Akebia Therapeutics, Inc.

quarter, these achievements were highlighted by the publication of our global phase three program results for Vatadustat in the New England Journal of Medicine. And more recently, FDA acceptance for filing of the Vatadustat NDA for the treatment of anemia due to chronic kidney disease in both adult patients on dialysis and not on dialysis with a PDUFA target action date of March 29, 2022. Putting all this together, as there are currently no approved HIF-PHIs to treat anemia due to CKD in the U.S., we believe that AdduCet is positioned as a potential first-in-class product, and that these achievements bring us one step closer to having a novel oral therapeutic available for patients living with this disease. This is an exciting time in Akiva, and we believe we have a tremendous opportunity ahead of us. which is why I want to spend some time this morning and really remind everyone of the clarity of the global phase three data for Vatadustat, our clinical development program, and Vatadustat's potential market opportunity in dialysis, which we believe is now broader than originally anticipated. I also want to underscore the significance of our existing commercial footprint. We've established a strong reputation in the kidney community with our commercial product, Arixia, And we look forward to leveraging both our nephrology-focused sales force and our expertise upon the launch of Vatadustat. And of course, all my comments today regarding the launch of Vatadustat, its adoption, and use are all subject to its regulatory approval. So let's begin. We believe strongly in Vatadustat's potential as a treatment for anemia due to CKD. And we're excited with the prospect of having Vatadustat lead a new class of therapeutics and help people living with this disease. Today, there are approximately 560,000 dialysis patients in the United States, a number that will continue to grow as the overall population ages. In general, this is a group of patients with significant health issues. Approximately 90% are being treated with erythropoiesis stimulating agents, or ESAs, to manage their anemia. The impact of this disease on patients with CKD is profound. In addition to the well-known symptoms of fatigue, dizziness, and shortness of breath, anemia has been associated with more severe adverse outcomes, such as cardiovascular complications, including left ventricular hypertrophy and congestive heart failure. Multiple large peer-reviewed studies have demonstrated the increased cardiovascular risk associated with ESA use in both dialysis and non-dialysis patients. Physicians and key opinion leaders associate that risk with the speed of hemoglobin increase and hemoglobin overshoots above their target level. These concerns were raised recently in the context of the FDA's review of another company's HIF-PHI product under development and their newly disclosed adverse event data. While we will not speculate on the outcome for their company or their data, we believe there are differentiating and important aspects of the global phase three data for Vatadustat and our program. As the Vatadustat MDA is actively under review at the FDA, I'll limit my comments to our public data, which fortunately there's an abundance of, and it's published in one of the most reputable journals in the world. Our team has done a great job executing on our publication plans. First, our global phase three clinical data showed that once daily dosing of Vatadustat increased hemoglobin in a gradual and steady manner. The data also showed that Vatadustat minimized hemoglobin overshoots compared to darbopoietin alpha and ESA. We have been highlighting this treatment goal in the design of our studies for a number of years. And it's encouraging to see this approach validated in the phase three results across both our dialysis and non-dialysis programs. I'd also like to remind you that our entire Global Phase III program, including the starting dose used in both dialysis and non-dialysis programs, was designed after extensive dialogue with both the FDA and European regulators. This was a very significant undertaking, and we're very pleased that it enabled us to align with regulators on the details of our statistical analysis plan, the pre-specified analyses, and the non-inferiority margins. We're also grateful to have the support of the chairs of the Independent Executive Steering Committee for both Innovate and Protect, Drs. Chertow and Eckert, and the entire committee, who have continued to ensure the ongoing quality of our program, as well as an objective, independent voice in data analysis and publication. Having the results of our Global Phase III program published in the New England Journal of Medicine was tremendous validation of all of this work. We believe these publications not only reinforce the scientific rigor and quality of our program, but also speak to the clarity of the data for the broader medical community. This is one more tangible example of Akebia's commitment to transparency. Feedback and interest in these publications from key opinion leaders and the broader kidney community continues to be very positive. We believe these publications will be highly informative for physicians, patients, dialysis providers, and payers, as they make important decisions about patient care, and potentially a key consideration when differentiating among HIFs in the class, as well as differentiating Vatadustat from treatment with ESAs. Importantly, as seen in the New England Journal publications, our global Phase III data showed no significant safety signal on adverse events, including thromboembolic events, seizures, and infections. More specifically, the data showed that these events were very similar for Vatadustat as compared to darbopoietin alpha in the dialysis and non-dialysis programs. We've provided the links to these journal publications in today's press release, and of course, they are also available on our website. I encourage you to read these papers and the supplementary data as well. as we believe they will provide a very clear understanding of Vatadustat and our program. And of course, we have Dr. Burke, our chief medical officer, on the call today to answer any questions you have about the journal publications. With Vatadustat's PDUFA date set for March, we're progressing on the path to commercialization and are highly focused on prelaunch activities to ensure that we are well positioned for successful U.S. launch in 2022 subject to regulatory approval. More recently, with the exciting potential for Vatadustat to now be first to market, we've been expanding our planning to include a broader market opportunity in dialysis than originally anticipated. We believe dialysis represents a large and growing potential $2 billion market opportunity in the U.S. alone. We believe we have a clear path ahead of us in dialysis, and we're confident that upon U.S. approval, we will have the potential to address the unmet needs of over half a million adult patients on dialysis and rapidly establish Vatadustat as the new oral standard of care for the treatment of anemia due to CKD. We anticipate that the consistency and clarity of our dialysis data, bolstered by recent publication in the New England Journal, will play a meaningful role in helping develop treatment protocols within dialysis providers which are critical to driving adoption in the dialysis market. We're also conducting two studies, one led by our partner Otsuka, to show that Vatadustat can also be dosed three times a week. Assuming the data are positive, we expect to use this data to support a supplemental NDA for this dosing regimen post-approval. Although the significant majority of dialysis patients are cared for in center, several factors, including the COVID-19 pandemic, are supporting a growing shift towards home dialysis. Based on reports from the largest dialysis providers, home dialysis appears to be the fastest growing segment of the dialysis population. CMS is also creating payment models to encourage this move to home treatment. These trends are exciting as we believe that as a convenient once daily oral therapeutic, Vatadustat has the potential to offer an important value proposition, both to the growing number of home dialysis patients and to dialysis providers looking to better support these patients, simplify administration, and grow their home programs. With our planned commercial launch and strategic alignments, we believe that we can enable broad market access for patients and support rapid adoption of that Adustat in the dialysis market. As a potential first-to-market product, our go-to-market strategy now has a broad focus. Our plans include leveraging our exclusive distribution relationship with B4 Pharma to access Fresenius Medical Care and certain independent dialysis providers, which include up to 60% of the U.S. dialysis patients. Additionally, we plan to leverage our direct nephrology-focused sales force to facilitate adoption at DaVita and other strategically important dialysis providers that account for the remaining 40% of patients, with our partner Otsuka sharing in the launch costs and responsibilities. Adding to this, is a unique reimbursement model in the U.S. dialysis market with Tdapa, an add-on payment to the bundle that's intended to encourage adoption of innovative therapies by clinicians and dialysis providers. Although there is limited market experience with the Tdapa process, our understanding of the process suggests it may take approximately six months from regulatory approval to Tdapa designation. Now, as TdapA payments will continue for two years following TdapA designation, we believe that the timing of TdapA designation will be important to the rate of adoption. Again, as a potential first-in-class product, we now believe Vatadustat has a broader market opportunity in dialysis than originally anticipated. And we believe we created a go-to-market strategy to support both our near-term and long-term growth potential in this market. Now turning to non-dialysis. Consistent with our prior comments, while we remain cautious for approval in non-dialysis, we believe we have put forward a compelling and extensive NDA data package, and we look forward to continuing to work with the FDA in their review of the efficacy and safety data. We believe the patient need for a safe and effective oral treatment for anemia due to CKD is clear across both the dialysis and non-dialysis populations. Now shifting gears to performance of our existing commercial product, Arixia. We're encouraged with Arixia's performance in the second quarter. We continue to be pleased with how the market is viewing Arixia's strengths. And importantly, the team continues to do a great job supporting our customers and patients, getting our therapies to those in need. We're hopeful that as the industry continues to focus on prioritizing vaccines for dialysis patients, COVID-related hospitalizations and mortality will continue to decline. We continue to expect Erixia to deliver annual revenue growth for 2021. And again, we're excited to leverage this outstanding team with the expected launch of Vatadustat next year. Finally, I'd like to share with you a number of potential catalysts that we're focused on for 2021 and beyond. As our largest potential market, the U.S. remains our highest priority for Vatadustat, with a PDUFA target action date of March 29, 2022. We're also continuing to collaborate with our partner, OTSUKA, and expect to file Vatadustat's MAA submission to the European Medicines Agency later this year. We continue to explore potential development opportunities for Vatadustat and look to share more information on these efforts later this year. As we've discussed previously, UT Health is engaged in an ongoing investigator-sponsored study of Vatadustat as a potential therapy to prevent and lessen the severity of acute respiratory distress syndrome, or ARDS, in adult patients who've been hospitalized due to COVID-19. They currently have over 300 patients enrolled in this 400-patient study, and when possible, we'll share an update on the study. We look towards additional presentations of our Phase III results and data, including multiple abstracts expected at ASN and at future medical conferences and in peer-reviewed journals. Lastly, as we move closer to the potential launch of Vatadustat, we'll also look to share progress on our pre-commercial activities. So to briefly summarize, this is a busy and exciting time at Akiva. We remain confident in Vatadustat's potential as a first-in-class treatment for anemia due to CKD And we look forward to continuing to engage with the FDA in the review of our NDA. I'll now turn the call over to Dave, who will review our financial results.

Dave? Thank you, John, and good morning, everyone. As John mentioned, having laid the groundwork for potential approval, we're advancing pre-commercial launch preparations for Vatadustat. We believe we are well positioned with our existing commercial footprint, and together with our partners, our team is fully engaged in the work to ensure appropriate commercial drug supply at the time of launch, subject to approval. Turning to our financial results for the quarter, starting with revenue. Total revenue is $52.9 million in the second quarter of 2021, compared to $90.1 million for the second quarter of 2020. reflecting lower collaboration revenue consistent with successfully completing our global Phase III clinical development program for Vatavistat. In terms of Akibia's commercial performance, net product revenue for Orixia increased 7.4% to $33 million for the second quarter of 2021, compared with $30.7 million for the second quarter of 2020. We are encouraged by this growth, which we believe is a great illustration of our commercial team's execution in this ongoing COVID-19 environment. We believe this performance also highlights Arexia's favorable product profile and the critical nature of this therapy. Looking ahead, we believe the team's focus and execution on our marketing, sales, and payer strategies will continue to drive net product revenue growth. Turning to expenses. We continue to prioritize investments to support both Vata-Dustat and Topline growth, while also continuing to focus on improving costs and advancing our pipeline of development opportunities. Cost of goods sold was $52.5 million for the second quarter of 2021, compared to $174.6 million for the second quarter of 2020. Current year includes a $30 million non-cash charge for excess purchase commitments consistent with continued execution of our long-term payer contract strategy, which remains focused on contract economics and net product revenue growth. Cost of goods sold for the prior year period included the impact of a non-cash impairment charge of $115.5 million related to the Arixia intangible asset, in addition to other charges noted in our press release for that period. Research and development expenses were $37.2 million for the second quarter of 2021 compared to $52.8 million for the second quarter of 2020. The spending reduction was primarily driven by a decrease in costs consistent with completing the Innovate and Protect Global Phase III clinical programs. We expect that R&D expenses will remain significant as we continue to support ongoing planned clinical work as well as the cost of our supply chain and inventory billed ahead of the expected approval of Vatadustat. For clarity, we would like to remind you that consistent with the terms of our collaboration agreements for regions including the U.S., Europe, Japan, and others, Vatadustat supply chain costs are shared with our partners respectively. Selling, general, and administrative expenses increased to $41.7 million for the second quarter of 2021, compared to $35.5 million for the second quarter of 2020. The increase compared to the prior year period was due primarily to higher marketing expenses as we prepare for a potential launch of VAT abuse debt subject to approval. As our commercial team is already in place, we expect only a modest increase in SG&A for the remainder of 2021 to support these efforts and Erixia growth. For our bottom line, net loss was $83 million for the second quarter of 2021 compared to $175.8 million for the second quarter of 2020. The improvement in net loss compared to the prior year period was due primarily to the non-recurrence of the one-time impairment charge in the prior year quarter, as well as lower operating expenses, partially offset by lower collaboration revenue for the second quarter of 2021. Turning to our capital position. We ended the second quarter with $247 million in cash equivalents and available for sale securities. Our Q2 cash balance includes the impact of $37.3 million in net proceeds from sales of stock under our ATM in the second quarter. We also received $16.1 million in net proceeds from sales under the ATM subsequent to the quarter end through July 16th. We believe that our cash resources will be sufficient to fund our current operating plan through at least the next 12 months. Additionally, we believe our cash runway would extend beyond that period, assuming timely regulatory approval of Attadee's debt and the receipt of associated regulatory milestones. With respect to future milestone payments to Akiva, I'll remind you that subject to the terms of our collaboration agreements with OTSUKA, Akibia has the right to receive milestone payments from OTSUKA upon the approval of Vatadustat in U.S. and Europe. Given the tiered nature of these milestones, if Vatadustat succeeds in being the first HIF-PHI to market in the U.S., the U.S. regulatory milestones from OTSUKA are estimated to be $15 million and $50 million for dialysis and non-dialysis indications, respectively. Additionally, there are significant sales and commercial milestones. As a part of our existing R&D funding arrangement with OTSUCA, up to 50% of these milestones may be used to offset accumulated R&D pre-funding, which today stands at $100 million. In addition, consistent with the terms of our license agreement with V4, Akibia has the right to receive a $25 million milestone payment upon U.S. approval of Vatadu's debt and its inclusion in the prospective payment system or Tdapa, whichever is first. With that, we'll open the line to questions. Operator?

Thank you. Ladies and gentlemen, to ask the question, you will need to press star then one on your telephone. To withdraw your question, press the pound key. Again, that's star one to ask the question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Chris Raymond with Piper Sandler. Your line is open.