FibroGen Inc (FGEN) 2016 Q4 法說會逐字稿

Welcome to the Quarter Four 2016 FibroGen, Inc. Earnings Conference Call. My name is Victoria, and I will be your operator for today's call. (Operator Instructions)

Please note that this conference is being recorded. And I would now like to turn the conference over to Karen Bergman. Karen, you may begin.

Thank you, Victoria. Good afternoon, everyone, and thank you for joining this call. Today we are reporting financial results and corporate updates for the fourth quarter and year-end of 2016. The call will be led by Tom Neff, our Chief Executive Officer. Tom will start with an overview of our corporate strategy and execution on product programs in the quarter and the year. We will be joined by Dr. Peony Yu, Chief Medical Officer, who will provide updates on our Phase 3 clinical trials in China, our global anemia program in kidney disease and chronic kidney disease, and then on anemia associated with myelodysplastic syndrome. Chris Chung, Vice President of China operations, will address brand and commercial planning for roxadustat in China. Dr. Seth Porter, Vice President of Fibrosis Therapeutics, will discuss FibroGen's clinical development programs for pamrevlumab in idiopathic pulmonary fibrosis and pancreatic cancer; and Mr. Pat Cotroneo, Chief Financial Officer, who will review financial performance.

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 business matters.

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. For risks and uncertainties regarding our business statements made on the call today as well as factors that may cause differences between current expectations and actual results, we refer you to our Form 10-K for the fiscal year ended December 31, 2015, and quarterly reports, including our Form 10-Q for the period ended September 30, 2016, filed with the Securities and Exchange Commission.

Copies of these filings can be found in the Investors section of our website. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise.

The format for today's call will include remarks from FibroGen's management team, and then we'll open the lines to take your questions.

A webcast of this conference call will be available for replay on the Investors page on FibroGen's website, www.fibrogen.com.

At this time, it is my pleasure to turn the call over to our CEO, Tom Neff.

Thank you, Karen. Good afternoon, and thank you for joining us today on our conference call and webcast. In the fourth quarter and full year '16, we have made significant progress on our roxadustat and pamrevlumab programs. In January, it was our privilege to report roxadustat top line data from our Phase 3 China trials. This year, we expect to report importantly staged clinical developments and regulatory milestones for roxadustat in China, and for pamrevlumab and IPF idiopathic pulmonary fibrosis and in pancreatic cancer, the lead programs we have distilled after many years of clinical research across multiple indications.

Roxadustat's program -- roxadustat is our first-in-class oral anemia agent and global Phase 3 development. We believe roxadustat has the potential to expand the anemia market beyond the current ESA footprint. ESA use in chronic kidney disease, or CKD, patients who are not yet receiving dialysis has declined significantly since 2006 when study results highlighted ESA safety concerns, and the FDA has progressively revised ESA product labels, first in cancer, followed by CKD in July 2011. With these package label restrictions and revisions, ESA use in the United States at the onset of dialysis declined from 30% in 2006 to below 14% in 2014.

An important point here is that ESA use is driven mostly by those patients who are seeing nephrologists. If you think about the CKD patients who are not under nephrology care, only 1.8% of the patients have been treated with ESA at the transition of dialysis.

We believe the anemia non-dialysis CKD patients is generally not addressed because a majority of CKD patients today are not under nephrology care prior to transition to dialysis. Roxadustat not only offers the advantages of access and convenience of an oral therapy but also has the potential to treat anemia without safety and efficacy limitations of ESA to address anemia and CKD. For these reasons, we have taken a systematic approach to building the roxadustat product development program from anemia associated with CKD in dialysis and non-dialysis kind of patients, and now we're expanding into oncology-related anemias.

With regard to roxadustat safety, in February 2017, the Data and Safety Monitoring board or DSMB, which is responsible for safety oversight across our United States and European anemia studies, reviewed our Phase 3 programs and recommended continuation of all trials without protocol modification.

We are incredibly excited about the results from our two Phase 3 trials in China for dialysis and non-dialysis dependent CKD patients. We reported our top line data in January 31 this year. These data represent the results of first pivotal studies for any HIF-PHI anemia compound anywhere in the world. These data are not only confirmatory to the efficacy results we saw in the Phase 2 trials in the U.S., but now offer evidence for roxadustat's potential to overcome inflammation, which has compromised the efficacy of ESAs.

Our study also showed the promise of roxadustat to be statistically superior to the premium-priced EPO products in China manufactured by Kirin for the treatment of CKD anemia and dialysis patients.

FibroGen China is positioned for a productive year in clinical development as well as pre-launch commercial planning for roxadustat. We are on track to complete the 52-week safety assessment portion of the second quarter and to complete our NDA submission in the third quarter of 2017. We have now established a substantial presence in China, which includes [little] manufacturing facilities. Later on, Peony will discuss our global roxadustat program in more detail, and we'll also address our expansion into oncology-related anemias.

Pamrevlumab is a first-in-class fully human monoclonal therapeutic antibody that inhibits connected tissue growth factor or CTGF, a central mediator in chronic fibrotic and proliferative disorder. Due to pamrevlumab's unique activity and the role of CTGF in multiple disease pathologies, we have also taken a systematic approach to evaluate its activity in multiple categories in fibrotic disease, which now supports our ability to prioritize our development programs at high-value indications where there's tremendous unmet medical need.

We've conducted two expert panel meetings in Q4 2016 for each of the IPF and pancreatic cancer programs. For both indications, these experts expressed great enthusiasm for the potential pamrevlumab has shown to provide meaningful benefit for these challenging indications.

With respect to clinical trial progress, we look forward to results in the third quarter from our Phase 2 randomized placebo-controlled study in idiopathic pulmonary fibrosis as well as combination substudies with each of the approved medicines in this category. And we are pleased to report continued progress in our trial in locally advanced pancreatic cancer. Seth will discuss our progress in pamrevlumab and our two most advanced indications later in his presentation.

Regarding corporate updates, let me comment briefly on a patent matter that was resolved earlier this year and about which our shareholders have been wanting to hear. In June of last year, GlaxoSmithKline, or GSK, filed petitions for inter partes review of six FibroGen U.S. patents. IPR is one of the newer procedures for patent challenge that came out of the 2012 America Invents Act and recent reform to U.S. patent law. These patents relate generally to the use of HIF-PHIs to treat anemia and other conditions and to achieve certain effects on iron-related parameters.

In January, the patent and trademark appeal of -- the Patent Trial Appeal Board, or PTAB, of the U.S. Patent and Trademark Office ruled against GSK, denying all six of the petitions and refusing to initiate IPR challenges against any of these FibroGen patterns. We are pleased with these decisions, which we see as validation of our primary role in the field of 50 HIF therapeutics. These rulings are final and non-appealable.

Moving on to finance. I am pleased to report that we ended the year with $342.2 million of cash year-end 2016. This is about 10% higher than what we have estimated earlier in the year and compares to $336.9 million we reported for year-end 2015. And our most recent projection for 2017, we expect cash at year-end to be between $250 million and $260 million. Pat will discuss our financial results for the fourth quarter and full year, and I will wrap up later with our comments today on the 2017 milestones prior to opening the call for your questions.

I'd now like to turn this over to Peony Yu. Dr. Yu, please?

Thank you, Tom. We have an extensive global Phase 3 program supporting regulatory submissions in the U.S., Europe, China and Japan.

In China, our two roxadustat Phase 3 clinical studies for CKD anemia have generated exciting results. In the eight-week double-blind placebo-controlled portion of our CKD non-dialysis study, we saw a highly significant increase in hemoglobin level. As we reported in our press release and 10-K filing, 84% of roxadustat patients achieved hemoglobin response versus zero in the placebo arm. Response is defined as at least 1 gram per deciliter increase in hemoglobin level.

In the 26-week active control dialysis study, patients previously treated with stable doses of EPO commercially available in China were randomized 2 to 1 to roxadustat or to the premium-priced Kirin EPO. After meeting the non-inferiority criterion for the primary efficacy endpoint of change in hemoglobin. Pre-specified step-wise comparison shows roxadustat is superior to Kirin's EPO. Roxadustat achieved a larger mean increase in hemoglobin level than EPO throughout the study period. Please note that during this study, there was an overall increase in average EPO doses in inflamed patient with respect to baseline.

Roxadustat performed remarkably well in the presence of inflammation. In a separate analysis by baseline C reactive protein level, or CRP, a marker for inflammation, the hemoglobin levels in patients with inflammations were lower than non-inflamed patients even though they received higher doses EPO in the comparator arm. In contrast, regardless of inflammation status, roxadustat-treated patients achieved the desired hemoglobin levels with similar dose requirements.

Inflammation is believed to be the main cause of hyporesponsiveness to ESAs in dialysis. Hyporesponsiveness typically leads to higher ESA doses, which have been associated with safety issues. Inflammation is also a major culprit in anemia of chronic disease, including MDS, cancer and autoimmune diseases. The fact that roxadustat was able to correct and maintain hemoglobin levels in patients with inflammation potentially offers us an opportunity to address anemia in a broad range of patients.

We are very pleased about the positive results from both Phase 3 studies in China and look forward to completing our 52-week safety assessment in June. These two studies will be the basis of our China NDA submission in third quarter of this year.

I'd like to briefly comment on the expansion of our roxadustat development program in China, where our next indication is in anemia associated with MDS. Our CTA for Phase 2, 3 trial in the MDS anemia is currently under review by the China FDA. We also plan to develop roxadustat for the treatment of anemia in other cancer-related conditions in China.

Turning to our global programs supporting U.S. and European regulatory submissions in CKD anemia, we are working closely with our partners, AstraZeneca and Astellas, on a total of seven pivotal studies. As you may be aware from AstraZeneca's recent earnings call, we are on track to submit U.S. NDA in 2018. We have updated our target patient numbers in the FibroGen and AstraZeneca studies. These changes reflect updated estimates of the number of patients in each study to achieve necessary accrual of events.

In Japan, our partner, Astellas, is conducting six Phase 3 studies. Descriptions of these ongoing trials are available on clinicaltrials.gov. We are expanding roxadustat development beyond CKD anemia in the U.S. The IND in MDS anemia, which is our first cancer-related indication, has been approved by the FDA. We are working on study startup. Stay tuned.

With that, I'd like to turn the call back to Tom.

Thank you, Peony. Now I'd like to ask Chris Chung to talk about our efforts with AstraZeneca in China to prepare for regulatory milestones and commercialization of roxadustat.

Thank you, Tom. The Phase 3 top line data represents the culmination of years of planning, building out an organization on the ground in China and an unyielding focus on execution. Over the next few months, we will work to ensure that the NDA submission process advances on schedule. This is going to be a very busy year for China, and we're committed to meeting these objectives.

In parallel, we are working and putting resources to work with AstraZeneca's dedicated roxadustat marketing and market access teams to refine the commercialization plan for China. We believe we have a compelling opportunity in front of us to introduce a paradigm shift for how CKD anemia will be treated in China in terms of access to treatment, clinical treatment pathway and clinical outcomes. We have, over the years, invested in developing an extensive network of senior-level key opinion leaders, and we will continue to work with them to characterize the unmet medical need and educate the broader nephrology community about the HIF mechanism of action.

The AstraZeneca market access team has presence in all 31 provinces in China, and we have started to craft a reimbursement strategy, one which we hope will accelerate reimbursement coverage for roxadustat. We are working with AstraZeneca on brand strategy in a manner that differentiates the HIF mechanism from the combination of ESA and intravenous ion, a brand strategy that will also inform our pricing. It is extremely rare for a first-in-class drug to be approved in China before the United States.

The AstraZeneca FibroGen roxadustat team is working to ensure a successful first launch of our HIF-PHI therapeutic. And with that, I now turn the call back to China -- to Tom, sorry.

Thank you, Chris. I would now like to introduce Seth Porter, who heads up our pamrevlumab and Fibrosis Therapeutics programs. Seth?

Thank you, Tom. In 2017, we will report the results of our Phase 2b trial for IPF and complete the treatment period for the Phase 1/2 proof of concept trial for locally advanced pancreatic cancer.

For IPF, we will complete conduct of the placebo-controlled as well as the standard of care portions of the 067 study. We expect to report top line results in the third quarter of this year and hope to subsequently represent them at an international pulmonary meeting. Results of the 049 open-label Phase 2 IPF study, reported in the European Respiratory Journal in 2016, provide us with a reasonable basis for the results we expect to see in the 067 randomized placebo-controlled trial.

We also expect to present this fall data from a mouse radiation-induced fibrosis model in which we compare efficacy of pamrevlumab with pirfenidone and nintedanib. This mouse radiation-induced lung fibrosis model is the same one that previously demonstrated the ability of pamrevlumab to reverse lung fibrosis measured by quantitative high-resolution CT imaging and to improve pulmonary function. Those results, in many ways, predicted the outcomes we observed in the 049 clinical study.

For pancreatic cancer, we expect to complete enrollment and the treatment phase of the 069 study this year. In January, we presented updated results from that trial. Seven of nine subjects who completed treatment with chemotherapy plus pamrevlumab met protocol-defined criteria for treatment response and were considered potentially operable following treatment. Three subjects had complete tumor removal or R0, and one subject had microscopic tumor remaining after surgery, R1. Three were found to have micro metastases that had not been detected at study entry. In contrast, of six subjects who received chemotherapy alone, only one met protocol-defined criteria for treatment response and had complete tumor removal, R0.

Pamrevlumab continues to be well-tolerated with no safety concerns. Differences in overall survival between the subjects treated with and without pamrevlumab look encouraging.

This is consistent with the results of the 028 clinical trial in pancreatic cancer that we published in the Journal of Cancer Clinical Trials in February 2017.

Those published results support a dose-related increase in survival in advanced pancreatic cancer, and that pamrevlumab can be safely combined with chemotherapy.

It's known that for pancreatic cancer patients with locally advanced non-resectable tumors, the median survival is 8 to 12 months. Whereas for patients with resectable tumors, the median survival approximately doubles to 17 to 27 months. Pancreatic cancer experts in our advisory board meeting agreed that if pamrevlumab treatment can improve the resection rate of locally advanced pancreatic tumors, it would be expected to yield a substantial survival benefit and would probably require only a modestly sized pivotal clinical trial to demonstrate clinical benefit. Based on that, we are evaluating design options for a pivotal trial for locally advanced pancreatic cancer.

We anticipate the results from the IPF and pancreatic cancer studies will place us in a strong position to possibly initiate pivotal programs in two indications for which there is considerable unmet medical need.

Thank you for your time today, and now back to Tom.

Thank you, Seth. Pat Cotroneo, our Chief Financial Officer, will now walk through financial highlights for the fourth quarter and full year. Pat?

Thank you, Tom. As announced today, total revenue for the year ended December 31, 2016, was $179.6 million. For the same period, operating expenses were $233.2 million, and net loss was $61.7 million per diluted or $0.98 per diluted and basic share. Included in the operating expenses for the year ended December 31, 2016, was an aggregate noncash portion totaling $40.7 million, of which $32.1 million was a result of stock-based compensation expense. In terms of our total cash balance, we had $342.2 million as of December 31, 2016, as compared to $336.9 million at the end of 2015.

For these purposes, total cash refers to cash, including cash, cash equivalents, receivables, investments consisting primarily of investment-grade corporate debt, and restricted time deposits relating to our building lease.

On our balance sheet, the category of long-term investments consists entirely of investment-grade corporate debt with remaining maturities of up to two years.

For Q4 and full year 2016, our financial results show the effect of reaching our funding cap in Q4 2015 with AstraZeneca. For roxadustat U.S./RoW development costs. Most notably, we no longer pay the 50% portion of our partners' development cost. Plus we are now able to invoice 100% of agreed-upon roxadustat development cost instead of 50% before the cap was reached.

These two changes resulted in a net reduction in cash burn of approximately $90 million for 2016. This amount represents the pro forma reduction in 2016 cash burn as if the 50-50 applied to the full year of 2016. Looking to 2017, we are currently projecting year-end cash in the range of approximately $250 million to $260 million.

I will now turn the call back over to Tom.

Thank you, Pat. As promised, I'd like to preview a number of our upcoming [conference] in 2017. Milestones for roxadustat include, in China, we anticipate completing our NDA submission in anemia associated with CKD in both dialysis and non-dialysis dependent populations in the third quarter of '17. Our Phase 2, 3 CTA for anemia associated with MDS is under active regulatory review by the CFDA, and we expect to initiate the study by the end of the third quarter.

For roxadustat development in the U.S. and RoW, we expect that NDA submission in 2018, based on our large ongoing global CKD anemia program subject to the partnership's most recent estimates of the number of patients more and more recent events to meet the necessary statistical requirements.

In our MDS trial, given the recent acceptance of our Phase 3 study design by FDA, we are preparing for a midyear study initiation. For pamrevlumab, we expect top line data in Q3 from our IPF placebo-controlled [efficacy] trial, where we expect to see an exciting inflection point for this program. In our locally advanced pancreatic cancer indication, we expect to complete enrollment in May and to develop a regulatory strategy by year-end.

Operator, if you would open up the call to Q&A?

(Operator Instructions) Our first question comes from Michael Yee from RBC Capital Markets.

Two questions. The first is on roxadustat. Can you comment on how big the change in enrollment is now? How many patients or what percentage increased in size? And the second question is, have you talked to the FDA about these changes? What is the feedback on amending the protocol? What have they said about it? And what's the feedback on that?

Okay. Thank you, Michael. So Peony, go ahead and address the change in enrollment, please?

Okay. So these numbers, of the five studies being run by FibroGen and AstraZeneca, four of them already have a change in target patient numbers that are already reflected on clinicaltrials.gov, and one of them is in the process of being changed. AstraZeneca study 001, also known OLYMPUS, new target number is 2,700 patients. That changed from 2,600. Rockies are also known as study 002, the dialysis study. It's been -- new target number is 2,100, a change from 1,425.

The one that has not appeared yet, which is the FibroGen-sponsored incident dialysis study, 063. New number is 900, changed from 750. FibroGen-sponsored study, 064, in patients on dialysis. New number, 820, a change from 600. FibroGen non-dialysis study, 060, new target number is 900, a change from 600, which, for all three of these FibroGen-sponsored studies, I believe, Mike, you are aware that we had met our original target enrollment goal quite some time ago, and we have continued to enroll patients.

Thank you, Peony. With respect to updates and a process we're planning on with FDA, the updates would be that in November, we had a very extensive advisory board, one over two days, with a number of senior FDA reviewers who are now retired and very expert in these matters as well as statisticians. That was followed in December by a week of intensive meetings between the companies as well as in January. If I had to characterize what has happened, the net effect of the advisory boards were to leave the impression with the team of really an increased sense of optimism about the overall picture. I think across the board, everybody felt pretty good about what we were hearing and what's going on.

With respect to the FDA, we do not yet have an ability to comment on that, and we won't say anything until we've had the full interaction completed for fear of prejudicing any discussion. So that's the update.

Generally, when would that be? Later this year, midyear, summer? That will so help.

It will be later this year, and we have to see there are people that are in the throes of writing briefing materials now, so very large process. And the complexity of the process actually slows things down a little bit. But everybody's very focused on getting there.

And our next question comes from Terence Flynn from Goldman Sachs.

This as Cameron, on for Terence. Maybe just one quick one, can you remind us of the status of the ongoing European patent dispute you have with Akebia?

So in Europe, we have four active oppositions, and two of them are essentially ongoing still and two are under appeal. The terms of the appeal process, the appellant process are that the patents stay outstanding in full force, and the expectation is three to four years until the appeals will be heard. I think that's about all we're willing to say there.

And our next question comes from Geoffrey Porges from Leerink Partners.

Just a few quick questions, if I may. First, Chris, could you talk about your expectations for what the likely the timing of the review cycle will be with the China FDA? And then what we should expect in terms of the timing for achieving reimbursement or at least some degree of reimbursement in that market?

And then secondly, Tom, should it now be our expectation, having gone through the IPR, that GSK is likely to infringe FibroGen's patents -- HIF patents in the future?

And then lastly, for Seth, could you talk about what the path -- the regulatory path might be for pamrevlumab in the IPF and pancreatic cancer indications? Do you have confirmation that resectability is an end point in pancreatic cancer, and might the Phase 2b data be sufficient for filing in IPF? And sorry for all the questions.

Okay. So Chris, go ahead and take on parts that Geoff asked about China.

Sure. So Geoff, to your first question, which is the expected turnaround time for the NDA review cycle by the Chinese CFDA. On the very, very aggressive end of things, we would like to think that we could move the dial to a 12 to 15 months time frame. We're allowing for up to 18 months so we're expecting NDA approval by the end of 2018. As you know, the Chinese FDA has put together extensive reforms starting in 2015 that highly favors innovation. We're hoping to take advantage of that to move forward as fast as possible.

Second question you had is what is the expected timing of reimbursement. As we all know, the National Reimbursement Drug List was just announced. It's anyone's guess as to when this cycle will come around again. As we all know, the last time before 2017, it was 2009. However, we've been informed by our AstraZeneca colleagues that the Chinese government is contemplating different types of innovative mechanisms such as a rolling reimbursement clock.

So right now, George (sic - "Geoff"), unfortunately, it's a little bit too early to tell. And for competitive reasons and not to compromise the regulators, we prefer not to discuss more extensively at this point. But later, when we see more, we'll most certainly come back to you.

With regard to the GSK patent matter, it is not our policy to speculate whether or how another party might view our portfolio. These things are very complicated. There's all kinds of issues. The various patent prosecution has gone on for over a decade so we can just tell you the facts. And the important facts here are, we're not spending a lot of money this year on six IPR processes.

Seth, do you want to go ahead and --

Sure. Hi, Geoff. Thanks for your question. With regard to IPF, our regulatory path, it's really going to be determined largely from the results from our 067 study that we'll read out in Q3. And it really depends upon the effects size that we see in terms of the sample size it will need for pivotal trial and what we want to do in terms of comparator arms. So we're certainly working through a number of potential scenarios and modeling out potential sample sizes. But I think it -- we have to wait until we get the results from that randomized trial before we make any kind of definitive statements.

With regard to locally advanced pancreatic cancer, interesting question about whether the current study would be sufficient. We don't think so. It's still a relatively modestly sized trial. We're very encouraged by the results that we've seen. And if you recall, I don't know if you saw the ASCO GI poster, but we're seeing some signs of improvements in survival.

But based on those results, as I said in my comments, we're getting guidance that if, in fact, we can continue to see that difference between pamrevlumab plus chemo versus chemo alone that should lead to substantial improvement in survival. So we will certainly suggest that, that resection be a surrogate endpoint, but our expectation at this point is that we may have to show survival either as a primary endpoint or as a commitment after accelerated approval. So we're working again through those scenarios as well. But we think that there's a very viable path forward, in any case.

And our next question comes from Joel Beatty from Citi.

Could you tell us more about the impact of the finding in the roxadustat trial in China compared to EPO that showed superiority? What does that mean for the potential of roxadustat in China? And then also is there any read-through to the U.S?

That's a good question, and I'll try to answer it, Joel. The market in China is currently is involving numerous EPO compounds, most of which were knockoffs, not biosimilars. And the Kirin EPO, which is priced at about three and a half times the others is been seen as the "premium EPO." We use the Kirin EPO in the control arm of our study because we thought it was the best single test in light of what council from the regulators was.

The result, as it relates to sort of superiority, let me point out that the Kirin arm, the Kirin EPO arm for patients, the PIs were allowed to increase dose. And if you look in our 10-K filing, you'll see that they actually did increase dose to try to stay in that target range of 10 to 12. So there was no restriction on dose.

However, to be honest, we were very surprised at the superiority on efficacy side. We didn't expect any non-inferiority so that's the kind of thing where you're just sort of amazed at what happens. We do have additional data, which I also think is in the filing relating to patients that have high inflammation, which is CRP above 5 versus low inflammation. And you'll see that with roxa, the high inflammation patients were -- actually, the one arm out the four that responded the best. And if you look at the dosing over the term of the study, the dosing actually went down as the PIs tried to stay in the range of 10 to 12, which they successfully did across the board. And by contrast with the EPO, the high CRP arm did very poorly. It was the lowest-performing of the four arms in the study. And the dosing was steadily increased. It looks like -- I can't give you an exact number. It looks like about 30% increase over the entire study given that subset.

As it relates to the superiority aspect in efficacy, I don't expect that has much impact on the U.S. By contrast, in China, it's important to remember that there are very tight restrictions in many ways for, first off, in China, there is no public source of transfusion. So most red cells in the U.S. come from transfused blood, probably 95% of them do. And in China, this is really not part of the standard of care medicine, and we've been instructed by our regulators not to include that in control arm assumptions in the study in another studies.

With respect to EPO, in the early years, the prices were very, very high, and it took much disagreement between the government and the original innovator, which was Amgen, to finally get to something that resembled equilibrium. And what we see is that the knockoffs were brought into the market by the government. They are largely products that are promoted and sold by state-owned enterprises, and only one is really a biopharma product.

And with regard to the potential and so on, what we noticed is that at the hospital level, the budgets for these kinds of products require provincial level approval. And there are very tight restrictions on the use of EPO beyond dialysis, where it is used to -- as the government's building out the dialysis system, and most other areas is very limited. And so as a result, there's a large opportunity in China to be another source of red cell for standard of care medicine. So I think that's all I should you probably say for now, but I think you get the general idea.

Okay, yes, thank you for the explanation. And I have one other question, a housekeeping question. Are there any milestone payments included in the 2017 cash guidance?

There's one milestone payment, which is $15 million associated with the NDA filing in China.

And our next question comes from Kennen MacKay from Credit Suisse.

This is Slanix Alex, calling in for Kennen. Thanks for taking the questions and congrats on all the progress. I had a quick question on the upsizing of the trials for roxadustat. And I apologize if we missed this from earlier, but could you just go into -- add some color as to the rationale for the upsizing?

Let me have Dr. Peony Yu address this. Peony, go ahead.

Okay. Hi. As for the patient numbers, these numbers are also reflected in our new 10-K, which was filed today. As for rationale for the upsizing, this was primarily to optimize our program in the dialysis patient population. We are adding to patient numbers to ensure sufficient number of incident dialysis patients from the U.S. And in the -- and there's also, as you see, the number of patients we're adding to the non-dialysis is looking -- is fairly small when you -- only a few hundred patients when you look at the overall scope of the program. And this is overall optimization for the right patient mix as well as to optimize our timeline to achieve the patients that we need, patient exposure we need for meeting the safety end point requirements.

And I had a second question on IPF, perhaps for Seth. I was wondering if you could provide some color on some of the differences between the HRCT scans that have been done for some of the marketed or IPF drugs versus what is -- has been done for pamrevlumab and what we might be expecting in the Phase 2 update?

Yes, thanks for your question. It's a good question, and an important one. So for what we've done in the previous open label Phase 2 trial and the trial that we will be finishing up this year, we are doing quantitative high-resolution CT imaging. So we're not just looking at qualitative assessment by eye, but we're using validated computer systems to quantify the extent and the changes in fibrosis in the IPF patients. And importantly, we stipulate in our trial, unlike others, that there has to be at least a minimum amount of fibrosis in our IPF patients so that there -- if there is reduction in fibrosis, we can see it and measure it.

As far as we know, what's been done in the other trials, we've always seen is the sort of the typical qualitative assessment of HRCT imaging, which is really, at best, semi-quantitative assessment of changes in fibrosis. And what we've learned from our trial and there is more and more information being published on it, the computer is a far more reliable assessment of extent in change than is the human eye. And that -- we know that other companies have been conducting studies using quantitative HRCT, but we haven't seen any results. So we are the only company who has reported results in terms of quantitative HRCT in IPF and changes in fibrosis accordingly.

It's also important to point out that our primary endpoint certainly in this randomized Phase 2 study is, like the others, changes in [FTC] percent predicted. So that's our primary endpoint, and that would be the basis of decision-making going forward for pivotal trials. But the -- we think that the quantitative HRCT has indicated, that at least in some patients, pamrevlumab is, in fact, disease-modifying.

Got it. And just one follow-up question, I saw that the potential shelf filing have -- we saw that come through. Just wanted to get a sense from you overall what any potential funds from this might be used for?

In our corporate planning process, we look at scenarios going forward. And what is happening is, both in China and in the U.S., with the antibody program, there are data-driven opportunities that are emerging and regulatory feedback that has been very encouraging and very serious where we might choose to end up investing more in various areas than what we planned originally at the time of the IPO.

If you recall at the time of the IPO, the U.S./RoW anemia program was actually fully financed, and so we didn't have any going-forward financing plans. However, in this past year, the overall process, we realized that there are possibilities here of need for finance. And as a result, we studied the options, and choices were made, and the shelf filings reported now actually was agreed upon a couple of months ago. I think that's all we'll say for now.

And our last question comes from Tom Shrader from Stifel.

To go back to the last question, I just wanted to make sure, in your own incident dialysis trials, are all those trials done in places where people can give as much ESA as they want? Or will you run into places where people could stop giving ESA?

So that's a good question. There's a public order from FDA in 2012 asking for incident dialysis patient enrollment in prior times. It wasn't done, so you don't have any studies sort of the early part of dialysis initiation, and attempts to correct hemoglobin and what the results were and so on, so FDA wants to see that.

As it turns out, we've been able to enroll incident patient outside the U.S. and in the U.S. But with regard to the categories that are of particular concern in the U.S., this is the portion of the maintenance dialysis population that uses very high levels of EPO and iron support, the so-called hyporesponsive patients, we have been informed by CMS in 2015 that they viewed about this 35% to 40% portion of the maintenance pool as not having adequate standard of care, and we were informed that if it turns out that our data supports treatment favorable results for those patients, that we would not be expected to be in the bundle but be separately reimbursed.

As a result, it's very important for us to plumb through the incident population in the U.S. I think it's fair to say that the limitations on use elsewhere produce fewer patients that can survive on dialysis when they have chronic inflammatory disorders. So there's more morbidity, mortality at the time of initiation, or people don't even go on the dialysis because they can't respond to ESAs at normal doses. And I think that narrative is an important issue, and I know from the interactions with CMS, people that the interest in the possibility that roxa approaches this entirely differently and because of regulation of [POSEIDON] and the no impact to inflammation may be a unique solution that's sort of great importance in the U.S. So we're all very focused on getting the largest number of incident patients possible in the U.S. because of that. So your question is very insightful, Tom.

A quick follow-up to Chris. Chris, does this give you hope that there's a significant self-pay market in China because of people who just couldn't respond to ESA?

So yes, I think we're very optimistic based on the superiority that Peony presented and is illustrated in the 10-K, that we have a very strong basis of differentiation for not only the patient population that has not responded in the past but also people who have historically been willing to pay for a premium EPO. So yes, we're very confident about the self-pay market, even more so that we have so historically.

And there are no further questions at this time.

Thank you all for joining our call today. We are excited about and committed to 2017 regulatory and clinical objectives for our lead programs. With China Phase 3 data serving as a very positive start to this year, we are looking forward to sharing more news in our late-stage progress in China for roxadustat, in addition to staying focused on advancing our Phase 3 programs worldwide. This will also be an important year for pamrevlumab as we complete the Phase 2 enrollment and treatment portion of the trial and locally advanced pancreatic cancer patients and report top line data from our Phase 2 trial in idiopathic pulmonary fibrosis. We are constantly building value in our pipeline but executing on multiple indications in each of our programs while leveraging our partnerships and managing our resources. It goes without saying that we are dedicated to demonstrating the value of our pipeline programs and the potential to address serious gaps in the treatment of chronic and life-threatening conditions.

I'd like to thank the FibroGen team in the U.S. and in China for their hard work and our shareholders for sharing this vision and their continued support. I'd like to wish everyone a good afternoon. Thank you.

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