FibroGen Inc (FGEN) 2022 Q2 法說會逐字稿

Good day and thank you for standing by. Welcome to the FibroGen's Second Quarter 2022 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Michael Tung. Please go ahead.

Thank you, Bella, and good afternoon, everyone. I'm Michael Tung, Vice President of Corporate Strategy and Investor Relations at FibroGen. Joining me on today's call are Enrique Conterno, our Chief Executive Officer; Dr. Mark Eisner, our Chief Medical Officer; Juan Graham, our Chief Financial Officer, Dr. John Hunter, our Chief Scientific Officer; Thane Wettig, our Chief Commercial Officer; and Chris Chung, our Senior Vice President of China Operations.

The format for today's call includes prepared remarks from Enrique and Juan, after which we will open up the call for Q&A. I would like to remind you that remarks made on today's call include forward-looking statements about FibroGen. Such statements may include, but are not limited to, our collaborations with AstraZeneca and Astellas; financial guidance; the initiation, enrollment, design, conduct, and results of clinical trials; our regulatory strategies and potential regulatory results; our research and development activities; commercial results and results of operations; risks related to our business; and certain other business matters. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in FibroGen's filings with the SEC, including our most recent Form 10-K and Form 10-Q. FibroGen does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. The press release reporting our financial results and business update and a webcast of today's conference call can be found on the Investors section of FibroGen's website at www.fibrogen.com.

With that, I would like to turn the call over to Enrique Conterno, our CEO. Enrique?

Very good. Thank you, Mike, and good afternoon, everyone, and welcome to our second quarter 2022 earnings call. On today's call, I will provide a high-level summary of the most important accomplishments and developments in the second quarter of 2022, Juan Graham, our CFO, will then review the financials, after which we will open the call for your questions.

Starting with Slide 3. FibroGen is positioned to create significant value for patients and shareholders by executing on our 3 areas of focus: #1, accelerating the development of pamrevlumab in 3 indications with significant unmet medical needs, idiopathic pulmonary fibrosis or IPF, locally advanced unresectable pancreatic cancer, or LAPC, and Duchenne muscular dystrophy, or DMD; #2 ensuring commercial success of roxadustat in patients with chronic kidney disease outside the U.S., while continuing to explore our path forward in the U.S.; and #3, increasing our research productivity to advanced novel programs that leverage internal expertise and accessing external innovation for additional pipeline opportunities.

Let's move to our clinical trials, beginning with pamrevlumab on Slide 4. Pamrevlumab is a wholly-owned asset in Phase III clinical trials for 3 high-value indications: IPF, LAPC, and DMD. Each one of these diseases represents an important unmet medical need and each constitutes a significant market opportunity. As we recently announced, during the second quarter, we completed enrollment of the LELANTOS-2 Phase III clinical trial of pamrevlumab in ambulatory patients with DMD. This brings the number of fully-enrolled pivotal pamrevlumab to 4: the ZEPHYRUS-1 trial in IPF, the LELANTOS-1 and LELANTOS-2 trials in non-ambulatory and ambulatory DMD, respectively; and the LAPIS trial in LAPC. Enrollment continues in our second ZEPHYRUS Phase III study in IPF, and we look forward to updating you as the trial progresses.

Moving now to locally advanced pancreatic cancer. As previously discussed, we set a very high bar for event-free survival that would have enabled us to file for accelerated approval. An independent interim analysis of event-free survival in the LAPIS Phase III study was conducted in the second quarter. Based on the interim analysis, we will not be filing a BLA for accelerated approval. As planned, the study will continue to its primary endpoint of overall survival with top line data expected in the first half of 2024. It is very exciting to be expecting data readouts from 4 pivotal Phase III trials in 2023. The ZEPHYRUS-1 Phase III trial in IPF mid-2023; the LELANTOS-1 and LELANTOS-2 Phase III trials in DMD, in the first half of 2023 and the second half of 2023, respectively; and the MATTERHORN Phase III trial of roxadustat in MDS in the first half of 2023.

I'd now like to spend a few minutes highlighting our perspective on the significant commercial opportunity we see with pamrevlumab in each of the 3 disease areas on Slide 5, beginning with IPF. With a diagnosed prevalence of approximately 330,000 patients across the U.S., EU, China, and Japan, IPF represents a significant opportunity, with the 2 approved IPF therapies generating almost USD4 billion in net revenue in 2021. Despite this market size, there remains significant unmet need with these 2 approved therapies, as characterized by continued disease progression and challenging tolerability. There is sentiment in the IPF community of limitation with the current therapies and a desire for additional therapeutic options.

If the Phase III ZEPHYRUS program produces similar results to the Phase II PRAISE trial, we believe pamrevlumab has the potential to help a sizable number of patients with IPF and be a very significant medicine for FibroGen. In the middle column, you can see the locally advanced pancreatic cancer opportunity. Pancreatic cancer represents one of the largest unmet needs in oncology, given that diagnosed prevalence of over 90,000 patients across the major regions combined, with a low 5-year disease-free survival rate of around 10%. There have been limited treatment advances in the nonmetastatic setting over the last 2 decades with immune-oncology therapies failing to demonstrate survival benefits over the current standard-of-care. There is limited late-stage development activity in nonmetastatic pancreatic cancer, which creates a meaningful commercial opportunity for pamrevlumab in LAPC if it can demonstrate a significant improvement in overall survival.

In addition, the pancreatic cancer action networks Precision Promise adaptive trial platform evaluating pamrevlumab in combination with standard-of-care for patients with metastatic pancreatic cancer continues to progress. And finally, in the third column, we wrap up the pamrevlumab market section with a snapshot of the DMD opportunity. Given the devastating nature of DMD and the relentless progression of the disease, we're hopeful that the LELANTOS Phase III program can lead to an approved therapy that is desperately needed by the DMD community.

While the currently approved exon-skipping therapies produce an increase in the dystrophin levels, they are targeted to a small proportion of DMD patients. There is a clear need for therapies that can attenuate disease progression by targeting the downstream pathological changes to improve muscle function and prolonged ambulation. We believe the antifibrotic mechanism of pamrevlumab may be a solution that can help these patients and their families.

Now let's move to roxadustat on Slide 6. Roxadustat continues to be approved in additional countries and was recently approved in Mexico and South Africa. It is now approved in China, Europe, Japan, and numerous other countries for the treatment of CKD patients on dialysis and not on dialysis. Evrenzo has an important first-mover advantage in the EU relative to other HIF-PH and Astellas recently received positive reimbursement decisions in the U.K., Finland, Slovakia, and Sweden. We believe the anemia of CKD opportunity in Europe is significant. Our initial uptake has been slower than expected in the EU countries where Evrenzo has launched. The early feedback from healthcare providers prescribing Evrenzo has been positive. As noted earlier, we continue development of roxadustat in MDS with the partners AstraZeneca and Astellas.

Moving now to China. Roxadustat continues its strong performance. As you can see on Slide 7, we are reporting second quarter total roxadustat net sales in China of USD53.1 million by FibroGen under joint distribution entity compared to USD52.8 million in the second quarter of 2021. This was driven by an increase of over 80% in volume offset, benefiting from the price reduction of the NRDL. We continue to expect roxadustat net sales growth for the full year in China, driven by significant growth in volume. FibroGen's proportion of roxadustat net product revenue in China was USD23.3 million for the second quarter on a U.S. GAAP basis. Juan will elaborate further in the financial update.

Turning now to the updated external market data on Slide 8. Roxadustat continues to be the #1 branded treatment for anemia of CKD, as measured by the value share in the category, which includes all ESA products and roxadustat. We expect this category leadership to continue as roxadustat volume continues to grow at a fast pace. Next, Slide 9 provides a snapshot of roxadustat unit growth as indexed to December 2020 on the chart on the left as well as year-over-year growth in the table on the right. Of note there is a significant unit growth of roxadustat, while the leading ESA brand is slightly up, reflecting the anemia of CKD market expansion that has been driven by roxadustat since its original NRDL listing in 2020.

I will now turn the call over to our CFO, Juan Graham, for the financial update. Juan?

Thank you, Enrique. Before jumping into my financial remarks, I would like to highlight the remarkable effort by our team in China that despite COVID lockdown challenges, they continue to put patients with CKD anemia at the forefront of everything they do, enabling the outstanding financial results for the quarter. As mentioned by Enrique, we continued to build momentum on our clinical trial execution and enrollment for pamrevlumab. I also want to take some time to thank our colleagues for their day-to-day energy and passion to move our clinical trials forward, which we hope will have a significant impact on patients suffering from idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer, and Duchenne muscular dystrophy.

Now, getting into our financials. Total revenue for the quarter was USD29.8 million compared to USD24.4 million for the same in 2021. This represents growth of 22% quarter over quarter. Breakdown of revenue sources is as follows: we recorded USD23.3 million of net product revenue for roxadustat sales in China compared to USD13.4 million in the second quarter of 2021. During the quarter, we also recorded development revenue of USD5.5 million associated with co-development efforts for roxadustat with our partners as compared to USD19.6 million during the second quarter of 2021. Given the stage of roxadustat development and as anticipated, we expect a reduction in co-development revenue in the coming quarters. Finally, we recorded USD1.1 million in drug product revenue for roxadustat bulk drug or active pharmaceutical ingredient sold to Astellas as compared to a negative USD8.6 million in the same period last year.

Diving deeper into the operational results of our roxadustat business in China. Total roxadustat net sales from the joint distribution entity, jointly owned by AstraZeneca and FibroGen, or JDE, was USD53.1 million this quarter compared to USD52.8 million in the second quarter of 2021. It is worth noting that this quarter sales include a one-time gross-to-net adjustment, resulting in a net sales reduction of USD3 million related to distributor adjustment due to the new NRDL price. Excluding this impact, underlying roxadustat sales growth versus Q2 2021 was 6%. Further, this sales performance is the result of a significant volume increase of over 80% offsetting the 2021 NRDL price renewal. As I previously mentioned, the growth experienced by our China operations continues to be strong and in line with our expectations of year-over-year growth in sales.

Moving from total roxadustat net sales in China, FibroGen's net transfer price from sales to the JDE was USD18.2 million for the second quarter, consistent with the 30% to 45% range of the JDE's roxadustat net sales, which we have continuously guided. During this quarter, we released USD1.5 million from deferred revenue due to the change in our future estimates as per U.S. GAAP as we have communicated in the past, the deferred revenue balance in FibroGen China fluctuates based on management estimates of future revenue. It is worth highlighting that we expect further release of deferred revenue in future quarters. As a result, FibroGen recorded USD19.7 million in net revenue for the quarter from roxadustat sales to the JDE and USD3.5 million of direct-to-distributor sales from FibroGen China.

Making our way down the P&L. Operating costs and expenses were USD108 million compared to USD158.2 million for the second quarter in 2021. This decrease in operating costs is driven by a one-time charge of USD25 million related to our partnership with HiFiBiO incurred in the prior year period. Lower R&D expenses with our Phase III clinical trials, including drug supply costs associated with our pamrevlumab programs and overall cost management efforts in our infrastructure despite inflationary pressures. During the second quarter of 2022, net loss was USD72.6 million, or USD0.78 net loss per both basic and diluted shares as compared to net loss of USD134 million, or USD1.45 per basic and diluted shares for the second quarter last year.

By June 30th we reported USD517.6 million in cash, cash equivalents, investments and accounts receivable. We estimate our 2022 ending balance of cash, cash equivalents, investments, and accounts receivable to be in the range of USD330 million to USD360 million. This is a significant improvement to our initial 2022 ending cash guidance. This improvement has been driven through execution, enhancements, unlocking efficiencies, as well as investment prioritization throughout the organization. As I have mentioned in prior quarters, we believe we're appropriately financed through key initial pamrevlumab data readouts, and we are privileged with a wide array of options to consider as we continue to look for opportunities to strengthen our cash position over time.

Will conclude my financial remarks by mentioning that today we are refreshing our S-3 shelf registration statement and have filed a prospectus supplement for an at-the-market or ATM equity offering. We have no near-term plans to utilize the ATM. We view this as good corporate housekeeping and financial management.

Thank you. And now I'd like to turn the call back over to Enrique.

In closing -- and thank you, Juan -- we remain committed to advancing pamrevlumab as a potential first-in-class medicine in Phase III development in 3 indications with significant unmet medical needs: idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer, and Duchenne muscular dystrophy. Notably, we expect top line data in 2023 from pamrevlumab, ZEPHYRUS-1 Phase III trial in IPF and the LELANTOS-1 and LELANTOS-2 Phase III trials in non-ambulatory and ambulatory DMD, respectively, as well as roxadustat MATTERHORN Phase III trial in MDS. Roxadustat continues to perform very well in China. Our partner, Astellas, is moving forward with commercialization of roxadustat in Europe. And in addition to the recent regulatory approvals, we have additional regulatory submissions under review in other geographies.

We continue to have a strong financial position with USD517.6 million in cash, and expect to end 2022 with USD330 million to USD360 million in cash. Additionally, we have multiple options to consider to further strengthen our balance sheet to ensure our long-term success. Now I would like to turn the call back to the operator for questions. Bella?

(Operator Instructions) And our first question comes from the line of Michael Yee with Jefferies.

We had the 2 questions. Appreciating the LAPC study past the initial analysis and it's going to continue, can you tell us if the IPF ZEPHYRUS-1 study has any interim or what can you say about what you're looking at, is DSMB looking at it, or is there any interim on that study? And with the DMD studies as well that are reading out, what can you say about interims on those studies as well?

I'm going to ask Dr. Eisner to answer your questions.

The answer is no. There's no further interim analysis for any of the studies, including IPF or DMD. All of them, of course, have independent DMCs to monitor safety, but there are no planned interim analyses.

Okay. And one final question as a follow-up. With the DMD studies, appreciating these are novel endpoints and this is a untraveled path, have you talked with FDA on these endpoints and what you need to show and what data is required there to be deemed a successful study?

Yes, so we do have endpoints for both the non-ambulatory and ambulatory studies. We have discussed those with FDA. The performance of the Upper Limb score is the endpoint for the non-ambulatory, and for ambulatory it's the North Star Ambulatory Assessment. These are standardized measures for both types of DMD patients. So we expect that if we demonstrate efficacy based on these endpoints that there would be a path forward for filing an approval. And your next question comes from the line of Annabel Samimy with Stifel.

This is Jack calling in for Annabel. For pam, could you provide a little more color on how we should think about the IPF opportunity in the context of the current treatments available? What background treatments are allowed in those trials? And how you expect to eliminate the noise around that?

Very good. And I'm going to ask Mark to discuss our trial design for IPF and Thane to share a bit about what we've learned about the opportunity that we would have with pam.

All right. So for the ZEPHYRUS Phase III program of pamrevlumab, it is placebo-controlled trials of pam versus placebo for the treatment of IPF. Patients are not to be on background therapy when they enter the trial. We do allow both treatment-naive and treatment-experienced patients on the trial, but when they enter the study, they're not on either pirfenidone or nintedanib, so it's a monotherapy trial design. Thane?

Yes. So as we think about the commercial opportunity, I think there's a couple of things to keep in mind. First is that we were able to replicate in our Phase III ZEPHYRUS program what we've seen in the Phase II PRAISE trial. We would expect an indication for pamrevlumab for the treatment of patients with IPF. As we have investigated the current state related to the current standards of care, it's pretty clear, and this is based upon published literature, that given the tolerability challenges associated with both Ofev and Esbriet, upwards of 40% to 50% of patients who start on either of those therapies have stopped taking it by the end of the first year. And so there's a significant unmet need, not only as it relates to disease progression, but really as it relates to keeping patients on therapy. And, again, if we reflect on the PRAISE Phase II data and we look at the tolerability profile, while not head-to-head against either Ofev or Esbriet, we're pretty confident that we've got a product that not only demonstrated a very significant efficacy but also a tolerability profile that we think could lead to differentiation relative to the 2 current available therapies.

And your next question comes from the line of Andy Hsieh with William Blair.

Congratulations on the very robust China launch or continued China launch and also the clinical progress with pamrevlumab. I have 2 questions, both on pamrevlumab. So the first one has to do with the futility analysis from the LAPIS study. I'm just curious about how derisking is that, the futility analysis. So is that kind of like a garden-variety hazard ratio greater than 1 or it's more intricate than that? And also when looking at the futility analysis, is that based on EFS or OS?

And my second question has to do with the -- also the LAPIS study design. I noticed that in 2019 when the trial was first initiated only gem-Abraxane was included. Subsequently FOLFIRINOX was added. And so I'm just trying to get an appreciation about how the incorporation of FOLFIRINOX might affect the primary analysis down the road.

Andy, I'm going to have Mark answer both of your questions on the futility analysis for LAPIS and then on the incorporation of FOLFIRINOX as background -- accepted background therapy for that trial.

Sure. So the independent statistician conducted an analysis of event-free survival and that was actually to look for efficacy that could have supported an early accelerated filing. So based on that analysis, we're moving forward with the overall survival endpoint as planned, which was and remains the primary endpoint for the trial. So it wasn't really a futility analysis as much as it was an early look at efficacy based on the surrogate endpoint of event-free survival.

Now recall we'd said previously that we saw this as a very high bar to cross over, and we thought it was unlikely that we would hit the event-free survival but given that just very high unmet medical need in pancreatic cancer and the desperate need patients have for therapy, we did put this interim EFS analysis in place. But we are moving forward with the OS, which was our base case and what we were planning.

In terms of the background chemotherapy, you are quite right. The initial design was a gem-nab and now it allows -- it also allowed for FOLFIRINOX as well. So about 1/3 of the patients I think are on FOLFIRINOX as a background chemotherapy. The rationale is that this is a commonly prescribed chemotherapy regimen. It's particularly favored by oncologic surgeons. So we thought it'd be important to allow both of these commonly used backbone chemotherapy regimens into the trial of pam versus placebo on top of backbone chemotherapy. So we'll be able to look at both the overall population and the subgroups with both of the individual chemotherapy backbones.

That's very helpful.

Your next question comes from the line of Yaron Werber with Cowen.

This is Brendan on for Yaron. Just a couple of quick ones on DMD from us as well. I guess looking ahead to those readouts next year and maybe also the evolving treatment landscape that I know you acknowledged in your prepared remarks that I guess are more so for the specific DMD genotypes. First, are you all tracking the different subtypes of patients in your study and the different background therapies they're on? Can you just remind us do you require them to come off of maybe some of the exon-skipping therapies? And related to that, based on your conversations with regulators up to now, do you expect any additional studies might be necessary to incorporate pamrevlumab into the current paradigm maybe where there are genetically targeted therapies available? And maybe just let us know if that's something you're considering moving forward.

Very good. I think those are questions for Mark. Mark, could you address the questions around DMD?

Sure. So both LELANTOS-1 and LELANTOS-2 patients are on background corticosteroids as per standard of care, but they're not on exon-skipping therapies or other gene therapies, so those are the exclusion criteria for our trial. And then in terms of your question about will additional studies be necessary for approval, we don't think additional studies would be necessary for approval. We think the LELANTOS-1 and LELANTOS-2 either individually or together could serve as the basis for an approval for DMD. There are, of course, other interesting clinical questions that we are thinking about that we could be answering down the road, but those would not be necessary for the initial approval.

And your next question comes from the line of Paul Choi with Goldman Sachs.

I had one question on the commercial side, perhaps for either Enrique or Chris. Just as you think about the impact from COVID during your Q2 performance, can you maybe just quantify for us how many patients or any slowdown in treatment you may have observed and how you're thinking about that impact on the forward here over the balance of 2022?

And my second question is on pamrevlumab. You completed enrollment for the ZEPHYRUS-1 trial, but I was just wondering if you could provide a status update on the second trial, its enrollment status and whether if ZEPHYRUS-1 is successful, whether that plus your Phase II study could potentially serve as a basis for a filing?

Very good. And I'm going to ask Chris to answer the first question on China and Mark to answer the question around ZEPHYRUS-2 and the ability to file with ZEPHYRUS-1 plus PRAISE. Chris?

I believe you asked if there's a way for us to quantify the impact of COVID on our first half performance. So as background, and this is publicly available information, the multinationals in China have just disclosed, on average, they have lost about 10% of revenues for the first half of the year due to COVID. Obviously, roxadustat has seen an uptick in volume, not a decrease. It'd be very difficult for us to tell you net-net what we would have done had it not been for COVID. However, I believe, generally, the market sees the oral administration of roxadustat as a significant advantage. So we suspect we benefited from it. We also came out of the NRDL price reduction with tremendous momentum, and that accounts for a lot of the market uptake. And generally, we have [a team between] AstraZeneca and FibroGen who are experienced now almost 3 years after launch and executing very well.

So on the positive side, there were many things going for us. It's hard for me to tell you how much more business we would have done without COVID, but we're obviously very pleased with the results. And I don't think those factors I just mentioned would continue to bring us a good top line in the second half of the year.

Yes. So back to pamrevlumab, for ZEPHYRUS-2, we have not yet provided guidance on when we anticipate enrollment to complete, but we are making very good progress, and we're very excited about our efforts there. In terms of the filing strategy, I think as we've said before, our base case is ZEPHYRUS-1 and ZEPHYRUS-2 will be needed to file. That said, if we have strong ZEPHYRUS-1 data because those data will be coming first, we would potentially explore with FDA whether that ZEPHYRUS-1 trial could be filed with the Phase II PRAISE study for an initial approval as you've suggested.

And your last question comes from the line of Jason Gerberry with Bank of America.

Just first on DMD, apologies if I missed this if it was stated in the past, but are the ambulatory/non-ambulatory populations potentially like separate -- the basis of separate filings if one worked versus another not working. Just curious how that would pan out. And just wanted to get your views, is the non-ambulatory the higher-risk trial of the 2 from your perspective?

And then shifting over to roxa just commercially. As we think ahead to this growth dynamic where you work through with higher volumes to offset the NRDL impact and you have maybe a 1- or 2-year period of no NRDL comp to deal with, do you expect the NRDL cuts to get smaller with each successive cut, if you have a perspective on that or any analog that you think are relevant that would be helpful.

Very good. Why don't we start with the China question first? I'm going to have Chris tackle that one and then Mark you can address the question about LELANTOS-1 and LELANTOS-2 and the potential of filing those based on independent results.

So first, I want to make sure I understand the question correctly. We did state that we believe part of the volume uptake in the current calendar year is due to the NRDL price cut, and the question is whether we expect subsequent price cuts to be of a lower range. So not talking about roxadustat specifically but about NRDL generally, the industry expects the first cut to be the most significant, which is what we experienced in 2019. We have to concede a certain amount on pricing to get into the NRDL. Subsequent pricing cuts are dependent on a variety of factors; first, the rules for price cuts change every single year. Many will tell you, and this is publicly disclosed, that the 2020 round -- 2021 round was significant because budget allocations were diverted to COVID controls. So it's hard to predict. But as a general rule, the price cuts do decrease with time. It's hard for us to predict if our next cut would be less than what we experienced in the past. That's certainly what we would hope for. It would depend on how much volume we actually uptake and how much of the national budget we actually take. The pricing of our competitors at that time, which is ESAs, a variety of factors, but we're certainly hopeful that the next cut would be smaller than the one we just experienced. I hope I answered your question.

Yes and that's helpful.

And then your question about DMD, I think it's a really good question about the ambulatory and non-ambulatory populations. If you think about the approvals to date, basically exon-skipping therapies have approved on biomarker data without any real clinical evidence besides the biomarker. I think we'd have a very good chance at filing either the LELANTOS-1 or LELANTOS-2 studies non-ambulatory or ambulatory alone, together, just depending on the data. If the data are strong, I think they could support a filing. So it's something we're actively discussing internally. We'll see what the data show. Of course, non-ambulatory LELANTOS-1 is coming first. But the unmet need here is so high and the patients and their parents are so desperately in need of new therapies that we would do everything possible with positive data in hand to try to get that approved as expeditiously as possible.

And I see no further questions at this time. I would now like to turn the conference back over to Enrique Conterno.

Thank you, Bella, and thank you to everyone for your participation in today's investor call and your interest in FibroGen. Enjoy the rest of your day. Thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.