you, Tom. Now I would like to turn briefly to FG-3019, our program for treatment of fibrotic diseases and cancer.

FG-3019 is a fully-human monoclonal antibody that blocks connected tissue growth factor, or CTGF. A large body of scientific literature demonstrates that CTGF is a central mediator of fibrosis. We believe that FG-3019, by blocking the biologic activity of CTGF, may be a treatment for an array of fibrotic diseases and fibrotic cancers.

Until recently, it was believed that fibrosis is an irreversible process. Today it is generally understood that fibrosis is a dynamic process that is reversible. FibroGen has generated data for FG-3019 in human and in animal studies that are consistent with this new scientific consensus.

As Tom noted earlier, we have used advanced medical imaging technology to quantify changes in fibrosis throughout the lungs in patients with idiopathic pulmonary fibrosis, or IPF. In an open-label Phase 2 trial of FG-3019 in patients with IPF we performed high-resolution CT scans of the chest and quantified changes in lung fibrosis over time. Our data suggests that FG-3019 may stabilize, and in some instances, may reverse pulmonary fibrosis and improve pulmonary function.

A manuscript summarizing the results of this study is under editorial review and we anticipate publication later this year. We are currently running study 067, which is a randomized, double-blind, placebo-controlled, Phase 2 trial in patients with idiopathic pulmonary fibrosis. Study endpoints at week 48 include change in baseline and forced vital capacity percent predicted and change from baseline in whole lung fibrosis measured by high-resolution CT scans.

We have expanded the study to include multiple sites in Europe and former commonwealth countries and our contract research organization expects to begin enrolling patients in the second half of this year. We expect to complete enrollment in late 2015 and to report top-line data in late 2016.

We are also evaluating FG-3019 as potential therapy in certain cancers. Elevated CTGF levels have been observed in diseases characterized by sustained production of extracellular matrix, or ECM. Several cancers have a prominent ECM component that may promote angiogenesis, metastasis, and progressive disease. FibroGen has conducted both animal and proof-of-concept studies of FG-3019 in pancreatic cancer.

In most models of pancreatic cancer, including the KPC mouse model, FG-3019 treatment demonstrated reduction of tumor mass, slowing of metastases, and improvement in survival. In an open-label Phase 2 trial, pancreatic cancer patients treated with FG-3019 plus the chemotherapeutic agents Gemcitabine and erlotinib, FG 3019 showed a dose-dependent improvement in one-year survival rate.

We are currently conducting study 069, which is a randomized trial in 40 patients locally advanced pancreatic cancer that cannot be removed surgically. In this study, patients are randomized treatment with Gemcitabine plus nab-paclitaxel, which is standard of care regimen, administered alone or combined with FG-3019.

The endpoint of this study is conversion of the tumor from an inoperable state to an operable state. Complete surgical removal of the tumor is the only chance these patients have to cure their cancer. We expect to receive preliminary data from this study in the second half of this year.

Duchenne muscular dystrophy is characterized by extensive muscle fibrosis and we consider DMD to be a fibrotic disease. As Tom noted earlier, we are putting our full weight on the accelerated development of FG-3019 in Duchenne muscular dystrophy. Our goal was to start a clinical study of FG-3019 in these patients in the second half of 2015.

DMD has been of scientific and clinical interest to FibroGen for a number of years. During that time, we obtained compelling clinical and preclinical data to support developing FG-3019 in muscular dystrophy. In addition, over the last few years, we obtained sufficient human safety data to make us and DMD experts comfortable with testing FG-3019 in boys with Duchenne muscular dystrophy.

I'd like to review some of the important factors that informed our decision to invest in DMD. This body of work examines the role of CTGF in DMD and the effects of FG-3019 in animal models of DMD, such as the MDX mouse model. Much of this work has already been published in peer-reviewed journals.

First, we know that fibrosis is a central component of Duchenne muscular dystrophy. Disease progression leads to muscle fibrosis and to the ensuing loss of both smooth muscle and skeletal muscle function. In advanced disease, muscles are replaced by fibrotic and fatty tissue.

The published research suggests that CTGF may contribute to DMD progression in two important ways. First, as a central mediator of fibrosis and, second, in the dedifferentiation and breakdown of muscle itself. An anti-CTGF therapy, such as FG-3019, has the potential to address both of these important disease mechanisms.

Investigator-sponsored studies of FG-3019 in the MDX mouse model of DMD have yielded encouraging results. In one example, research conducted in the laboratory of Professor [Enrique Randan] published in the Journal of Human Molecular Genetics in 2013 compared FG-3019 treated and untreated MDX mice. Investigators concluded that FG-3019 mice performed better in an exercise endurance test, had greater muscle strength in isolated muscles, and had less skeletal muscle impairment, less apoptotic damage and less fibrosis.

We presented these preclinical data and our safety data from clinical trials to two expert panels and feedback has been consistently positive, encouraging us to be in clinical trials of FG-3019 in Duchenne muscular dystrophy. In October 2014 we met with the TREAT-NMD Advisory Committee for Therapeutics, or TACT. TACT is a multidisciplinary committee of international thought leaders with broad expertise in rare neuromuscular diseases, such as Duchenne muscular dystrophy. A summary of the TACT review is available on its website.

Just this month, we hosted an advisory meeting with a group of DMD thought leaders here in the United States. Both groups affirmed there is compelling evidence, both preclinical and clinical, to support the use of anti-fibrotic agents in DMD and to support the potential for the use of FG-3019 as one of these agents.

These experts pointed out particular areas where our data show promise. The first is the potential to slow down the progression of lung function loss, which is approximately 5% a year in DMD patients from ages 5 to 24. The second area is the potential of FG-3019 to prevent replacement of muscle with fat, eliminating CTGF which causes muscle dedifferentiation.

News that FibroGen plans to be in the clinic later this year met with strong enthusiasm by these groups. Several promising candidates for treatment of DMD are in development; these so-called exon-skipping drugs target specific genetic defects and stand to benefit a small fraction of the overall patient population. We believe that FG-3019 has the potential to address a substantially broader segment of the DMD population.

In addition, the mechanism of FG-3019 action suggests this product could have potential benefit other forms of muscular dystrophy. We are looking forward to opening up trials in DMD later this year.

With that I will turn this back to Tom.

Thank you, Frank. Now we will turn to financial results. Rod, please go ahead.

Thank you, Tom. As we announced in our press release today, total revenue for the year ended December 31, 2014, was $137.6 million. For the same period, operating expenses were $187.7 million and net loss was $59.5 million, or $3.17 per share, on both a basic and diluted basis.

On a pro forma basis, our net loss per share for 2014 was $1.01 based on primary shares outstanding of $59 million at December 31, 2014. In terms of our cash balances, we ended 2014 with $346.8 million in cash, cash equivalents, investments, and receivables compared to $165 million at the end of 2013. Our investments consist primarily of two- to three-year investment-grade corporate debt.

As Tom has mentioned, our cash balances at year-end 2014 included $171.8 million in net proceeds from the Company's initial public offering, including the exercise of the underwriters' overallotment option and AstraZeneca's side-by-side $20 million private placement. Our cash has allowed us to fund our operations in a straightforward manner through equity financings and collaboration payments without the need for or use of debt.

In connection with the cost-sharing agreement with AstraZeneca, FibroGen's total funding obligations for roxadustat outside of China are limited to $116.5 million, of which $46.8 million has been incurred and $69.7 million remains as of December 31, 2014. Based on current budgets, FibroGen expects to reach this $116.5 million cap in the fourth quarter of 2015, at which time Astellas and AstraZeneca will be responsible for funding roxadustat development in CKD through launch for all territories outside of China.

Specifically, once the cap is reached, FibroGen will no longer be billed by AstraZeneca for 50% of AstraZeneca's development costs, resulting in lower expenses in our statement of operations in addition to offsetting our Phase 3 expense exposure for Phase 3 expenses. Once the cap is reached roxadustat development expenses incurred by FibroGen will be offset by reimbursement of these expenses rather than being shared with our partners.

Total operating expenses for the year ended December 31, 2014, include non-cash, stock-based compensation expense of $18.7 million compared to $3.4 million in 2013. Approximately $7.4 million of the 2014 non-cash, stock-based compensation expense is due to one-time charges associated with stock options granted in 2014 and in connection with our initial public offering. As such, we consider this amount to be non-recurring.

Looking to year-end 2015, we anticipate our cash, cash equivalents, investments, and receivables to be in the range of $325 million. As Tom has already noted, we also expect non-contingent license and milestone payments of nearly $200 million in the next 15 months.

I will now turn the call back over to Tom.

Thank you, Rod. Operator, if you would; we are ready for the Q&A session, if you could read the instructions, please.

(Operator Instructions) Michael Yee, RBC Capital.

Thanks. Hey, Tom, congratulations on everything so far. A couple questions on FG-3019. As it relates to IPF, which you talked about, maybe you could comment on what your go/no-go hurdle would be for that study; what type of efficacy you are looking for.

I know you expanded the study to look at people who failed [approved] drug, but if you look at combinations with Esbriet, because they work in different mechanisms so presumably a combination could be quite interesting. And then also with NASH; obviously there was a lot of data out today by somebody. NASH is a pretty interesting, huge market. Are you going to start a study there?

And then broadly, are you thinking about partnering this program or this drug? Maybe you could talk a little bit about that. Thanks.

Thank you, Michael; full plate here. Frank, I think you should take the IPF and NASH parts of this. Please, go ahead.

Thank you for those questions, Michael. We spent a lot of time thinking about those.

As you know, we are running a placebo-controlled trial right now in patients with IPF. That trial was modified to allow patients who received prior therapy with pirfenidone or nintedanib, so we will get a view of how FG-3019 works as a second-line agent. We also, given the current accrual rates, suspect to have a substantial number of patients who are treatment naive. We continue to see an interest here in the United States among patients to receive 3019 rather than go on to some of the recently approved agents.

So we are looking forward to seeing the early results of the trial at the end of next year, and with that I think we will be able to make a go/no-go decision. We certainly expect to show superiority to placebo at the end of that time, although obviously we have to wait for the data to come on board.

You raised a question about combination therapies. I think we all agree that may be the wave of the future and we currently are actually modeling essentially all the possible combinations of trials looking forward to Phase 3. That could be placebo controlled and second line; it could be combination therapy or perhaps, if our data is encouraging enough, head-to-head against currently-approved agents. That's all just in the planning phase and we need the data coming out in the future in order to make the final decision there.

I think you asked a question about NASH. We have had ongoing trials in liver fibrosis, patients with liver fibrosis due to hepatitis B. That trial reached its accrual goal and as we watched the data come out we realized that our assessments of liver fibrosis by liver biopsy were going to be inadequate. The results are just too noisy and the background level of activity of antivirals is just too high for us to discern any benefit of FG-3019.

We have been running that trial for a while now to gather safety data, and I would add the safety profile in that setting is excellent.

We currently are looking at the next set of trials. We plan to bring our effort back here into the US now. We will have the ability to do more high-tech type studies. We had a meeting with advisers several months ago to get guidance about where to go. We are interested in patients with advanced liver fibrosis. That can include patients with NASH as well as hepatitis C, perhaps cured of the virus, as well as other types of fibrosis. At this point, I would be agnostic about where we will go, though NASH is certainly of great interest to us.

As we've looked at endpoints, we do want to go to patients with more advanced disease because they are likely to have liver-related events, which are the kind of endpoints the FDA likes. And we think we can find surrogate markers that will be sufficiently close to those endpoints that we can actually obtain approval possibly off of certain endpoints.

We are currently looking at things like hepatic venous pressure gradients. We are also looking at something called HepQuant, which is a dual stable isotope labeled collate product, that actually simultaneously measures liver function and liver blood flow.

Of course, we are also interested in fibrosis and we are currently discussing with experts the utility of MRI or MRS to quantify liver fibrosis. This is an area of active development and we hope to have more to report later this year.

Frank, thank you very much for that part. Michael, as it relates to partnering, let me take that part on.

We have had many discussions with partners for many years, prospective partners. In each case we run into the problem that we are interested in developing across a broad platform of activities and the partner typically is enabled simply to do one indication and wants an exclusive for everything else without any obligation to develop. And so we've routinely passed on those opportunities.

There have been a couple of occasions where people have come to us to propose geographic splitting, where they would, in fact, propose to fund several different development opportunities. I believe that those situations do have some prominence and I think they are ones in which we could get the kind of partnering results that we are accustomed to in other areas so that there's a strategic element to the decision.

For example, if somebody wanted to partner and have the right in Japan and Europe, leaving us with the US and China, and would fund five or six indications, and we could agree on the protocols, which is the part that's been sticky so far, I think that you'd get to something that would be tractable. I'm a little hesitant to use any partnering as source of funding. It's really got to be something that one plus one is three; strategically we're better off doing the partnering and so that's been the criteria applied so far.

We will do this on a pragmatic basis. If the opportunity is there next year, we will do it. If the opportunity is there four years from now, we will do it. It depends on the right circumstances.

I hope that helps in terms of an answer.

Yes, it does. Thanks, guys. Appreciate it.

Terence Flynn, Goldman Sachs.

Thanks for taking the questions. Maybe first just on roxa for the Phase 3 trials; if you could give us any more specifics on where enrollment stands. And then, Peony, I think you mentioned there had been a recent DMB meeting. Can you just confirm that?

Then one last question just on FG-3019 for pancreatic cancer. It sounded like there was going to be some interim data later this year. Maybe you could just help frame expectations for that data, because the endpoint is a little bit different from what we are used to looking at. Thanks.

Thank you, Terence. I will hand the first part of this over to Peony with one introductory comment, and that is that for enrollment at the present time we can characterize our trials, but we are not permitted to share our partners' data which is confidential. And we have not gotten to the point yet where we are discussing how it might be that FibroGen could reflect accurately all seven trials.

I will simply say, with respect to our trials, we are ahead of the budgets that are out there for -- you can interpolate from clintrials.gov. And we hope to continue to be.

Peony, please go ahead. Terence asked an additional question.

It is about the [DMC].

Yes. So --.

This is about the data monitoring committee.

Yes. Terence, indeed we have had -- our data monitoring committee has met and it has been quite recent. Their opinion is that we should continue executing our Phase 3 trial as fast as we can.

Thank you, Peony. Frank, you want to take on the pancreatic data that Terence asked about?

Sure. I think the pancreatic cancer trial is a very interesting one. It is a randomized trial. Patients receiving Gemcitabine and nab-paclitaxel alone are combined with 3019, so we have randomized data. It is in stage III patients who are actually surgically staged to confirm they don't have metastatic disease and are unresectable.

By the nature of the trial, our main endpoint is really can we resect these patients, so-called R0 resection. That would give you potential for curing the patients. But of course, in the nature of this type of study they are getting six months of chemotherapy and we are tracking all of the usual endpoints you would see in any cancer study. We will have data regarding changes in tumor size using standard RECIST criteria.

We will also be tracking things like CA 19-9 and we are also interested in PET scanning as an early marker as well as an overall marker of response. So we are going to end up walking away with the totality of data, both standard clinical measures as well as this very unique endpoint of a R0 resection, and a good deal of tumor histology and data about how this product works; it's basically how CTGF is expressed in tumors.

Although the primary endpoint may be tumor resection, we are actually looking at a vast array, a totality of data that comes in one patient at a time. When they are done with treatment we will get all the data assessed and we expect by the end of the year, given the enrollment we have and this large bulk of data, to be able to make initial comments, not final comments, about the results.

Thank you, Frank. Next question, please.

Howard Liang, Leerink Partners.

Great, thanks very much for taking the questions. Roxadustat program, can you talk about whether there are internal analysis on efficacy or safety that either are visible or not visible to us?

Howard, thank you. I will ask Dr. Peony Yu if she can answer that. If you can't, you should just say that.

Howard, to conduct interim analysis, this will require an agreement with our partners as well as with the regulatory agencies and at this time we are not able to comment yet until we have a completed such a discussion.

And as a reminder, for safety monitoring, our DSMB looks at our data on a preplanned periodic basis and they are -- they do have full access to the clinical data from studies conducted by all three companies in this program. One could consider that a form of safety interim analysis without us interfering with the integrity of the data.

And then I have a question on the IPF program. I was intrigued by your comment that many of the patients in the US enroll in the study or choose to get FG-3019 instead of some of the currently approved agents. Can you talk about what do you expect to be the makeup of the trial population? Would this be mostly a first-line -- treatment-naive patient population?

Howard, I will give this to Dr. Valone, but I will start with one general comment. We are actually expanding our US study now, which was not conceived of when we planned to grow out in Europe and in the former Commonwealth countries. And it's because of I think the patient's reaction to the currently approved drugs, but Dr. Valone please go ahead.

It's hard for me to come up with a final answer to how many patients will be treatment naive and how many are going to have had prior pirfenidone and nintedanib -- and/or nintedanib. We, as Tom indicated, expanded to Europe because we thought we may have to be picking up more patients who had received these drugs who were either intolerant or had failed them.

We have been pleasantly surprised, though, that as these drugs became available in the US we've actually had a small uptick in interest in the United States from patients who have looked at our data. There's a large blogosphere out there discussing the fact that we have showed reversal of fibrosis on patients with IPF. Nobody has ever reported that. Some patients have made an informed decision that, rather than taking an approved drug, they would rather receive a drug that may actually benefit them while understanding that it has not yet been proven.

So we don't know the final mix, but we are going to be -- we think we're going to continue to get enough treatment-naive patients to get a view of efficacy in both treatment naive and in second-line settings.

I would also add that with respect to the blogosphere, we don't actively monitor it, but I have been shown blogs where some patients have experienced significant benefit and they keep track of it on the blog. So I think that's something that's part of this world we are living in, for better or for worse.

Anyway, next question, please.

Tom Shrader, Stifel.

Good afternoon. Congratulations. I wanted to ask a little bit about the roxa trial, see if I can get -- in the dialysis, you gave us 3,500 patients all-in. Can you tell us the fraction that are switching versus new dialysis? And are you expected to show MACE non-inferiority in the new dialysis patients where you really expect most of the signal?

Tom, those are good questions and I will answer part of this and have Peony answer part of it. At the beginning of time and the discussions with FDA, there had never been incident dialysis studies performed previously. FDA got the idea that this was an excluded class where there was tremendous mortality and morbidity about the time Affymax was around and ordered Affymax's mandatory phase 4, with specific dates associated with it, to perform an incident dialysis study. And that was really about the time that we were talking to the FDA generally.

So as a result, we were cautious initially as it relates to how large that particular study could be and we have been very pleasantly surprised by the rate of enrollment. And as a proportion of the total, we'd love for it to be half. I don't think people were willing to bet on half, so more like a third is probably median of the people that are making book on this these days.

Let me turn this over to Peony, though, on the MACE question and what the impact is of incident versus conversion patients in the MACE equations.

Yes, as Tom said that traditionally the other CKD anemia program only used switch patients in their Phase 3 and FDA, in fact, had asked one of the companies to do a post-approval commitment, which signifies the importance of this population. For our purpose, we are -- we have a study, study 063, that takes in only the incident dialysis patients and AstraZeneca study of 1,425 patients will accept patients from both incident and stable dialysis.

The advantage of incident dialysis is that this is a time that patients are most vulnerable where they use most amount of ESA and has highest cardiovascular complications, which have also been associated with ESA use. By picking this population, we are taking treatment-naive patients and randomizing them to our drug and ESA. They are seeing -- patients are seeing either type of drug for the first time, whereas in the switch population they had already been -- had used to getting ESA and survived that first few months.

So we do see that inclusion of the incident dialysis patient will be a great opportunity to show differentiation of our drug compared to the comparator. And for the purpose of the MACE program we feel that by inclusion of dialysis patients at different time periods in their dialysis course will be an advantage as these patients are expected to have overall higher event rate and that can help with the sample size.

The other factor I would look to put in this picture is that with your conversion patients they are essentially a survivor pool, very enriched pool because they survived both going on the dialysis and correction on hemoglobin with whatever agents are used. For our purposes though, they are the more likely hypo response population. So we are more likely to see patients that have inflammation hypo response, something we expect to do pretty well in, as well as EPO hypo response something that people don't understand that well. So the incident patient is of great interest in terms of what actually happens.

Exactly. To Tom's point, in our Phase 2 incident dialysis patients, those on roxadustat use is very comparable to the stable dialysis. And this is very different picture from ESA.

Thank you, Dr. Yu. Next question, please

(Operator Instructions) Yaron Werber, Citi.

Great, thanks for taking my question, too. I want to actually shift to fibrosis in DMD; help us understand, in animal models what do you see with 3019? Does it -- the distribution -- how well does it distribute into the muscle? What stage of DMD do you think you need to start targeting to avoid fibrosis and the typical pathology you see in muscle?

And then, I don't know if you can talk about your early-stage pipeline as well; what's behind 3019? Thank you.

Let me start with the observation that there are really two general areas of interest. One is the antibody acts on fibrosis in a way which might improve lung function. The other really is that CTGF seems to be involved in the disease progression and has been shown to prevent assembly of muscle. It has also been shown to dedifferentiate muscle.

And so over the years, with the work we have done, we have ended up proving that 3019 actually strengthens the muscles and the data in that realm. Dr. Valone has a much greater grasp of this, though, and so I will now turn this over to Dr. Valone.

I think you are asking some complex questions, some of which we don't have full answers to. Obviously antibody penetration into muscle is pretty good. We have not actually examined that in detail, except to say when we've looked at muscle function we do see a global affect. We are not seeing some spotty impact of FG-3019 in the animal models.

The animals we have treated with have been primarily on the younger side. We are currently expanding that to look at some of the older mice. As we have actually studied the disease in detail, it is a progressive disease where you are looking at different muscle groups over time developing increasing fat replacement of fibrosis.

So we think we actually impact boys early on in the ambulatory stage as well as later on in the disease when they may be in wheelchairs, but they still have substantial muscle function in their arms and relatively little fibrosis. We have had really key opinion leaders direct us to both groups, initially in the non-ambulatory group where they think we may have a big impact because of effects on smooth muscle for instance, as well as the issue of cardiac fibrosis, an area that is relatively mild in the 10-year-olds and then progresses over the next decade to the point where cardiac fibrosis is the main problem these boys often have as they stabilize with bad lung functions.

We don't see any unique time point in the continuum of muscular dystrophy which says we must intervene at that point, but rather think we can intervene across the continuum of the disease, starting out, as I said, in non-ambulatory and then probably moving to ambulatory down the road in another year or so.

Yaron, the one other response to questions you asked that I should offer is that in our earlier stage program, it's quite extensive now, one thing to note is we have a number of efforts in studying inflammatory anemias, like inflammatory bowel disease. Another effort is the ongoing improvements in potency and so on of the series of compounds that yielded roxadustat. So that's what we call [four-gen]. And those are sort of active chunks around anemia.

In addition, we have programs in interfering in collagen biosynthesis for purposes of interfering with metastases. All these areas I think it's fair to expect -- along with the sub acute heart failure, which we've mentioned before, to expect data as time goes on. So let me conclude there.

Operator, are there any other questions?

I am showing no further questions, so at this time I would like to turn the call over to Tom Neff for closing remarks.

Thanks to everyone for joining our call today. We look forward to speaking to you again at the end of next quarter. Appreciate your attendance.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.