Akebia Therapeutics, Inc.

Good day, ladies and gentlemen, and welcome to Akibia Therapeutics' third quarter fiscal 2020 financial results and business update conference call. As a reminder, this call is being recorded. I would now like to introduce your host for today's event, Kristen Shepard, Senior Vice President of Investor Relations with Akibia. Thank you, and welcome to Akibia's third quarter fiscal 2020 financial results and business update conference call. Please note that the press release detailing our results for the third quarter was issued earlier this morning and is available on our investor relations website. For your convenience, a replay of today's call will also be available on our website shortly after we conclude today's call. Joining me for today's call is John Butler, our Chief Executive Officer, and David Spellman, our Chief Financial Officer. Before we begin, I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information regarding these factors is described in the forward-looking statements section of the press release we issued this morning, as well as in the risk factors and management discussion and analysis sections of our most recent quarterly and annual reports filed with the SEC. The forward-looking statements on this call speak only as of the original date of this and we do not undertake any obligation to update or revise any of these statements. With that, I'd like to introduce our CEO, John Butler. John?

Thank you, Kristen, and thank you all for joining us today. We held an investor briefing webcast two short weeks ago to go over the newly presented data in detail. My comments on today's call will be mainly focused on our regulatory submission for the potential U.S. approval of Atadustat for the treatment of anemia due to CKD. I'll then turn the call over to Dave to review the financial results for the quarter, and we'll conclude with some Q&A. So with that, let's get started. Akiba has made significant progress this year, and I'm proud of our team's resilience, performance, and their unwavering commitment to kidney patients and the community that we serve. especially given the challenges presented by the ongoing global COVID-19 pandemic. Our team is leading Akibia through the most dynamic period in its history. And importantly, we believe we're positioning Akibia to deliver on a strategy that we believe will build long-term value for our shareholders. We recently completed our pre-NDA meeting with the FDA. Following this important milestone, We remain on track to submit to the FDA our NDA for Vatadustat as early as possible next year. A key component of this NDA is the positive data from our Global Phase III Innovate program and dialysis, which we first announced in May and then shared more recently at ASN Kidney Week. These data were clear and consistent across both efficacy and safety. the data showed that Vatadustat achieved both the primary and key secondary efficacy endpoints as well as the primary and key secondary safety or MACE endpoints of the INOVAIT program. More specifically, the data showed Vatadustat achieved and maintained patients in the target hemoglobin range while minimizing excursions above that target range. In addition, Vatadustat achieved non-inferiority to darbopoietin alpha on key secondary safety endpoints that included expanded MACE, cardiovascular MACE, cardiovascular mortality, and all-cause mortality. We believe these data underscore Vatadustat's potential as a new oral standard of care for treating patients with anemia due to chronic kidney disease, or CKD, on dialysis, marking a significant milestone for Akebia. And we believe an even more significant milestone for people on dialysis and their care teams. Based on our pre-NDA meeting, we remain confident that the INOVATE results place us on a straightforward path to advance Vatadustat to potential approval for the treatment of anemia due to CKD in patients on dialysis. And we're on track to complete an NDA submission as early as possible in 2021. Upon approval, we believe we have a significant opportunity to advance our mission and help address the unmet needs of the 500,000-plus adult patients with anemia due to CKD on dialysis in the U.S., including both incident and prevalent dialysis patients. We believe this could translate into a potential $2 billion market opportunity in the U.S. alone. We are equally excited with Vatadustat's opportunity in dialysis beyond the U.S. market and we're working in close collaboration with Otsuka to prepare a marketing authorization application, or MAA, for submission to the European Medicines Agency next year following our NDA. We look forward to leveraging our renal expertise and existing nephrology-focused commercial organization to support a strong Vatadustat launch in dialysis upon approval. We believe we are also well-positioned with our partner Otsuka sharing in the launch costs and responsibilities and the unique reimbursement system in the U.S. dialysis market that encourages the adoption of innovative therapies. These go-to-market strategies, coupled with the unique reimbursement structure, represent opportunities to meaningfully enhance the potential of bringing that induced death to patients on dialysis as quickly as possible, subject to regulatory approval. A great example of this is where our team is already supporting the commercialization of Atadustat in its first major market, Japan, under the trade name Vafseo. I'd like to pause here and say how incredibly rewarding it is to all of us to see the promise of Atadustat realized in Japan, where it's commercially available with a broad label to treat adult patients both on dialysis and not on dialysis. Both MTPC, our partner in Japan, and Akibia worked hard to achieve this goal, and we look forward to future commercial success in this market and potentially others. Which is a nice segue to say that I'm very pleased with the strength of our MTPC partnership, as well as our more extensive collaboration with Otsuka. I'm encouraged by the confidence and enthusiasm they continue to demonstrate in both Vatadustat and Akibia. While our highest priority in 2021 remain submitting their NDA. We're continuing to execute across many different work streams focused on areas such as medical affairs, scientific communications, disease state education, patient services, and manufacturing to ensure commercial readiness upon approval. Together with our partner, Otsuka, we recently launched a comprehensive campaign designed to increase awareness and education of anemia due to CKD among healthcare providers all with the goal of improving the management of this disease for patients. Again, there's a significant unmet need among patients with anemia due to CKD, and we see a promising opportunity in Vatadustat to advance the standard of care for patients on dialysis. And as Dave will discuss, we're pleased to be doing all of this from a place of financial strength with a cash runway that extends beyond the expected U.S. launch of Vatadustat. While our commercial team executes on pre-commercialization activities, our medical team continues to support Vatadustat's potential with a robust publication plan. In addition to all of the data presentations at ASN, we look forward to the publication of the full Innovate data in a prestigious peer-reviewed publication, as well as many other publications moving forward. I'd also like to touch on our non-dialysis opportunity. The non-dialysis indication will also be part of our NDA submission. A pre-NDA meeting confirmed that, as we expected, the FDA will need to review our global Phase III data to determine whether it's sufficient to support approval of Atadustat for the treatment of anemia due to CKD in adult patients not on dialysis. So we are being appropriately cautious in our outlook for approval in the non-dialysis indication, and we suggest you are as well. Importantly, based on all of our regulatory interactions, including the pre-NDA meeting, we believe this review issue in non-dialysis will not impact the potential approvability of Vatadustat for the treatment of adult patients with anemia due to CKD on dialysis. In summary, given the strength of our dialysis data, we remain confident that subject to approval, Vatadustat has the potential to be a new oral standard of care to help address the unmet needs of adult patients with anemia due to CKD on dialysis, and that this is currently a $2 billion market opportunity in the U.S. alone. Together with our collaborator Otsuka, we look forward to bringing this innovative therapy to patients on dialysis globally, if approved. Now, I'll turn the call over to our CFO, Dave Spellman, who I think many of you know. Dave joined Akibia back in July and brings with him an extensive background in commercial companies, We are very excited to have him on board. Dave?

Thank you, John, and good morning, everyone. After completing my first full quarter as a Kibia's Chief Financial Officer, I would just like to say how inspiring it's been to be part of a company and more so a tightly knit community of really talented people pursuing a deeply held mission to better the lives of people impacted by kidney disease. I'm excited to be here, and I'm looking forward to speaking with all of you as we continue to advance both Akebia and our Vatadustat development program. With that, I'll jump right into the quarter's results. Total revenue for the third quarter of 2020 was $60 million compared to $92 million for the third quarter of 2019. The decline versus the prior period was driven by lower collaborative revenue consistent with the company advancing the Vatadustat development program in completing both the Innovate and Protect studies. As you may know, 80% of our Phase III Vatadustat development costs are reimbursed by our collaborator, OTSUCA, and these corresponding payments are recorded as collaborative revenue. So as these costs decline, so will the corresponding payments. Separately, note that subject to the terms of our collaboration agreements with OTSUCA, Akiba has the potential to receive development and regulatory milestone payments from Otsuka upon approval of Vatadustat in both the U.S. and in Europe. As John mentioned, the third quarter marked the first commercial availability of Vatadustat under the trade name Vaseo in Japan. I'm pleased to report that since launching in late August, we recorded $373,000 in royalty revenue related to the sale of SAO by Mitsubishi Tanabe, our collaboration partner in Japan. We're pleased with this early commercial performance and continue to believe that Japan represents a meaningful growth opportunity for Vatadustat. In terms of Akibia's commercial performance, net product revenue for Orixia increased 14.6% to $34.4 million for the third quarter of 2020, compared with $30.0 million for the third quarter of 2019. While this is encouraging performance, we remain cautious in our planning for Erixia revenue due to the fundamental impact that CMS's non-coverage decision continues to have on our business, as well as uncertainty from COVID-19. Cost of goods sold associated with the manufacture of Arixia was $30.3 million for the three months ended September 30, 2020, and includes the impact of $9.9 million in non-cash inventory write-downs, largely related to a previously disclosed manufacturing quality issue with Arixia. Moving to our research and development expenses. R&D expenses were $46.9 million for the third quarter of 2020 compared to $74.5 million for the third quarter of 2019. As I just mentioned, the decline here was primarily driven by a decrease in costs consistent with the company completing the Innovate and Protect studies. Selling, general, and administrative expenses were $40.2 million for the third quarter of 2020 compared to $34.2 million for the third quarter of 2019. The increase was primarily a result of higher professional service fees related to some of the pre-commercial activities currently underway to support Vatadustat's introduction in the U.S. subject to approval. We expect to continue to focus our investments in our potential market opportunity with Vatadustat in patients on dialysis where we see significant potential to help patients and drive future growth. For our bottom line, the company reported a net loss of $60 million for the third quarter of 2020 as compared to a net loss of $54.6 million for the third quarter of 2019. Turning to our capital position, we ended the third quarter of 2020 in a strong financial position with cash equivalents and available-for-sale securities of $269.3 million. We expect our cash resources to fund our current operating plan beyond the expected U.S. launch of Vatadustat, assuming regulatory approval. And lastly, we ended the quarter with approximately 143 million shares outstanding. With that, we'll open the line for questions. Operator?