FibroGen, Inc

Hello, thank you for standing by and welcome to the FibroGen third quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Dr. Michael Tong. Please go ahead.

Thank you, Josh. Good afternoon, everyone, and welcome to FibreGen's 2021 Third Quarter Conference Call. I'm Michael Tong, Vice President of Corporate Strategy and Investor Relations at FibreGen. Joining me on today's call are Enrique Quintero, our Chief Executive Officer, Dr. Mark Eisner, our Chief Medical Officer, Juan Graham, our Chief Financial Officer, Dr. John Hunter, our Chief Scientific Officer, Fain Wedick, our Chief Commercial Officer, and Chris Chung, our Senior Vice President of China Operations. The format for today's call will include 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 based on Fibrogen's current expectations. Such statements may include statements regarding, but not limited to, our research and development activities, the initiation, enrollment, design, conduct, and results of clinical trials, our regulatory strategies and potential regulatory results, anticipated FDA interactions, commercialization and results of operations, risks, plans, market opportunity, and strategy related to our business, our collaborations with AstraZeneca and Astellas, financial guidance, and certain other business matters. Such forward-looking statements are subject to significant risks and uncertainties that cause actual results to differ materially from those anticipated in such statements. For discussion of these and other material risk and factors that could affect our future financial results in business, please refer to the disclosure in today's press release reporting our fiscal 2021 third quarter financial results and business update, our most recent forms 10K and 10Q, and reports that we may file on form 8K with the Securities and Exchange Commissions. All our statements are made as of today, November 9th, 2021, based on information currently available to us. And Fibrogen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Today's press release reporting our fiscal 2021 third quarter financial results and business update in a webcast of today's conference call can be found on the investor section of Fibrogen's website at www.fibrogen.com. And with that, I would like to turn the call over to Enrique Quintero, our CEO. Enrique?

Very good. Thank you, Mike. Good afternoon, everyone, and welcome to our third quarter 2021 earnings call. Today, I would like to provide a high-level summary of important accomplishments and developments in recent months. I would also like to welcome and introduce our newly appointed CFO, Juan Graham, who will review the financials. We will then open the call for your questions. I also want to thank Pat Cotronell, who stepped down as CFO in September and who worked at Fibrogen for 21 years. Under his leadership, Fibrogen transitioned from a private to public company and from a development stage to commercial stage company. Pat will serve as executive advisor through March 2022 to ensure a smooth transition. Today's call will include an update of the regulatory status of Roxodustat and our continuous strong performance in China. So why don't we get started? Let's get started with Roxodustat on slide three. In August, the European Commission approved Evrenzo for the treatment of symptomatic anemia associated with chronic kidney disease. Astellas? has launched in Germany, the United Kingdom, Netherlands, and Austria. And yearly feedback from healthcare providers is positive. The anemia of CKD opportunity in Europe is significant, and Evrenso has an important first-mover advantage relative to other HPHIs. The recent FDA complete response letter we received for Oxetustat for the treatment of Anemia of chronic kidney disease, however, represents a major setback. We and our partner, AstraZeneca, are in discussions on a potential path forward in anemia of CKD, and we have an additional meeting with the FDA scheduled. In China, we reported another strong quarter of Roxazusta performance. Finally, last week, We and our partners, Astellas and AstraZeneca, presented 15 poster presentations related to Roxadustat and CKD at the ASN Kidney Week 2021 virtual conference. Moving now to slide four and the recent reorganization. Given the uncertainty regarding Roxadustat's path forward in the U.S., we have developed and are beginning the implementation of a comprehensive plan which includes a cost reduction effort that would enable us to focus on our strategic priorities of development of Pambrelu map, Roxadusta, and advancing our pipeline. Our plan is to reduce projected expenses by approximately $100 million per year for each of the next three years. We are eliminating approximately 100 positions in the U.S., of which 70% are open positions and 30% are existing positions. We thank all the employees whose positions were eliminated for their meaningful contributions to Fibrogen. Moving to slide five, Fibrogen continues to be positioned to create significant value for patients and shareholders by executing on our three areas of focus. Number one, accelerating the development of pembrelumab in three indications with significant unmet medical needs. Idiopathic pulmonary fibrosis, locally advanced and resectable pancreatic cancer, and Duchenne muscular dystrophy. Number two, ensuring commercial success of Roxadustan in patients with chronic kidney disease outside the U.S., while exploring a path in the U.S. and with a potential for expansion into additional therapeutic indications. Number three, increasing our research productivity to advance novel programs that leverage internal expertise and accessing external innovation for additional pipeline opportunities. As you can see on slide six, were pleased to report total Roxadustat net sales to distributors in China of $57.8 million for the third quarter and $154.1 million year-to-date for 2021. We continue to see increased Roxadustat adoption. Fabrigem reported $13.4 million in China Roxadustat net product revenue for the third quarter 2021 and 42.2 million year-to-date. As you can see on slide seven, the ESA market growth has accelerated since the inclusion of Roxadustat on the NRDL. In fact, ESA revenue over the last eight months has shown meaningful growth over the same period in the prior year. Moving to slide eight, Roxadustat has driven the expansion of the anemia of CKD category and is capturing share in an expanding market. Roxadustat captured 74% of the category growth for the eight months ended August 2021 over the same period in 2020. Finally, as shown on slide nine, Roxadustat is the number one branded treatment for anemia of CKD in China for the past eight months, achieving a value share of 33% in the most recent month within the segment that includes all ESA products on Roxadustat, currently the only HIEF PHI on the market. By year end, we expect to finalize the revised reimbursement price for Roxadustat in China, which will be lower, and are prepared to ensure continued growth year on year. We look forward to keeping you updated as we advance our long-term goal of making Roxadustat the standard of care in treating China's CKD anemia patients. Moving now to our clinical development programs on slide 10. Today, we are reiterating our timelines reported last quarter. And we continue to make progress on the licensed HIFI biotherapeutic assets, and to evaluate the other program opportunities available under the exclusive option agreement. I will now turn the call over to our CFO, Juan Graham, for the financial update. Juan?

Thank you, Enrique, and appreciate the welcoming words as I joined the team. Before jumping in, let me start by stating how excited I am to be joining FibreGen. I'm looking forward to supporting the organization in our vision of developing and commercializing innovative medicines in areas of significant and met need, in addition to delivering value to our shareholders. I also want to extend my thanks to Pat Cotroneo for his leadership and contributions to the organization for the last two decades. Now, getting into our results for the quarter, as we announced today, total revenue was $156 million for the third quarter of 2021, as compared to $44 million for the same period in 2020. Before diving into our revenue performance, and as a reminder, we record four sources of revenue. First, license revenue, which is allocated from license payments and milestones earned or deemed probable of being earned in the period. Second, Development and other revenue, which is revenue from development expense reimbursement and revenue from other development activities. Third, net product revenue, which is revenue from direct sales to distributors and sales to our joint distribution entity, or JDE, in China, from which we recognize a transfer price. And fourth, drug product revenue, which includes transfer price payments from our collaboration partners for a commercial-grade API service. for bulk drug product shipments made to them. In the third quarter, revenue includes a total of $120 million in milestone payments from Astellas related to the European Commission approval of Ruxudustat, or Ebrenzo, for the treatment of adult patients with symptomatic anemia associated with CKD. This amount is allocated at $108.4 million and $11.6 million between license revenue and development revenue, respectively. In the third quarter, we recorded $14.6 million in development and other revenue, in addition to $8 million as upfront payment related to Illuminex, outlicensed transaction recorded as licensed revenue. During the quarter, and as stated earlier by Enrique, we recorded $13.4 million net product revenue for ROC Seducet sales in China. This includes $10.3 million from our sales to the Joint Distribution Entity, or JDE, and $3.1 million of direct sales Fibrogen made to distributors. As we have previously disclosed, starting the first quarter of 2021, the distribution entity jointly owned by AstraZeneca and Fibrogen, or JDE, began selling Roxadustat to distributors and paying for AstraZeneca's commercialization efforts in China and AstraZeneca's portion of the profit share. Previously, Fibrogen was responsible for these items. For the third quarter of 2021, the JDE accounted for over 94% of the total China ROXADUSTAT sales volume, with the remaining 6% occurring through Fibrogen's direct sales to distributors. To provide context for the operating results of our ROXADUSTAT business in China, Total Ruxudustat net sales, including sales through the JDE to its distributors and FiberGen China's direct sales to our distributors, was $57.8 million for the third quarter of 2021, which represents 155% growth compared to $22.7 million for the third quarter in 2020. We are encouraged by the growth of our China operations, and we expect continued growth continued strong market performance in the future. Fibrogen's net transfer price from the sales to the JDE was $19.1 million for the third quarter, consistent with the 30 to 45 percent range of the JDE's Ruxa-Dustat net sales to which we have previously guided. From this net transfer price, we defer a certain portion for revenue recognition purposes under EOS GAAP. After this deferral, Fibrogen recorded $10.3 million in net revenue for the quarter from Roxodustat sales to the JDE. Finally, for the third quarter, we did not record any revenue related to drug product revenue. Now moving down to P&L, during the third quarter, operating costs and expenses were $105 million compared to $11.7 million a year ago. To put this in context, roughly around 80% or $74.8 million of the operating expense net increase during this quarter is related to the Q3 2020 comparator of China SG&A expenses. In the third quarter of 2020, driven by the China amendment between FiberGene China and AstraZeneca, a portion of the historical unpaid co-promotion expense was adjusted to reduce the amount owed by FiberGene China. This one-time adjustment totaled $84.4 million, offset by charges for Q3 2020 under the amended agreement, hence driving the variance versus the third quarter of 2021. In addition, in the third quarter, R&D costs increased by $17.4 million, or 30% compared to prior year. Primarily driven by Phase III clinical trial expenses, including drug supply costs, associated with our PEMREVLMAP programs. During the third quarter, net income and EPS was $49.8 million, or 54 cents both per basic and diluted shares, respectively, as compared to net income of $33 million, or 36 cents per basic and 35 cents per diluted shares for the third quarter last year, respectively. At September 30th, we accounted for $665 million in cash, cash equivalents, investments, and trade receivables. Looking forward, based on our latest forecast, we estimate our 2021 ending balance of cash, cash equivalents, investments, and trade receivables to be in the range of $580 to $610 million. The increase in our 2021 ending cash range from our previous guidance of $480 to $490 million is primarily attributable to the timing of certain one-time payments, as well as net cost savings expected to be realized in the remainder of this year. With that, I would now like to turn the call back over to Enrique.

Enrique Garcia- In closing, we continue to look to maximize the value of our portfolio and reduce expenses which will enable us to focus on our strategic priorities and development of Pambrevlumab, Roxadustat, and advancing our pipeline. Pambrevlumab is a potential first-in-class medicine in Phase III development in three indications with significant unmet medical needs, idiopathic pulmonary fibrosis, locally advanced and resectable pancreatic cancer, and Duchenne muscular dystrophy. Roxadustat continues to perform very well in China, and commercialization has now commenced in Europe. As shown on slide 11, we continue to have a strong financial position with approximately $665 million in cash and expect to end the year with $580 to $610 million in cash. We are well capitalized to meet our goal of delivering innovation to areas of unmet clinical needs. I would like to turn the call back to the operator for questions. Josh?

Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by. We'll compile the Q&A roster. Our first question comes from Annabelle Samimi with People. You may proceed with your question.

Hi. Thanks for taking my questions. I was just wondering if you had had discussions with AstraZeneca on what is okay and what is a non-starter as far as additional clinical work for both of you for ROX and the U.S., and could that drive a change in the U.S. agreement, and would they be willing to continue investing given the, I guess, altering competitive landscape and, I guess, the catch-up that competitors are having on you? And then... Secondly, since the CRL, have you noticed whether enrollment in any of the studies, namely the Matterhorn study, has slowed down? And have any of the new therapies that are picking up in the space complicated that as well? Thank you.

Very good. Thank you very much for your question. I think on... AstraZeneca and the potential path forward. What I will say, and I'm going to ask Mark Eisner to compliment me, is we not only do we have to have an aligned plan with AstraZeneca, but of course we need to ensure that whatever path forward basically is discussed and aligned with the FDA. So there is no question that we continue to believe in the product, and the question is really how can we ensure that we can conduct a trial that meets the complete response letter for us to be able to have commercial access in the U.S. in an email CKD, and at the same time be able to do that in an expeditious manner. But I'm going to ask Mark to comment I'll provide a bit more color and then I'll answer your questions on the collaboration agreement.

Thanks, Enrique. As Enrique said, we are collaborating very closely with AstraZeneca to determine the best path forward. We are planning to jointly meet with the FDA to discuss this in the very near future. We're highly aligned with AZ on doing that. You asked a question about the CRL and has it affected enrollment in the Matterhorn study or other studies? We haven't noticed any slowdown after the CRL. I think the clinicians and the investigators seem to be still very interested in those studies and enrolling those studies. So back to you, Enrique.

Yeah, and clearly our discussion with the FDA will be key when it comes to how do we think about this potential path forward here in the U.S. And as far as the relationship with AstraZeneca, the relationship is healthy. Of course, we suffered a significant setback here in the U.S., but we're trying to have an aligned path forward, and the teams are collaborating, I think, very closely.

Thank you.

Thank you. Our next question goes from Edwin Zhang with HCU Enright. You may proceed with your question.

Hi. Thanks for taking my question. A question on Roxa in China. We know last year you amended your agreement with AstraZeneca on China operations. One of the major purposes of the amendment was for FibreGen to be profitable sooner in China. Can you talk about this business goal a bit further? Given the current ROXA sales and growth in China, when do you expect to achieve profitability there?

Yeah, very good. Clearly, we are very excited about our performance and overall progress when it comes to profitability in China. I think it's fair to say that the product has had significant success. And I think this is demonstrated this quarter again. Since we've gotten reimbursement from the NRDA, we see continued increased adoptions. As we mentioned in the past, hospital listings used to be a major driver. We are now largely listed in about 80% of the universe or the opportunity for anemia of CKD in China. The question is really now increasing the adoption within those listed hospitals, and I think it's fair to say things are going very well. We did amend the agreement with AstraZeneca, I think, for Fabergen. This, as you will point out, meant more predictable and a profitable business. So, and I think we've made huge, huge, huge progress. At the end of the day, I think the overall performance of the product makes a very important difference in that regard. I'm going to ask now Juan to maybe make a few additional comments.

Sure, Enrique. I think Edwin, you know, apart from what Enrique has just mentioned, the other component around China is that we are on a good trajectory, as I mentioned earlier, around the growth of the product. We are, I think, well on our way for P&L profitability at this point in time, in addition to in 2023 being able to start as well repatriating some of that cash that we have in China, which is tied to as well our profitability. So I think overall we are well on track to continue on that path and being able to you have to continue to find operations as well within the Chinese business.

Good. Also, I think, Enrique, you mentioned that ROXA is becoming the standard of care for CKD patients in China. Can you provide some color on this? Is ROXA officially included in the clinical guidance in China, or is it recommended as a first-line treatment or ESA for anemic patients? Thank you.

Yeah, this is an excellent question. Indeed, Roxa has been included in a number of the clinical guidelines in China. It is included together with ESAs and other treatments. But as you know, I think for new products, this inclusion becomes critical, I think, How Roxa is described, we are very pleased with that. The mention that we made related to becoming standard of care relates to basically just looking at the share performance that we're having. When we look at the last few months, basically now Roxa Dusta is the largest brand by value in China. has about a 33%, 34% share by value, and it's continually increasing. Clearly, our aspiration is still higher. And I think what's important, I think, is when we look at the market is not just that we're capturing share, but since Rox and Dusta was launched and reimbursed, we've seen an expansion of the market. In fact, an expansion... out of, you know, even ESAs are growing at faster rates. So there is the increased promotion of Roxadustia and Anemio CKD. Clearly, there's a lot of animate need, and we basically have seen that reflected in the marketplace in China. So we are very pleased in terms of where we are and standing the protest today in China.

Very helpful. Thank you.

Thank you. Our next question comes from Michael Yee with Jeffrey. You may proceed with your question.

Hi, guys. Good afternoon. I had two questions. Following up on the scenario tree with the FDA and with AstraZeneca, can you maybe lay out some of the various scenarios that you see and when you would be in a position, generally speaking, to update us on what happens? Presumably, the goal is to run another study with the FDA. So is that the base case? And the alternatives would include not doing that and rejiggering the whole partnership. So maybe you could just make some comments on that and the timing of when you think this is reasonable to update the screen. Thank you.

Yeah, thank you. Yeah, the meeting with the schedule with the FDA is coming up shortly. That meeting, of course, is critical. I think our basis, given the complete response letter, is that, and given the discussion we have with the FDA, that we will need to conduct a trial to be able to bring Roxadustat to market in the U.S. for an email CKD. Once we basically have an aligned path forward with the FDA. I think at that point in time, we'll be in a better position, I think, to provide an update to the market. I don't want to speculate on the different types of scenarios here in terms of how to think if that's not the case. Right now, I think that's... I want to make sure that we have the meeting. We have, I think... a good proposal we'd like to make to discuss with the FDA and see where we go from there.

Okay. Thank you.

Thank you. Our next question comes from Jeffrey Borges with SBB Learning. You may proceed with your question.

Thank you very much. A couple of questions, if I may. First, I just want to be clear on the expense guidance and the restructuring. You've highlighted the $100 million reduction in 2022 and then again in 2023. But I think you said it was against what you were planning to spend. Should we be modeling a $100 million reduction versus the $105 million expense run rate in Q3 or the $450 to $500 to the full year? So should we literally be paying $350 for next year or $300 for next year and then $200 for the year after? Or is it a reduction against a hypothetical increase that you would otherwise have incurred in support of the product launch. So it would be helpful if you could be really clear about that. The second question, would you consider monetizing the JDE in China as a source of capital to fund your internal R&D investments? I'd be interested in your comments, having seen all the competitors' data for their HIF. Do you believe the signals that the FDA identified in your studies were molecule effects or class effects? Thanks.

Very good. Thank you. Let me first try to address your first question. I'm going to ask Juan to also comment, and then we'll go to the other two questions that you basically said. had around China monetization and then whether some of the signals are product or more general to the class. First, I think what we basically provided in terms of guidance today was guidance around cuts relative to projected expenses. Now, having said that, we are eliminating So our headcount is going to be lower, and that by definition basically means that we are lowering expenses. But yes, I think the $100 million is relative to projected expenses. Keep in mind that as we get Pambrello Map closer to the readouts and to a potential launch, we basically will have some additional expenses that we have to account for. Our aim today is to be able to launch PAM in the U.S. as FibroGen, and we want to make sure that we have the resources to be able to do that. Juan, do you want to make any additional comments on the first point? We're not providing guidance when it comes to operating expenses at this stage, but do you want to provide any more color on that?

I think you explained it well, Enrique. I think, Jeffrey, as Enrique mentioned, you know, this is against our forecasted venue, you know, given of what we have planned prior to the CRL. So that's, I think... you know, how to think through this in terms of our future expenses. But as Enrique mentioned, you know, there is also some element of reduction of cost versus our actual dollars, right, related to the number that he highlighted earlier around, you know, some job eliminations or terminations in the United States.

Just to give you a sense, I think we said – we are eliminating 100 positions, right? 30 of those positions were currently filled, but clearly over the last few months, we've been managing positions, not filling them, and we're not replacing positions. So all in all, I think we are expecting to vis-a-vis the expected position that we have. It's basically a full elimination of 100 positions. You probably have also seen... Jeff, that we have our cash guidance for the year has increased. Some of it is timing, but about $15 million of the increase in the cash guidance, it relates directly to expense reduction. And that's, of course, very recent. So that's already having an impact for the rest of the year. When it comes to... When it comes to China, clearly, we always think about all of the options. We're continually thinking about how to maximize the value of our assets and what is it that we could do, whether it's in a China operations. And that's something that we're always thinking about and exploring. whether it's China or whether it's thinking about, I know I get a lot of questions about PAM partnering. Clearly, I think the aim for it is always how can we basically maximize the value of the asset? And if partnering, for example, in the case of PAM, provides more value to hydrogen, that's something that we would pursue. Of course, as I mentioned, Our aim is to launch in the U.S. as Fibrogen, but clearly we are always thinking about what is it that we could do to ensure that the value of all of our assets is basically maximized. Finally, I think on your question on some of the additional data, I think it's always very difficult to... to say whether the signals were just a matter of, your signals are a matter of chance when events are low and you start seeing different signals in different products. These are large trials, but in any large trial, you are going to see basically some adverse events that basically go against you. Some are going to go uh, for you, uh, clearly the safety signals are the ones that are going against you. Uh, but I, my, my, uh, my take right now, I think it's very difficult to say, uh, you know, whether, uh, what we're seeing in some cases, some of those signals, um, uh, go across products or, or not. And I think at the end of the day, I think, um, More data needs to be released, and time would basically tell. I'm going to ask Mark also to provide some additional comments.

Thanks, Enrique. I mean, I think the differences in trial designs, dosing strategies, choice of competitor, for example, Roxyducedad was compared to placebo in a non-dialysis population versus Dopperducedad compared to an active comparator. It makes it very difficult to draw a generalizable comparison. principles there about the class versus the molecules. And there's also a lot we don't know yet, just based on the very top line data we've seen in presentations and publications. So very interesting question. I don't think we have a full answer to it yet. Great. Okay. Thank you.

Thank you. Our next question comes from Jason Gerberry with Bank of America. You may proceed with your questions.

Hi, this is Perry on the line for Jason. Thanks for taking our questions. First, I'd like to understand your impression of the ROCSIS CRL. What were your main takeaways related to the details of the CRL? And I guess, how has that informed the potential path forward for ROCSIS and CKD in the US market? Could there be a potential for a trial focused on you know, either dialysis-dependent or non-dialysis-dependent patients, a focus on ESA hyporesponders, and then just have one follow-up question.

Yeah, I'm going to have Mark directly address this question.

Yeah, so good question. As Enrique said, we're still working through the path forward and are going to be meeting with the FDA soon. As you'll recall from our advisory committee, we have proposed that a lower starting dose and a different dosing strategy could be a path forward for the molecule. So that's something we're clearly going to explore with the FDA. In terms of the specific populations that we need to study in order to achieve a broad label, I mean, we are still intending to achieve a label that includes both DD and NDD, that's still a point of discussion with the FDA about exactly how we can achieve that.

Okay, thanks. And then just one other related to adoption trends for ROXA and CKD in China is, I guess, where's the growth coming from at the indication level? Is it you know, around 50-50 between dialysis dependent and non-dialysis dependent? Is it predominantly one over the other? Any color would be helpful.

Yeah, we are seeing clearly when – if you're referring to market growth, right, clearly market growth is likely coming from both, but – clearly we are seeing a lot more NDD market expansion. Most patients, you know, with DD are actually treated for, with patients with anemia are being treated. So that's a point I would make at the market level. If you're asking about Roxadustat specifically, Most of our revenue, as we said before, is coming from DD, maybe about 65 coming from DD and 35 coming from NDD at the revenue level. We do see NDD as a huge significant opportunity longer term, and that's something that I think is going to be The opportunity for continued market expansion and for Roxadusta to play a leading role in that, I think, is still very significant in China. My view is we are in the first innings of the opportunity that we have with Roxadusta in China. Great. Thanks.

Thank you. Our next question comes from Paul Choi with Goldman Sachs. He may proceed with your question.

Paul Choi Hi. Thank you, and good afternoon, and thank you for taking our questions. My first question is on Europe, and can you maybe just, Enrique, update us on how you and your partner, Estella, are thinking about the cadence of establishing reimbursement in the key geographies and just how you're thinking about the launch trajectory? over the next one to two years, given that that's a potential gating factor there in Europe? And then I had a pipeline follow-up question.

Yeah, I'll make a general comment. I think the specifics when it comes to Europe, I think those questions need to be asked of Astellas. So we've agreed that they're going to be answering those questions directly. But as you know, in Europe, just generally what you basically have is you are launching in markets that allow you to launch with a with what is called a temporary price, like Germany and other markets. And then I think you are launching markets once you get basically actual reimbursement. So in Europe, the reimbursement is, of course, granted at the country level. And that basically tends to be staggered and I know that Astellas is now launching in the four markets, the four countries that I just mentioned, Germany, the U.K., Netherlands, Austria. But in addition to that, of course, they are working diligently to ensure that they can have reimbursement across Europe.

Okay. Thanks for that, Enrique. Okay. And then second, as a follow-up, just on the pipeline, can you maybe just update us on where you are with the – or how are you thinking about the development of ROXIDA set for CIA? I didn't see it mentioned here in your 3Q slides, and is that just something – an indication that's been deprioritized?

No, it is – thank you for your question. It's not a matter of deprioritization, but I think – We are looking forward to getting the insights from the discussion with the FDA around anemia of CKD because that also informs how we think about CIA and that program. The data for CIA, it's positive data, but we want to ensure that we are on solid footing as we think about that trial. Mark, anything else?

Not much to add, Enrique. As you said, our main thrust right now is establishing the path forward for CKD, and then CIA is under discussion with AZ in parallel, and we're trying to define the path forward for that one as well.

Okay. Thank you very much.

Thank you. Our next question comes from Andy Hissag with William Blair. You may proceed with your question.

Great. Thanks for taking my question. So one is... Enrique, can you kind of highlight the strength of your internal R&D and how is that differentiating? We're just trying to understand or reconcile between the desire to obviously seek internal pipeline candidates or external collaborations and also the reorganization expense reduction plans that you have.

Yeah, very good. Very good question. I'll start, and then I'm going to ask John Hunter to complement that question. I think your focus is, if I answer the focus of your question, is more on the R than on the D. But clearly, I think as part of this exercise, we've taken a very close look at every single area in the company. and every, you know, line item by line item trying to think about how do we ensure that we can run more efficiently. And, of course, that is a hugely important process. But as part of that, we also had to – we've raised the hurdle when it comes to innovation, including on – as we think about research and as we think about our preclinical program. So we've basically – targeted a certain number of programs that we believe had the best chance to make it to the clinic within the next few years, and those are the ones that we're basically investing behind. There is a mix of products. There are products from our HiFiBio collaboration, which as you mentioned is external, but then there are also internal programs that we are moving forward and we're investing behind. I'm going to ask John, if you'd like to make some additional comments.

Sure. I would only add that there are areas of expertise that have been developed over the years at Fibrogen, and we're really looking to take full advantage of them with the existing preclinical programs. And with the HiFiBio programs, clearly that brought in a new set of projects that that I think were initially outside of the expertise area of the company, but we have been building up around them as well. And we're really looking to move forward by kind of expanding out expertise where we need it, but also consolidating the programs around our therapeutic focus areas so that we have a coherent path forward with the new clinical programs.

Great, thank you. I have a follow-up question related to the price negotiation with the Chinese government coming up towards the year-end period. I'm just curious if you can educate us on how they are thinking when it comes to renegotiation on price. Do they look at real-world evidence? Do they look at renewed value proposition? Just curious about how they think about this process and maybe things that you can prepare heading into the process to really position FibroGyn at the best potential leverage point.

Yeah, clearly it is the case in China and it is the the case with any payer around the world when it comes to negotiating for pricing. I think the interest is to, of course, lower the price, the reimbursement price, the price the government is paying for products. In China, this happens, as you know, across the board every two years, right? So every product every two years has a product in the NRDL has a reimbursement renegotiation and a new price basically is set. There are a number of factors that basically are brought into the mix as part of this discussion. Everything from the clinical value of the product to to the number of competitors, whether they are direct competitors in the same class or functional competitors, neighboring countries' prices. And then also I think it's, you know, how successful the product is being, meaning products that have significant success just because of the impact on the budget tend to also garner more attention. So there's a combination of factors. I think it is extremely important, right, for products to be in the NRDL. And I think that's something that the industry is going to go across basically this month in terms of all the discussions, including us, right, to ensure that the products are basically reimbursed going forward. So that's maybe the frame that I would provide, and I'm not sure I can add much more to that. I don't know if that answers your question.

Yeah, that's helpful. Thank you very much.

Thank you. And as a reminder, to ask a question, you will need to press star 1 on your telephone. Our next question comes from with . You may proceed with your question. If your line is on mute, please unmute. And I would like to now turn the call back over to Enrique for any further remarks.

Thank you for all your questions. We very much appreciate your participation in today's investor call and your interest in Fabergen. Enjoy the rest of your day. Thank you very much.

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