FibroGen Inc (FGEN) 2015 Q2 法說會逐字稿

Hello and welcome to the FibroGen Q2 2015 Conference Call.

My name is [Mysa]. I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will continue a question-and-answer session. Please note this conference is being recorded.

I will now turn the meeting over to Mr. Greg Mann. Mr. Mann, you may begin.

Thank you all for joining our call. With me today are chief executive officer of FibroGen; Dr. Peony Yu, vice president of Clinical Development; Dr. Frank Valone, chief medical officer; Pat Cotroneo, chief financial officer; and Dr. Lynda Szczech, executive director, Clinical Development.

On this call, we expect to make forward-looking statements regarding our business, including our collaborations with AstraZeneca and Astellas, financial guidance, the initiation, enrolment, 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, many of which are outside of our control. We refer you to the risk factor section of our annual report on Form 10-K for the year ended December 31, 2014, our quarterly report on Form 10-Q for the quarter ended March 31, 2015, and our quarterly report on Form 10-Q for the quarter ended June 30, 2015, each of which has been filed with at the SEC 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 it's resulted new information, future developments, or otherwise.

A webcast to this conference call will be available for replay on the Investor Relations page at FibroGen's website, www.fibrogen.com.

I'll now hand the call over to Tom Neff.

Thank you, Greg.

Good afternoon. On today's call, we will review key updates, discuss accomplishments and results during Q2 and highlight our most important near-term and long-term goals. Many of those on the call today may be new to FibroGen, so I'd like to begin with a brief introduction.

The Company is advancing four distinct clinical stage programs in anemia, fibrosis, cancer, and corneal implants. In anemia, we have our lead compound roxadustat, a small molecule investigational therapy based on hypoxia-inducible factor system, which has been shown to trigger the natural responses to anemia.

Roxadustat is currently in Phase 3 trials in the US and in Europe, and is now expected to enter Phase 3 in China Q4 this year. Roxadustat was discovered and developed by FibroGen and is partnered with AstraZeneca and Astellas under multiple exclusive territory-based agreements. Our roxadustat patent portfolio includes multiple issued and pending US patents offering protection for roxadustat through 2033 and potentially beyond.

As noted in today's press release, we remain on track to achieve our goal of submitting regulatory applications in China in 2016 and in the US in 2018.

Working closely with AstraZeneca and Astellas, we have launched all seven studies required for the roxadustat regulatory submissions in the US and EU. Four of these studies are in hemodialysis patients where total enrolment is planned for just over 3,500 patients. Three of these studies are in non-dialysis with target enrolment of approximately 3,800 patients. Of these seven studies, three are being run by FibroGen, two by Astellas, and two by AstraZeneca.

The three FibroGen studies are focused in the US and account for 25% of patient enrolment. The two Astellas studies are focused in Europe. The two AstraZeneca studies are global in character and much larger than the others accounting for more than half of the entire program with target enrolment of more than 4,000 of the 7,300 patients we need to complete Phase 3 enrolment.

For the three FibroGen roxadustat Phase 3 studies, we have now reached approximately two-thirds of our cumulative target enrolment. During the past three months, we have been enrolling in the range of 125 to 150 patients per month in our three studies. The enrolment run rate give us added confidence that FibroGen can meet our enrolment goals. As was agreed with our partner AstraZeneca at the beginning of this year, the base plan is for FibroGen to complete target enrolment by March to April 2016. The stretch goal for all of our studies and their studies is to achieve full enrolment by year-end 2015.

At present, we expect one of our studies to meet or beat the stretch goal. And for the other two, we now think we can meet or beat the March, April targets.

As we previously stated in our March call, we completed two separate two-year carcinogenicity studies for roxadustat, one in rats and one in mice. These studies showed no evidence of effect on carcinogenicity or mortality. And as we announced on May 7th, the audited study reports triggered a $15 million payment from AstraZeneca for this milestone achievement.

In the roxadustat clinical trials, we have seen aspects of a clinical profile that are unique compared to previously approved anemia therapies. Roxadustat increases hemoglobin levels within our near physiologic levels of endogenous EPO, regulates genes that make iron bioavailable. And in addition, evidence shows that roxadustat suppresses the iron regulatory hormone hepcidin, and up-regulates the iron transport factor, transferrin.

Hepcidin is up-regulated in inflammatory conditions and blocks access to iron in macrophages that is used to make red blood cells. Studies have shown that IV iron increases hepcidin levels, which may interfere with the activity of the approved anemia therapies. Transferrin is the main protein that binds to iron and transports it through the body.

Consistent with these unique actions in our Phase 2 studies, we saw that roxadustat's ability to correct anemia does not appear to be impaired by inflammation irrespective of the level of inflammation. The paradigm is thus very different than recombinant EPO and IV iron where the presence of inflammation requires increasingly high doses.

The data suggests that roxadustat may be able to overcome inflammation to treat dialysis patients who are hyporesponsive to currently approved therapies with the erythropoiesis-stimulating agents and IV iron as well as potentially to treat patients with inflammatory bowel disease, lupus nephritis, ulcerative colitis, and other such categories where ESA products have not received a label. We are continuing to evaluate the possibility of developing roxadustat for these and other additional indications.

Based on these data and our differentiated mechanism of action and our discussions with our partner AstraZeneca including the view that the inflammatory anemias are considered unmet medical need, we modified our company disclosure during the second quarter of 2015 to indicate our assessment that for US dialysis patients it is now more likely than not that roxadustat will be separately reimbursed rather than being in the dialysis drug capitation bundle as was contemplated at the time of our IPO.

The global scope of the roxadustat program includes an agreement with our partner AstraZeneca for the deal on commercialization of roxadustat in China. We have been informed that the required technical review of our Phase 3 clinical trial application by the Center for Drug Evaluation, otherwise known as the CDE, has been completed, and the file has been referred back to the CFDA to obtain the official authorization to conduct the Phase 3 program.

Thus, we are now at a stage in our China program where we are advised that the remaining regulatory approval steps to start the Phase 3 studies are procedural. Therefore, we now expect to begin opening study sites and enrolling patients in two Phase 3 studies in China in Q4 2015.

As those of you who are involved in our IPO may recall, we committed to publish six manuscripts peer-reviewed journals the first half of 2015 all have now been submitted, and the publications of the roxadustat Phase 2 studies are beginning to roll out.

As we announced yesterday, the placebo-controlled dose-range finding study and non-dialysis CKD patients study, 017, has just been published in the current online edition of Nephrology Dialysis and Transplantation, or NDT, the journal of the ERA-EDTA in Europe. We expect a second manuscript will be published by a major journal in the coming weeks along with editorial comments, and the other studies will be in press during the months ahead.

These are the first peer-reviewed clinical studies to feature clinical evidence of hemoglobin correction by hypoxia-inducible factor, prolyl-hydroxylase inhibitor in anemic patients, a technology where FibroGen has been the innovator of record.

We are very proud of this milestone. But at the same time, it has taken a team effort. We want to recognize the tireless support of the teams in AstraZeneca and Astellas to who have reviewed CSRs, the study data, and the manuscripts, and extend our congratulations to the authors, particularly to our academic collaborators who have made critical contributions over the past decade in many ways.

In fibrosis, our second major clinical program, CTGF, was co-discovered by a former FibroGen scientist and an NIH research team, and it has since been shown that time after time that CTGF is the central mediator of fibrosis. As a result, we hold proprietary patent positions around the blockade of CTGF to treat fibrosis. We focus on development of FG-3019, a fully human antibody that was generated using Medarex technology and it blocks the biologic activities of CTGF.

There are particular pre-clinical results that drive our plans in exploring the use of FG-3019 to treat human fibrotic diseases. In proof of concept experiments, we showed that FG-3019 can reverse radiation-induced fibrosis. Mice received a lethal dose of radiation to their chest after which the mice developed progressive lung fibrosis that, without effective treatment, results in most mice dying within one year.

Sixteen weeks after the lethal radiation dose the mice had substantial fibrosis, and at that time, we began injecting FG-3019 treatment, an antibody, three times a week for a total of eight weeks.

Lung fibrosis improved significantly within two weeks of starting FG-3019 and this reversal persisted even when treatment stopped after eight weeks. There was a significant mortality difference between the treated and untreated animals.

Subsequently, we tested the ability of FG-3019 to reverse fibrosis in idiopathic pulmonary fibrosis patients. We monitored lung fibrosis using high-resolution computer tomography, or HRCT, and quantified lung fibrosis using a computer algorithm developed at UCLA. The results of our study showed that 35% subjects had stable or improved lung fibrosis and lung function after treatment with 3019 for 48 weeks. To our knowledge, FibroGen is the only company to report improved lung fibrosis in an IPF clinical trial.

We are now conducting a placebo-controlled trial in IPF patients to evaluate further the safety and efficacy of FG-3019. As part of the previously announced expansion of the study, we began opening new trial sites outside the US in the third quarter of 2015 to help accelerate enrolment.

As Dr. Valone will explain, we are considering now to expand this trial to include a cohort of subjects who are receiving approved therapies in the United States. We believe that the results of this trial, if positive, will point the way to further product development Phase 3 trials.

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 the CTGF mechanism of action in the disease and to test FG-3019 in DMD pre-clinical models.

More than 20 papers based on this work have been published in peer review journals by our collaborating investigators. As a key step towards moving into the clinic, we met with the international muscular dystrophy review board, TREAT-NMD Advisory Committee for Therapeutics, and reviewed these data and the key results. The TREAT-NMD Review Committee was supportive of conducting studies with FG-3019 in DMD patients.

Since then we met with American and European KOLs to review these findings, discuss the rationale for FG-3019 as a potential treatment for DMD as well as other muscular dystrophies, and to refine the clinical trial design.

We received FDA clearance of our IND for DMD last month and plan to initiate a Phase 2 study of FG-3019 in non-ambulatory DMD patients in Q4 2015. We also plan to meet with FDA to discuss requirements for treating ambulatory patients, particularly those age three to 11, shortly.

The third FibroGen platform is in cancer. Here we're exploring the impact of altering and reducing fibrotic extracellular matrix on tumor growth metastasis.

Results from our first dose escalation study conducted on pancreatic cancer patients showed that achieving higher circulating blood levels of FG-3019 was associated with an improvement and 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 now conducting a Phase 2 study in stage 3 pancreatic patients who have been scored as not eligible for surgical resection.

The study examines whether the combination of FG-3019 and the standard chemotherapy regimen of gemcitabine and abraxane plus radiation can convert these subjects' tumors from inoperable to operable state. Patients with inoperable stage 3 pancreatic cancer have survival similar to patients with metastatic cancer with studies showing only half of the inoperable stage 3 patients being alive approximately eight to 12 months after diagnosis, and very few studies even report five-year survival.

The outlook for patients with resectable pancreatic cancer is considerably better, with studies showing that half being alive between 17 and 27 months after diagnosis and 20% alive at five years. We intend to enroll up to 40 patients to determine if there is a significant difference versus standard of care alone and then make a decision to expand the study.

Dr. Frank Valone will provide further updates on IPF, DMD, and pancreatic programs later in this call.

Our fourth platform is the use of recombinant human collagen for corneal implants as a potential treatment for corneal blindness.

Capitalizing on our expertise in the biology of fibrosis, FibroGen developed the unique capability to make human collagens of many different types early on. In that program, we realized we could fabricate thermally stable type III collagen into a corneal implant that forms a clear crystalline structure that had optical properties similar to the human cornea.

In the human pilot study conducted in Sweden and now in its seventh year, corneal implants made of our material were shown to restore sight successfully in patients with corneal blindness. In this pilot study, the human collagen III implant integrated well the native tissue with nerve regrowth observed, patient's sense of touch restored and no tissue rejection. Importantly, these data indicate that this therapy should not require extended immunosuppressive supportive care.

We are proceeding with the plan development activities of a 5,200 molecule as a class III medical device in China for partial thickness and full thickness procedures where there are limited treatment options for corneal implants. There are an estimated 4 million to 5 million in China with corneal blindness.

Finally, I wish to mention a few items related to our financial position. As anticipated in the second quarter, we received a milestone payment and non-contingent license payment from AstraZeneca totaling $135 million.

Under the 50/50 cost share agreement with AstraZeneca based upon agreed budgets and current rolled up forecast, we expect to reach our cap of $116.5 million by mid Quarter 4 2015. After the cap is reached, AstraZeneca and Astellas reimburse our agreed upon costs related to CKD anemia with the exception of China where we continue to share 50/50 with AstraZeneca.

At June 30, 2015, FibroGen had approximately $408 million of cash, cash equivalents, investments, and receivables.

Now we will turn this call over to our lead clinician, Dr. Peony Yu in the anemia program and Dr. Frank Valone in fibrosis and cancer for some details on the trials. Then our CFO Pat Cotroneo will go over the numbers and we will conclude the session with some questions.

Peony, please go ahead.

Thank you, Tom. I'd like to comment briefly on the profile of roxadustat and its potential for treating patients with anemia and then describe our Phase 3 program.

Roxadustat is our first-in-class hypoxia-inducible factor prolyl-hydroxylase inhibitor in development for the treatment of anemia in patients with chronic kidney disease. In response to hypoxic conditions such as high altitude of 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.

Tom already mentioned how roxadustat mechanism of action includes mobilizing iron availability, reducing hepcidin, and stimulating only in modest amount of the body's own erythropoietin. We believe our novel approach with roxadustat leads to a differentiated therapeutic profile and potential advantages over the class of injectable erythropoietin stimulating agents, or commonly known as ESAs, that are currently used in anemia of CKD.

This includes the potential to overcome the safety issues with ESA to treat anemia effectively in the presence of inflammation, where ESAs don't work so well, and potentially eliminating the need for IV iron supplementation. We have studied roxadustat in more than 1,100 subjects in our Phase 1 and 2 studies.

In addition, due to the potentially differentiated clinical profile versus ESA, roxadustat as an oral agent have the potential to expand treatment except to CKD patients not on dialysis and who are not under the care of nephrologist. We and our corporate partners believe that most CKD patients are under the care of non-nephrologist physicians such as endocrinologist, cardiologist, and internist until late stages of CKD develops.

It's estimated that 36% of diabetic and 20% of hypertensive CKD patients suffer from anemia. Yet, the anemia goes untreated by their physicians because of the financial and the logistical barriers to prescribing ESA.

If roxadustat enters the market, these non-nephrologist physicians will be able to prescribe roxadustat for anemia. While taking care of other concomitant medical problems like diabetes and hypertension, which are the leading causes of CKD anemia.

Turning now to the roxadustat Phase 3 program. With guidance from the US FDA, our Phase 3 program has power to demonstrate cardiovascular safety using major adverse cardiac events, or commonly known as MACE, as primary safety endpoints. MACE has been evaluated in two separate patient study pools -- the dialysis and the non-dialysis pools.

In the non-dialysis Phase 3 studies, roxadustat is being compared to placebo. We aim to confirm roxadustat to be superior on efficacy in anemia correction and non-inferior in safety relative to placebo.

In dialysis, roxadustat is compared to epoetin alpha. In this setting, we need to show roxadustat to be non-inferior to epo alpha for efficacy and for safety. At the same time, our dialysis study pool has power to demonstrate safety superiority over ESA.

As Tom mentioned, we and our partners are conducting seven Phase 3 trials for meeting the requirements of US and European regulatory submission requirements.

FibroGen is directly responsible for three of these seven studies. These are Andes, which is otherwise known as Study 060 in non-dialysis patients; Himalayas, Study 063 in incident dialysis patients; and Sierras, Study 064 in conversion dialysis study in stable patients.

Patient recruitment is going relatively smoothly for us, and we expect to meet our base goal in reaching target enrolment in two of our three studies in the March, April 2016 timeframe, and to meet our stretch goal of achieving enrolment completion in the third study by the end of 2015.

An independent data safety monitoring board has been a standing review body for roxadustat since 2009, initially appointed to oversee the Phase 2 studies and now all the Phase 3 roxadustat studies. The DSMB consists of independent experts who, in accordance with the DSMB charter, reviewed the safety data periodically. During its July 2015 review that the DSMB instructed us to continue the Phase 3 studies as planned.

I'll hand the call back to Tom now, and we'll be happy to address questions at the conclusion of the call.

Thank you, Peony, for your comments. I'll now ask Dr. Frank Valone and make a few comments.

Frank, please go ahead.

Okay. Thank you, Tom. Now I'd like to return briefly to FG-3019 and our programs for treatment of fibrotic diseases and fibrotic cancers.

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

As Tom noted, we are seeing profound evidence in animal models and clinical studies that FG-3019 has the potential to inhibit and even reverse the progression of fibrosis.

We completed an open-label dose finding study of FG-3019 in patients with idiopathic pulmonary fibrosis, or IPF. That study showed that 35% of patients had improved or stabled lung fibrosis after 48 weeks of treatment with FG-3019.

To our knowledge, no IPF clinical trial has shown an improved lung fibrosis. This includes trials of the recently approved drugs, pirfenidone and nintedanib.

Based on the encouraging data from our open-label trial, we began Study 067, which is a randomized double-blind placebo-controlled trial of FG-3019, that was originally designed to enroll 90 subjects with IPF.

Study endpoints at week 48 include change from baseline in forced vital capacity percent predicted, change from baseline in whole lung fibrosis measured by high-resolution CT scans. The goal has been to enroll study by the end of 2015 and to have data approximately one year later.

Accrual has slowed in the US due to the approval and launch of pirfenidone and nintedanib for treatment of IPF.

In order to complete enrollment of the original study, we have opened up the trial in a number of countries where pirfenidone and nintedanib have not fully penetrated the markets. Countries we are now launching include Canada, Australia, South Africa, New Zealand, and India.

In anticipation of a positive Phase 2 trial, we began to model several routes of product approval. Second-line therapy, after failing to approve treatment, our first-line therapy and FG-3019 is combined with approved drug or possibly as single agent first-line therapy, we already increased the size of our Phase 2 trial from 90 to 136 subjects [ready] to include subjects with failed treatment with pirfenidone or nintedanib.

We are now considering expanding the trial further to include a group of patients for receiving concurrent approved therapy. We're still working on the details of the trial amendment.

However, initial modeling indicates that we will increase the size of the trial of 136 subjects to approximately 250 subjects in order to add a cohort of subjects receiving concurrent therapy such as pirfenidone. We will update further as our development decisions progress.

Duchenne's muscular dystrophy has been of scientific and clinical interest of FibroGen for a number of years. DMD is characterized by extensive muscular fibrosis, and we consider DMD to be a fibrotic disease. We and our collaborators have obtained compelling preclinical data that support FG-3019 in DMD. This is a high priority program for us because FG-3019 has the potential to treat all subjects with DMD regardless of the underlying genetic defect and, thus, is very different from most products under development to treat subsets of DMD patients with specific genetic defects.

As Tom noted earlier, we recently received FDA clearance on our IND, and our goal is to begin treating non-ambulatory DMD patients with FG-3019 in the fourth quarter of this year.

The study's primary endpoint is changed in forced vital capacity. Boys with DMD have progressive loss of lung function due to increasing muscle weakness, and for non-ambulatory boys, loss of lung function becomes a major health issue and ultimately results in full-time use of ventilators. Other end points in this study are changes in arm function, which is critical to the boys' quality of life, and direct measurement of arm muscle fibrosis by MRI.

We are also measuring cardiac fibrosis by MRI as heart failure due to cardiac fibrosis is becoming an increasing problem with boys who live longer due to improved pulmonary support. We intend to expand our DMD program to include boys with DMD who are ambulatory, and we intend to meet with the FDA to discuss this plan next year.

We are also evaluating FG-3019 as a 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 prominent ECM components that may promote angiogenesis, metastasis, and progressive disease.

FibroGen has conducted both animal and proof of concept clinical studies, the FG-3019 in pancreatic cancer. And most models of pancreatic cancer, including the KPC mouse model, FG-3019 treatment demonstrated reduction of tumor mass, slowing of metastasis, and improvement in survival.

In an open-label Phase 2 trial of pancreatic cancer patients treated with FG-3019 plus thechemotherapeutic 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 where locally advanced pancreatic cancer that cannot be removed surgically. In this study, patients are randomized to treatment with gemcitabine plus nab-paclitaxel, or Abraxane, which is a standard of care chemotherapy regimen administered alone or in combination with FG-3019.

The endpoint of the study is conversion of the tumor from an inoperable to an operable state. Complete surgical removal of the tumor is the best chance these patients have for cure of their cancer.

Additional study endpoints include tumor regression measured by CT scans, change in tumor metabolism measured by PET scans, and tumor markers such as CA 19.9. We plan to submit an abstract of the initial study results for presentation at the ASCO GI Meeting to be held in January of next year.

With this, I will turn back to Tom.

Thank you, Frank.

Pat Cotroneo will now review the financial results from Q2 as well as some of the end of the year projections.

Thank you, Tom.

Tom Neff& Yes.

As we announced in our press release today, total revenue for the quarter ended June 30, 2015 was $120.6 million. For the same period, operating expenses were $61.2 million and net income was $57.1 million or $0.95 per basic share and $0.83 per diluted share. Included in operating expenses for the quarter ended June 30, 2015 was an aggregate non-cash portion totaling $9.4 million of which $6.9 million was a result of stock-based compensation expense.

In terms of our cash balances, we had $408 million in cash, cash equivalents, investments, and receivables compared to $346.8 million at the end of 2014. Our investments consist primarily of two to three-year investment grade corporate debt.

As Tom has mentioned, our cash balances at June 30, 2015 include $120 million non-contingent license fee payment and a $15 million milestone payment received from AstraZeneca during the second quarter 2015.

In connection with the cost-sharing arrangement with AstraZeneca, FibroGen's total funding obligations for roxadustat outside of China are limited to $116.5 million, of which $83.4 million has been incurred and $33.1 million remained as of June 30, 2015.

Based on the current year budgets and enrolment forecast, FibroGen expects to reach this $116.5 million cap in Q4 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, once the cap is reached, roxadustat development expenses incurred by FibroGen will be fully offset by reimbursement. Looking to yearend 2015, we continue to anticipate that our cash, cash equivalence, investments and receivables will be in excess of $325 million.

I'll now turn it back to Tom.

Thank you, Pat.

Sure.

Operator, we're now ready to take -- to start taking the question-and-answer session, if you can set that up please.

Thank you. We will now begin the question-and-answer session.

(Operator Instructions). We are now standing by for questions.

Our first question is from Michael Yee with RBC Capital Markets. Please go ahead. Your line is now open.

Hi, thanks, good afternoon. Hi, Tom. Congrats on the progress. Two questions, one on roxadustat. I know there's a particular focus on safety and, of course, these DSMB analyses.

Can you just comment on to what degree or what additional information you could provide regarding risk of tumors whereby you feel very confident other than just the carcinogenicity studies, what kind of things were looked at with diligence? And in the DSMB analyses, are these specifically looking at that type of imbalance?

And the second question is just on pancreatic cancer, since there could be some data not too far away, just be a little more specific in terms of I guess where you are in that enrolment, how many patients do you think could be reported at ASCO GI, things of that nature, what would you be defining as good data to keep going? Thanks.

Okay. So Michael, thank you for the comments and questions. Let me -- let me do it this way. I will ask Frank to address the pancreatic question first and then I'll come back and ask Peony to address the questions you asked about DSMB and tumors and so on. So Frank, please go ahead.

Michael, a couple of things. We don't comment about patient enrolments to the level of detail you may have liked. We find that it might be misleading over time.

Enrolments may go on smoothly. We have three centers now winning patients. We'll have a fair amount of data on patients who completed the study. As I indicated in my presentation, the primary endpoint is tumor resection.

Along the way, we've heard a lot about tumor responses by CAT scans, PET scans and tumor markers. So we have to go and pull the totality of data together which we expect to do at the end of the year and as they present in January.

Whether that's going to be enough data to make a decision to expand the trial or simply continue as it's going, I wouldn't know until December, and now, you'll open up all those envelopes and see what we have. But we feel quite confident we should continue the trial. We just don't know whether it will be expanded based on the data we'll have in December.

Yes. So I might add one thing there, Michael, and that is the -- these are patients to fill resection scoring before we start the study and they're on standard of care gemcitabine and Abraxane and then 3019 and the randomized arm.

This means that if there is any patient that is resection eligible after six months, we've done some positive, and we already -- we've already seen that. And so now, it's just the question of how many patients do we need to see the difference, you know, really, you know, taking on the question of standard of care gemcitabine and Abraxane versus gem plus Abraxane plus 3019.

And so it's interesting times. I wish it would go faster but, you know, you know, methodologies are complex and, you know, getting people like Mayo and Georgetown onboard is taking a lot of work just because they are learning a paradigm they haven't really been involved in before.

So step by step, I think it's a good investment so far. So I'll stop there. Peony, do you want to address DSMB? You know, Michael is asking about tumors and surveillance of tumors and so on?

Yes. So Michael, thank you for the question. So first of all, roxadustat corrects hemoglobin via a mechanism that is very different than ESAs. And we understand the sensitivity about tumor risks in anemia therapy in the patients who received high doses of ESA as in the case of chemo-induced anemia historically.

And what we'd like to make it very clear is that our drug mechanism does not involve that extensive level of erythropoietin exposure. Furthermore, in the HIF biology, there is extensive work investigating the use of HIF-PHI for potential targeting treatment of cancers.

With that said, turning to your question regarding DSMB, our program has been under review by the DSMB since phase 2. During phase 2, we have not found any safety signal related to tumors. During phase 3, our DSMB continue to review all SAE and tumors are part of the SAE reporting.

And so we have not found any signals in the phase 3 review as well. One thing that we are very careful to avoid confounding by baseline factor is that we screen out patients with the pre-existing renal cell carcinoma by ultrasound prior to entering the study. So late-stage patients who already have renal cell carcinoma which is at higher prevalence in patients with end-stage kidney disease would have been screened out of the study. Does that address your question?

It does. There is a specific surveillance what is I see what...

And so Michael, yes, the point here is that by doing the pre-screen and ultrasound, we will be able to detect any insipient renal cell carcinoma during the study. We have not seen anything yet. You know, this is stuff that's surveilled pretty aggressively. But at the same time, you know, we had ways to go, but we have a way to have very clear readouts on that point.

Thank you.

Yes.

Thank you.

Anyone else?

Our next -- our next question is Kennen MacKay with Citi. Please go ahead. Your line is now open. Kennen MacKay, your line is now open. If you are muted, please unmute.

Sorry about that. So I was wondering if you could just comment on the regulatory timeline in China and sort of how long that submission process would take? And given that submission in 2016, when you could see approval there?

Okay, Kennen, thank you for the question. Let me confirm what you've asked about. You're saying what are the regulatory timelines as we presently conceive China?

Yes, yes, exactly. And just sort of --

Okay.

-- timelines from submission to potential approval there?

Yes. So let me walk you through what we currently think. The study looks like it will start enrolling this fall. We have been advised that about four weeks from now we'll get to the point of having the, what's called the chopped orders. So we have the authority to negotiate with IRBs and sites and contract for it and then start enrolling patients.

We have had in preparation for this several preceptor meetings where we fly the clinical teams over to the US and go through the data in great detail. So we're pretty enthusiastic about moving ahead with the enrolments.

And point of fact, we're doing 26-week study across the board. And then for safety cohort, we do 52 weeks. At the point that we had 26 weeks fully enrolled, we are able under the green pathway rules to initiate a dialog with the Beijing CFDA which is our regulator at the level of CM&C activities, so the local regulator, the CM&C in China and the national central regulator of this drug evaluation.

Under the terms of the agreement, it's a rolling review. We expect that the CM&C review will take somewhere between nine and 12 months based on history and analogous situations.

At the point, we have the 52-week data, we're allowed to submit the drug review for CDE, the Center for Drug Evaluation, to make a formal assessment on the drug, we believe that somewhere between five and seven months of time.

So the way that AstraZeneca, and we have thought about this, is that we're trying to make these two timelines meet up at the end of 2017, roughly December 2017, at the point that we would be authorized to make and ship drug.

Under the agreement with AstraZeneca, we are sending bulk drug shipments to AstraZeneca, you know, it goes by railway to [Wushi] City from Beijing. And we are paid 60 days later for the drug that we ship.

We expect that the terms of the Class 1.1 bio-venture rules will require us to do somewhere between 2,000 and 3,000 patients in phase 4 as a safety follow-up, the ideas on market drug and the safety follow-ups, so China looks at these things.

The administrative exclusivity rules are such that we would expect about a five-year period from the time of approval until any competing products can conceptually be in the market.

However, this is not -- this is not a judgment with respect to patents. This is simply a judgment with respect to administrative review in Class 1.1. So we would expect that we'll have extensive patent protection after that time.

So that's the basic idea, so you have an initial approval that is conditional and it's conditional, that is conditional on the phase 4 safety review being adequate, clean in the eyes of the regulators.

And so when you think about it that we're aiming for December 2017 for the point we'd have the conditional approval and we would be thinking that something like three years, three or four years later, we'd be done with the follow-up study and we would have the administrative exclusivity for five full years from December 17.

Is that clear enough?

Yes, yes, that's --

Yes.

That, we can talk about. Thank you.

Okay.

And then maybe just one more question on 3019. I think the sort of potential for a combination trial there is really a terrific one, and I was hoping maybe you could speak a little bit about the potential synergies that may arise in IPF, and if there is one sort of mechanism of the approved product out there that potentially jumps out as being essentially more synergistic with CTGF in these patients

So let me start by saying that we have been watching this year with the main manuscript submission on our exploratory study and looking at the peer review and the editorial comments and so on. And we are struck by the idea that the data seems pretty important to our people.

And so in our hands, many years ago, 1997, we had an option to look at pirfenidone. And we declined it to a matter of record because we didn't feel that it could do what we wanted in fibrosis.

So we have a general view that the mechanism of pirfenidone is somewhat different than the one that arises from [blockading] 3019. And so we expect that it would be additive, and so I would simply say that if we show that HRCT methodology which is really a time series of HRCT scoring, you know, take 1 millimeter thick cuts vertically and then horizontally in the patients so they get incredibly accurate data for a lung volume and for matrix and matrix deposition.

If it turns out that the data we saw in the exploratory study is replicated in this study, I think that there's a pretty compelling case for combination therapy.

Recently, I think in part because of the review of the manuscript and just thinking about what's being said, we have got -- taken on the idea of testing patients that have taken, for example, pirfenidone in the US because it's now been approved, so it would be concomitant therapy kind of idea.

Let me stop here and have Frank explain what our thinking is on this because we spent a lot of time -- the team -- Frank's team has really spent a lot of time on this perhaps 45 days.

Tom's covered most of what I would say. We're actually looking at the question of whether the combination of 3019 and pirfenidone or nintedanib would be synergistic. There are -- they have different mechanism of action.

So assuming they're additive rather than synergistic, we will look in preclinical models to see if we see signs of synergy, but I wouldn't plan on that in our trial designs. That might lead to trial failure. We're pretty comfortable that additive makes sense and we would be looking at that type of trial design.

At this point, I can't choose easily between pirfenidone and nintedanib. They both are -- operate pretty similar with different toxicities with similar efficacy and we may just be additive in both. Part of our discussion internally is how we want them go so that we need to really do further modeling. And as I said, we'll offer more comments once we've got a chance to look at this program.

Yes, I mean to-date, we've been thinking about -- you know, given the naive studies, it's end of the 90s range that the total patients in the study would be something on the order of 250.

You know, we may go back and we think that a little bit but I think that's sort of a scale that we think we can handle and execute efficiently. If we did that kind of number, we have to do one of the two, you know, pirfenidone instead of nintedanib or vice versa. And we just haven't quite got to the point yet of deciding about that.

So just to sort of follow up on that, following the trial readout in IPF sort of next year, you will have data from treatment-naive previously treated failures with pirfenidone and nintedanib and then also potentially the combination products.

So based on -- or combination with 3019, so would the decision then be sort of how to design a registrational trial and could you potentially go for -- head to head against approved products in treatment-naive patients then?

So I think the answer here is that we clearly are trying to leverage our ability to develop registrational strategy. And there is an option here depending on data to go head to head. But it depends a lot on data and we don't yet know what to expect. Frank, do you want to add anything there?

We're designing a program to have all possible options available to us in the end. What we do will be data-driven.

Got it, Okay. Thanks so much for taking my question.

Yes. Thank you, Kennen.

Thank you. Our next question is from Terence Flynn with Goldman Sachs. Please go ahead. Your line is now open.

Hi, thanks for taking the question. Maybe just one more in 3019. I'm just wondering if you can help maybe frame for us what type of FVC change you're looking for in non-ambulatory phase 2 DMD trial. Thanks.

Thank you, Terence. This is a topic that's been front and center here this year, and I think Frank knows a lot about it, so I'm going to let him walk through it.

Yes. Since we're still digging deep into that, and I just want to give you a number because I've got several models. The thing we're struck by is that in our trials, we see stable or better.

And so we have to decide still while we are looking at FVC change. We see change and look at some other marker that may provide further differentiation in currently approved drugs. So I don't want -- you know, I don't have that firm answer to this question.

Yes. I think the one thing we can say though is that the KOLs meetings we had, there's been an assertion that we should expect 5% decline in FVC percent predicted in these patients irrespective of the ambulatory status. And that kind of number is sort of staggering when you try to get your arms wrapped around it given what we've seen with IPF patients.

So, you know, so I think that, you know, it's a target-rich environment here in terms of what may happen for us. I think Frank is getting at the question of what the measurement endpoint we're going to ultimately choose. And that's -- but the concept here is that there is a really significant loss of lung function as a disease proceeds and --

So what time course is that 5% over Tom?

It's actually a little more than 5% on average now but 5% to 8% per year.

You know, what I saw was over a multi-year time period, this rate -- the slope continues. This is presented a guy -- by the guy in Paris -- a German guy and I forgotten his name, but -- Thomas Voit.

And so, you know -- and the other people there we're concurring with this, I mean that nobody is disagreeing, so you see really significant fibrotic impact on these patients. You know, the concepts here is that we originally noticed that there was a huge amount of [fibronectin] being made in DMD patients.

And as we dug into this, we realized that the dystrophin genetic defects were causing myofibroblasts to exponentiate an activity so there is a massive amount of CTGF around and a lot of collagen around. And we just started, you know, digging away year after year working on this from 2006 until now, 22 papers that our collaborators have done.

And it's very clearly the case that CTGF mediated disease progression is certainly part of the picture here. A lot of the factors we'll be paying a lot of attention to is there are some data that suggest CTGF dedifferentiates muscle.

And I don't know if it is turning muscle into fat. And if that's really true then, you know, we might be in a situation where we're directly modifying the disease, which is sort of an ideal situation if it turns out that way for our purposes.

But we don't have enough data yet to be sure about that whereas some of the other stuff like the affected reducing fibrosis on muscular strings, run, endurance, it was very clear. And so, you know, still to be explored at some -- but, all right, Terence, that's sort of the feel for it. Does that help at all?

Thank you. Okay.

Thank you. Our next question comes from Seamus Fernandez with Leerink. Please go ahead. Your line is now open.

Thanks very much for the questions and congratulations on all the progress. Just a few questions, maybe first off, Tom, can you help us better understand the -- your comment on the bundle and the determination there just in terms of its relative impacts? I know this is potentially important from a commercial perspective.

The second question -- yes, go ahead.

No, no, please go ahead and finish so that I can figure how to allocate.

Okay. And then maybe the second question, if you could comment on just sort of the next potential immediate indications. I think you mentioned a few in the prepared remarks just in terms of the indications and then also the timing initiations.

I have a few more questions if you don't mind but just the frequency of DSMB evaluations in the global roxadustat studies and how many more could occur from here.

And then the last question is you mentioned other fibrotic cancers, the fibrosis compounds. What other cancers should we be thinking about beyond pancreatic cancer potentially?

Okay. Let me do it this way. I'll start with the DSMB part and the bundle and then we'll -- Peony and I can take the indications and Frank can do the fibrosis question.

With regard to the DSMB charter, we adhere to the charter, so it's all prospective. And, you know, basically, there is preset prescribed activity each quarter. This goes on for quite a while in the future so much so that I don't know off the top of my head what is the point where it ends.

It's been going on since 2009. Several of the members have been on this committee since that time. So we just view this as part of the work environment. And when I was talking to the chair recently, you know, this -- at this point in steady size, there's a lot of focus on whether there is any small imbalances and things that are completely unexpected because this is the time period where if there's anything really off the wall happening, they try to seize on it.

So it's -- I mean it's pretty rigorous, you know, and I think people, while they believe that roxadustat is well tolerated, they also take this entire exercise very seriously. And so that's sort of the flavor of it.

With regard to the bundle, you know, I know you weren't involved with us at the time, but from the FDA actions in 2011 that resulted in major changes in the use of EPO, until about 2014, I think the entire investment community is pretty bearish on anything involving anemia in part because the Omontys failure and part because the market seemed to be smaller and so on.

And so it was a -- as a matter, of course, it was assumed by everybody we'd be in the bundle and I think that you'd find that all the analysts that did any work assumed that we would be competing a biosimilar or EPO for whatever paltry sum there is for, you know, some fraction of the bundle.

We have had the benefit of very excellent consulting advice including people that used to run CMS and, you know, they have a great deal of knowledge of how to think about these things.

And over time, the consensus built that the Hepcidin effects and our inflammation data where we really don't see any dose increase requirements when it's laid against the inflammation hyper response seen at about 40% of dialysis patients in the US were really high doses of EPO and iron needed.

There is a perception that we might trigger a view that some beneficiaries can benefit from this mechanism and a way that it's not available for current standard of care. And as we've thought about this over time, there have been various meetings and so on and I think that at some juncture this past quarter, I felt that it was inappropriate to allow the bundle assumption, that it would just be unchallenged.

And just -- we just sort of said, look, based on what we've heard so far given that things can change and one doesn't know exactly what will happen and so, you know, and certainly Amgen is out there with all of their lobbying power, nevertheless we felt that the better part of the argument was that we will be seeing several reimbursements in terms of bringing new technology and the perception of the problems with the inflammatory anemia.

So what we really did was just simply modify disclosure to say that it appears that, you know, more likely than not separate reimbursement which is quite a bit different than the bundle assumptions. And obviously, many things need to be proven there so it's not a simple pathway to that all figure out.

But that, Seamus, that's the idea. And let me -- let me stop there on that particular issue and turn to the question of anemia indications. I think we've acknowledged it in the call and marks that we have been looking at other indications of our partners.

Peony, do you want to comment on that at all?

Yes. You know, we always recognize that chronic kidney disease is a subset of many different conditions which leads to anemia. And given the mechanism of action of our drug as well as some of the preclinical work done in various other anemias, we do believe that our drug can be and -- has the potential to be of value in treating other anemias.

And this such work has been carried out over many years within FibroGen. And you heard earlier from Tom about the potential to treat inflammatory anemia in patients with rheumatoid arthritis, lupus, or inflammatory bowel disease.

And we know that ESA becomes less effective when there is inflammation and we know that these are inflammatory anemia are not on ESA label. At the same time, as I mentioned, this is a subset of seven or eight different types of anemia which we continue to -- we continue to evaluate and discuss with our partners. At this time, we will -- we are not -- you know, we will defer the answer about timing until further conversations.

Yes. Okay. So the last element of the Seamus' questions, Frank, as you look at the various fibrotic cancers, what are you excited about beyond pancreatic?

Seamus, I'll clarify our term fibrotic cancer because it extends rather widely to leukemias, for instance, have required a fibrotic stroma versus self-proliferation. And 3019 is actually active in models of acute lymphoblastic leukemia, for instance. So it's actually pretty wider range of cancers we could go after.

Ones that are particularly interesting at this point are glioblastomas but it seemed very nice preclinical data as well as squamous cell lung carcinomas. There's been internal discussion about some of our difficult orphan and GI bleeding disease such as cholangiocarcinomas at this point.

So I think we're really just working through this now. I have the new oncologists on the team that's really digging deep in to our data, so we can really come up with the further development plan and hope to give you updates about this in the future.

Good. Thank you, Frank.

Thank you so much.

Yes. Okay, good. Thank you, Seamus. Good questions.

Our next question is from Tom Shrader with Stifel. Please go ahead. Your line is now open.

Good afternoon. Thanks for taking the question. First quick question on 5200. Everything seems to be about China. Is there no market or have you not -- have you not think there's a market in the US and Europe is cadaveric enough there? Just talk a little bit about that?

So Tom, I think that's a -- that's a very reasonable question. The way that this developed I think that we, many years ago, started the pilot study. It's been in its 7thyear now, I guess we'd move backwards and probably, you know, started preparing the study around 2006, so we -- you know, we didn't know for a while we would be getting.

The occasion that caused the decisions around China was that in 2009, when we began to negotiate with the Beijing development authority which is the entity that controls most of the property around Beijing particularly in the science parks.

We were informed that there was a broad interest most clearly personified by the mayor of Beijing who said that this is really important for China, and that we would like to see you bringing this along with your anemia program as a second development platform.

And given that China does not do cadaveric transplant to any degree of significance, I mean there are some academic sites that do this but it's not very much. And as we've learned about this, there are actually professional arenas where the government only allows blind people to work such and such, for instance, being a masseuse.

So this is a feature of Chinese life where the prevalence is quite a bit higher than in the US, for instance, or in Western Europe. And so as we learn more about this and we learn about the reimbursement system for things made in China for China, we actually be on the realize that the Chinese development opportunity was considerably more compelling than the alternatives in the US and Europe and so on.

And so the general notion of development has been, for the past few years, that looks to the pilot really pivotal study that's required in China which we have been advised is around 75 patients.

And then go from there to developing a necessary support for CE Marking. And so with that step, you move in to certainly the Europe and Latin America and many other parts of the world except the US.

And with the US where in the past, the cadaveric transplants have dominated and only recently has it become apparent that there is a pretty serious problem, viral disease and the continued replacement of the cadaveric transplant to the point where immunosuppressives lose their effectiveness, we begin to see a subset population in the US where there is a compelling unmet need.

And so, you know, this is still seen as a less than a third of the patients in the US so it's not a dominant element but it's significant enough that it gives us a regulatory toehold. So I think that's generally where we'll probably go in the US at some point or another.

We're assuming success in China and the CE Marking and we will be looking at the patients that require transplant every three or four years because calcification occurs due to the viral diseases and they're have been problems with immunosuppressives, so clearly a population that needs an alternative.

So that's been the thinking and I'm sure it seems completely bass ackwards in some ways but given the circumstances of how things develop in FibroGen, there was a time when the offer in China was viewed as very, very compelling to us.

And so we took it up because in part, we wanted the anemia program to be enabled fully and which has happened. So that's the background on that. Is that as helpful?

Yes, yes. Okay, thanks a lot.

Okay. So with that, I think we're completing the Q&A period. Thank you, all, for joining our call on this summer August afternoon. I know you didn't -- any of you had to -- didn't have to do this so we really appreciate your attendance and support. And we look forward to conversations at our next update. Thank you very much.

Thank you, ladies and gentlemen. This concludes the FibroGen Q2 2015 conference call. Thank you all for participating. You may now disconnect.