FibroGen, Inc

Good day, and thank you for standing by. Welcome to FibroGen's third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to today's speaker, Michael Tung, Vice President of Corporate Strategy and Investor Relations. The floor is yours.

Thank you, Gerald, and good afternoon, everyone. I'm Michael Tung, Vice President of Corporate Strategy and Investor Relations at FibreGen. Joining me on today's call are Rika 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, Thane Wedig, 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 the call for your 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 preferences filings with the SEC, including our most recent Form 10-K and Form 10-Q. FibreGen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. The press release reporting on financial results and business update and a webcast of today's conference call can be found on the investor section of FibreGen's website at www.fibregen.com. And with that, I would like to turn the call over to Enrique Quintero, our CEO. Enrique?

Thank you, Mike, and good afternoon, everyone, and welcome to our third quarter 2022 earnings call. On today's call, I will provide a high-level summary of the most important accomplishments and developments in the third 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 three, today we announced a royalty monetization transaction with NovaQuest Capital Management, securing $50 million of additional non-dilutive capital, strengthening our balance sheet. We will use the additional proceeds to continue to support our strategic priorities, advancing our late-stage development programs, where we anticipate top-line data from seven pivotal Phase III studies, beginning in the first half of 2023 through mid-2024, five from PAMBREBLUMAP and two from ROXADUSTAT. as well as progressing our early stage pipeline. You can read more about the transaction in a press release published earlier today. Moving to slide four. Fibrogen is positioned to create significant value for patients and shareholders by executing on our three areas of focus. Number one, delivering pivotal phase three PAMBREVA data in three indications with significant unmet medical needs. idiopathic pulmonary fibrosis, or IPF, Duchenne muscular dystrophy, or DMD, and locally advanced unresectable pancreatic cancer, or LAPC. Number two, ensuring the commercial success of Roxadustat in patients with chronic kidney disease outside the U.S., as well as delivering phase three data in myelodysplastic syndromes, MDS, and chemotherapy-induced anemia, or CIA. Number three, increasing our research productivity to advance novel programs that leverage internal expertise and access external innovation for additional pipeline opportunities. Let's move to our clinical trials on slide five. Throughout 2022, we have made significant progress in enrolling our phase three studies. It's very exciting to be anticipating data readouts from seven pivotal phase three trials starting in the first half of 2023 through mid-2024. Let's begin with pembrelumab. Data from LELANTOS-1, our phase three trial of pembrelumab in non-ambulatory patients with DMD is expected in the first half of 2023. The Cephras-1 phase three trial of pembrelumab in patients with IPF is expected to read out in mid-2023. Data from Arlelantus-2 trial of pembrelumab in ambulatory patients is expected in the second half of 2023. Arlelapis phase three study of pembrelumab in locally advanced pancreatic cancer patients is expected to read out in the first half of 2024. And finally, we are pleased to announce today that our Cephris-2 phase three trial of pembrelumab in patients with APF is expected to report out mid-2024. Moving to the Roxadustat program, we anticipate readouts from the Matterhorn phase 3 trial of Roxadustat in patients with anemia of myelodysplastic syndromes in the first half of 2023, and data from our China phase 3 study of Roxadustat in patients with chemotherapy-induced anemia expected in mid-2023. 2023 will be a transformational year for Fabrigan, and we look forward to sharing the results of these studies. I would like to extend my gratitude to the patients, caregivers, and investigators, as well as my far-reaching colleagues for their commitment to these studies. I'd now like to spend a few minutes highlighting our perspective on the significant potential commercial opportunity we see with PAMBRELU-MAP, our wholly-owned monoclonal antibody program in each of the three disease areas on slide six, beginning with IPF. With a diagnosed prevalence of approximately 330,000 patients across the US, EU, China, and Japan, IPF represents a significant opportunity with the two approved IPF therapies generating almost $4 billion in net revenue in 2021. Important to note, there remains significant admin need with these two approved therapies as characterized by continued disease progression and challenging tolerability. There is a sentiment in the IPF community of limitations with the current therapies and a desire for additional therapeutic options. We believe Pambrelumab has the potential to help a sizable number of patients with IPF and be a very relevant medicine for patients. In the middle column, you can see the DMV opportunity. given the devastating nature of DMD and the relentless progression of the disease, we're hopeful that the Lantus Phase III program can lead to an approved therapy that is desperately needed by the DMD community. While the current approved exon skipping therapies produce an increase in the dystrophin levels, they're targeted at a small proportion of DMD patients and have yet to demonstrate a meaningful clinical improvement in symptoms or disease progression. There is a clear need for therapies that can attenuate disease progression by targeting the downstream pathological changes to improve muscle function and prolong ambulation. We believe the antifibrotic mechanism of pembrelumab may be a solution that can help these patients. And finally, in the third column, we wrap up with a snapshot of the locally advanced pancreatic cancer opportunities. Pancreatic cancer represents one of the largest unmet needs in oncology, given the diagnosed prevalence of over 90,000 patients across the major regions, combined with a low five-year disease-free survival rate of around 10%. There have been limited treatment advances in the non-metastatic setting over the last two decades, with immune oncology therapies failing to demonstrate survival benefits over the current standard of care. There is also limited late-stage development activity in non-metastatic pancreatic cancer, which creates a meaningful commercial opportunity for pembrelumab in LAPC if we can demonstrate a significant improvement in overall survival. In addition, the Pancreatic Cancer Action Network's precision PROMIS adaptive trial platform evaluating pembrelumab in combination with standard of care for patients with metastatic pancreatic cancer continues to progress. Now let's move to Roxadustat on slide seven. We continue the ongoing Roxadustat clinical trials for the treatment of anemia and myelodysplastic syndromes, or MDS, in the US and Europe, and for the treatment of patients with chemotherapy-induced anemia, or CIA, in China. Roxadustat is approved in China Europe, Japan, and numerous other countries for the treatment of anemia in chronic kidney disease patients. The European commercial activity with Roxadustar is accelerating, as it was recently launched in the United Kingdom, Germany, the Netherlands, and the Nordic countries, with further launches expected in the major EU markets over the coming months. We believe the anemia of CKD opportunity in Europe is significant. And while initial uptake has been slower than expected, where Evrenso has launched, the early feedback from healthcare providers prescribing Evrenso has been quite positive. And moving to China, Roxadusta continues its strong performance, as you can see on slide eight. We are reporting third quarter total Roxadusta net sales in China of $59 million by Fibrogen and the Joint Distribution Entity. compared to $57.8 billion in the third quarter of 2021. This represents an increase of 2% in U.S. dollars, despite the price reduction to the NRDL renegotiation and the impact of currency. This growth was driven by an increase in volume of over 80%. We continue to expect Roque d'Houston Air Sales growth for the full year 2022 in China, driven by significant growth in volume. Favreger's portion of Roxadusta net product revenue in China was $17.4 million for the third quarter on a U.S. GAAP basis. Juan will elaborate further in the finance update. Turning now to the updated external market data on slide 9. Bruxa d'Usta continues to be the number one branded treatment for Anemio CKD as measured by value share in the category, which includes all ESA products and Bruxa d'Usta. We expect this category leadership to continue as Bruxa d'Usta volume continues to grow at a fast pace. Next, slide 10 provides a snapshot of Bruxa d'Usta JuniGrowth 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 is the significant unit growth of Roxadustat, where the leading ESA brand is slightly up, reflecting the Anemio CKD market expansion that has been driven by Roxadustat since its original NRDO 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 the financial remarks, I would like to begin by thanking our colleagues in the United States and China for their leadership focus in executing on our strategic priorities. As we have communicated, we're fully enrolled in five of our seven phase three Pamreblumab and Miroxidustat trials with pivotal readouts starting in the first half of 2023. Today, we have also announced a royalty monetization transaction with NovaQuest Capital Management which will further strengthen our balance sheet to continue supporting our strategic priorities. Now getting into our financial results, total revenue for the quarter was $15.7 million compared to $156 million for the same period in 2021. It is important to note the main drivers of change versus the third quarter of 2021, which are, one, a $120 million milestone payment in the last year period from our partner, Estelest, related to the European Commission approval of Evrenzo for the treatment of adult patients with symptomatic anemia associated with CKD. And two, a decrease of $24.1 million in co-development revenue from our partners due to substantial completion of the Roxadustat development. Breakdown of revenue sources is as follows. We recorded $17.4 million net product revenue for Roxadustat sales in China compared to $13.4 million in the third quarter of 2021, which represents a 29% increase quarter over quarter. During the quarter, we also recorded development revenue of $2 million associated with co-development efforts for Ruxa-Dustat with our partners as compared to $26.1 million during the third quarter of 2021. Given the stage of Ruxa-Dustat development, And as anticipated and previously communicated, going forward, we expect co-development revenue to remain in range to this quarter's results. Finally, we recorded a reduction of $4.1 million in drug product revenue for Roxadustat bulk drug or active pharmaceutical ingredients sold to Astellas. This reduction was due to the change in our estimates related to the shipments as per U.S. GAAP. primarily driven by the Japanese yen currency depreciation versus the U.S. dollar. Now shifting our focus into the operating results for our Ruxudustat business in China. Total Ruxudustat net sales from the joint distribution entity jointly owned by AstraZeneca and Fibrogen, or JDE, was $59 million this quarter compared to $57.8 million in the third quarter of 2021. This represents an increase of 2%, despite the impact of the NRDL price reduction and currency headwinds. This sales performance is the result of a significant volume increase of over 80% versus third quarter of 2021. As we have previously communicated, 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 Raxadustat net sales in China, Fibrogen's net transfer price from sales to the JDE was $19.5 million for the third quarter, consistent with the 30% to 45% range of the JDE's Raxadustat net sales, which we have continuously guided. During this quarter, we deferred $4.6 million in revenue due to the change in our future estimates as per U.S. GAAP, primarily driven by unfavorable renminbi currency impact, amongst other estimates. As we have communicated in the past, the deferred revenue balance in FibreGen China fluctuates based on management estimates of future revenue. As a result, FibreGen recorded $14.9 million in net revenue for the quarter from Ruxadustat sales to the JDE and $2.4 million of direct-to-distributor sales from FibreGen China. Now, making our way down to P&L. Operating costs and expenses were $109.4 million compared to $105 million for the third quarter in 2021. This increase in operating costs is driven by higher drug supply costs associated with our PEM Revlima programs, offset by lower clinical trial expenses, and overall cost management efforts in our infrastructure despite inflationary pressures. Diving in deeper into our expenses, R&D continues to be our focus to support future growth, with roughly $75.2 million, or 69% of our operating expense capital, dedicated to research and development. Of the $75.2 million, $53.6 million was dedicated to PEM Revlimab development and CMC activities, $12.5 million funneled to support our early stage pipeline, and the remaining $9.1 million directed towards Ruxa-Dustad development. During the third quarter of 2022, net loss was $91.7 million or 98 cents net loss per basic and diluted share as compared to net income of $49.8 million or 54 cents per basic and diluted share for the third quarter last year. On slide 11 of our presentation, We make reference that at September 30th, we reported $441.6 million in cash, cash equivalents, investments, and accounts receivable. Considering today's announcement on the royalty monetization transaction with NovaQuest Capital Management, we estimate our 2022 ending cash balance of cash, cash equivalents, investments, and accounts receivable to be in the range of $380 to $410 million. The royalty monetization transaction, along with our focused financial discipline, will provide additional strength to our balance sheet, further enhancing our cash position to support our organization. Finally, as we have previously stated, we're privileged to be able to consider a variety of options to continue to strengthen our balance sheet. Thank you. And now I would like to turn the call back over to Enrique.

Very good. Thank you, Juan. And in closing, I would like to reiterate our third quarter developments. Our financing transaction, a royalty monetization transaction, which gives us $50 million of non-deluded capital, further strengthening our balance sheet. Our commitment to advancing pembrelumab as a potential first-in-class medicine in Phase III, developing three indications with significant unmet medical needs. We expect top-line data in 2023 from three pembrelumab pivot of Phase III studies, LAMBDOS-1, in non-ambulatory patients with DMD, Cepros-1 in IPF, and Elantus-2 in ambulatory DMD. Roxadusta continues to perform very well in China. Our partner, Astellas, is moving forward with the commercialization of Roxadusta in Europe with further launches and reversal decisions expected in the major EU markets over the coming months. We anticipate top-line date in 2023 from two Roxadusta pivotal phase three studies, one global MDS trial, and one China trial in CIA, which are expected to read out in the first half of 2023 and mid 2023 respectively. We continue to have a strong financial position with $441.6 million in cash as of December 30th, 2022, and expect to end the year with $380 to $410 million in cash. We continue to have multiple options to consider to further strengthen our balance sheet to ensure a long-term success. And now, I would like to turn the call back to the operator for questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question comes from Jason Gerberry of Bank of America. Your line is now open.

Hey, guys. Thanks for taking my questions. A couple for me just on the IPF opportunity. Can you speak to what underpins your confidence that you can enroll subjects of similar severity to the Phase IIB PRAISE trial, and specifically when PRAISE was conducted, I think patients were, or I'm sorry, the market was just kind of seeing the rollout of new standard of care IPF medicines. Just wanted to get your thoughts on that. And then secondarily, you know, if successful in the Deaf First program, just wanted to get your thoughts on running an adjunct trial, given that, you know, DI is the market leader and they are running an adjunctive trial. And so how important do you think that that is to do, or do you think that TAMREP as a monotherapy can just be highly competitive with the program that you're running? Thanks.

Hello, thank you, Jason, for your question. I'm going to pass your questions here to Dr. Eisner.

Yes, thanks. So your first question about our confidence that we can enroll a patient population of IPF patients in the Zephyrus program of a sort of range of severity similar to Prey is, yeah, we're highly confident. I mean, we are enrolling a broad range of patients, including more severe, and we expect to have a very generalizable population of patients in the Zephyrus program. And then your second question around the adjunct or combination trial. I'm going to start, and then I'll turn to my colleague, Thane, for any commercial kind of perspective that he might have. But we are certainly looking at lifecycle options. Assuming our Zephyrus trials are positive, we will be looking at several options. That could be one of them. I think we believe our data will be very informative because actually the monotherapy design of the Zephyrus program will give us a very clean efficacy and safety signal compared to placebo that will really be very highly informative to clinicians. So let me see what Thayne thinks about some of the more market-facing potential of your question.

Thanks, Mark. Hi, Jason. You know, as we continue to speak with pulmonologists about temrevumab and we highlight the praise data to get the reaction and then speak about our Phase III program with potential label scenarios, you know, one of the key questions we ask them is how they perceive Pemrevumab either as monotherapy or in combination, even if we don't have combination data to be able to share with them. And what we consistently hear back is that when they see the Pemrevumab profile, they consider the options that they have right now in terms of standard of care. And if they have somebody who is on OPEB or Esprit that they believe needs additional efficacy without then the trade-off of further issues from a tolerability perspective, they replay back to us just a natural inclination to add Tamrevlimab on top of current standard of care. And then when we further press them to say, you know, we don't have any data, what they then play back for us is, hey, as long as I know that you have a strong efficacy profile and that I'm confident about the tolerability of your product, as I understand a mechanism of an anti-CTGF, They then understand how that product can go along well with either OPEV or Esprit, and they just have a natural inclination to want to use them together. And so unless we have, you know, payer restrictions that say you cannot use pembrolizumab with OPEV or Esprit, then we're pretty confident that physicians will go there. And it's not unlike other disease areas where if you think about hypertension or type 2 diabetes or many other disease areas, These add-on therapies, it's a very common thing for physicians to do. It's a natural next step for them, and we've heard that same thing over and over again as we research this with pulmonologists in the U.S.

Jason, just let me add one more key point. Clearly, with positive Cephris-1 data, I think there will be a number of opportunities that will be in front of us. We have outlined some of those opportunities here internally. What you described is one of them. Quite frankly, of course, we have to look at the data, but I would not consider that to be the top opportunity for us. So a number of additional opportunities, including some what I'm going to call adjacent indications to IPF where we believe the product would work. Now we have to just wait for the data. We are, of course, highly enthusiastic, given the conviction that we have based on our praise results, and we look forward to having an incredible 2023. Thanks, Ed.

Thank you. Our next question comes from the line of Annabelle. Sam Emai from Stifle. The line is now open.

Hi, this is Jack calling in for Annabelle. Thanks for taking our questions. So thinking about PAM and IPF, right now my understanding is that the trial is enrolling patients who haven't been eligible or who have not tolerated current treatments. If you're successful in IPF and there's some indication of fibrosis reduction, how do you expect the treatment paradigm to shift? Is the study designed to potentially offer a first-line position before OPEF and Esprit or after? And also, do you have a sense of the percentage of the population enrolled who are naive to current therapies versus ineligible?

Very good. I'm going to have, once again, Dr. Mark Eisner respond to your question, Jack.

Yeah, no, thanks for your question. So just to clarify, in the Zephyrus program, we are enrolling both naive patients and patients who have previously been on standard of care and have discontinued standard of care prior to entry into the trial. So the good thing about that is we're going to have a very broad patient population that includes both naive and experienced patients, and we would expect a very broad label for the treatment of IPF reflecting the patient population that we enrolled. So we expect also, from a clinician point of view, that they will have, you know, all the information they need to make good decisions for their patients based on the benefit-risk profile of Pemrelvumab for IPF.

I think he also asked about the percentage.

Oh, yeah. We haven't really reported those percentages. I mean, they're ongoing trials, so we don't have that data for you right at the moment.

Great.

Thank you.

Thank you.

Our next question comes from Michael Yee of Jefferies. Your line is now open.

Hey, guys, thanks for the questions. We had two questions. One, following up on a lot of the IPF questions, we wanted to understand or remind us what you designed the Phase 3 powering for in terms of assumptions on drug versus placebo and how that related to what was seen in Phase 2. And the reason I ask that is in part because of the idea that you have patients that are have either previously failed or intolerable to the orals, whereas in the Phase II, they had never seen it at all. And so the idea here is that they're sicker patients, as you referred to. So I just wanted to triangulate the different populations sort of seen here and what you powered it for based on Phase II.

Thank you.

Yeah, great question. So in terms of power, I mean, we have powered the studies very robustly. to be able to detect a treatment effect of Pamrelvimab versus placebo. So we think statistical power should be more than adequate for each trial individually, Zephyrus 1 and Zephyrus 2. And then the other part of your question that's pretty interesting too is around, you know, how would you expect naive versus an experienced patient to perform in a clinical trial? And it's pretty interesting because I think what we're learning from other studies in the placebo group in particular is that patients who are treatment experienced to go into trials continue to progress over the next year much more than you would anticipate based on the labels for Aspirator or OFEV. So they do progress, and they actually are good patients to enroll in a trial, just as naive patients are. And the best theory about why that would be is that if you're a patient on SBIRT or OFAB and you're doing well, even if you discontinue the therapy and you're doing well, you're not really going to enroll in a trial. Patients who enroll in trials are patients who are continuing to progress typically and are symptomatic from the disease. So they actually progress on trial despite the fact they've been on standard of care in the past. So I think that whether they're naive or experienced, we expect those patients to progress on the trial in the placebo group, thereby providing us the opportunity with paramalvomab to show a treatment benefit.

Thank you for that. Yeah, to be interpreted in both a faster placebo, which could be a good thing, or also just a more difficult population in general.

But the other second question to follow up has to relate to combination. So you made some nice comments about combination therapy, which I think course is attractive particularly if it works and I do recall that previously there was a combination study fairly good sized I think the safety was positive but there never was any information never was presented can you just sort of remind us your takeaways from the combination study and what you learned from that thank you yeah I think you actually summarized it quite well I mean it was a very very small number of patients really not not able to draw any efficacy conclusions but they're certainly

the safety of combining Pemrobimab and the tolerability with Hesvirid or OPEV was more than acceptable.

Okay. Thank you, guys. Great. Thank you.

Our next question comes from Danielle Brill from Raymond James. Your line is now open.

Hey, guys. This is Alex, on for Danielle. Thanks for taking my question. Just another one on IPF, considering the theme. Just kind of curious to hear your thoughts on changing the Phase 3 enrollment criteria to include forced final capacity down to 45%. Were you seeing screening failures and needed to expand? And just kind of curious if there was any post-hoc data cuts at the Phase 2 of the efficacy as a function of baseline forced final capacity? Just kind of curious that evidence, you know, the panrembolumab was still working in these low baseline horizontal capacity that makes you confident that lowering it is not going to harm the trial. Thanks.

Yeah, good question. So, second question first. No, there really wasn't. There was no post hoc analysis looking at FVC as a predictor of efficacy in PRAISE. What I can tell you is that question has been thoroughly looked at in both ESBRIT and OFEV pivotal trials. And interestingly, you know, a lower or higher FDC, greater or less severity, does not predict OFEV or esberate efficacy in the pivotal trials of those agents. So we would expect similar in our trial. Yes, you're correct. We did lower the FDC from 55% in PRAISE to 45% in the Zephyrus program. That's for a couple of reasons. One key one, you mentioned, it's really important. to reducing screen failures and enrolling the trial. Second point is that that really harmonizes it with virtually all the pivotal phase three programs in IPF that have been conducted in the past and are being conducted now. And based on my other comments, you know, we don't expect that to have any adverse effect on the trial. If anything, we think there's some advantages in including the, you know, patients on the slightly more severe end of the spectrum.

Great. Thanks so much. Thank you. Our next question comes from the line of Andy Hazish from William Blair.

Congratulations on getting that deal done. So regarding the deal, just a quick question on its term. So first is, do we know you know, roughly estimate how much are you getting from Estella's royalty-wise per quarter? And also related to that, will future milestones count within the framework of this deal? Also, we also have a question on IPF. So, you know, obviously there's kind of a timing difference between the readout of the two phaser trials are about a year apart. company, whether you guys have strategies in terms of either probably shrinking the timing is not possible, but maybe engaging in dialogue earlier just to, you know, kind of mitigate the difference in time. Third one is kind of a quick one. I noticed that in the 10Q, you mentioned about this IP in China about the crystalline of Roxadustat. I'm just curious if you can comment a little bit further on that in the context of market exclusivity. Thanks so much.

Sure. I'm going to have Juan comment on and respond to your questions on the deal. Mark on IPF and the timing between the trials and strategies that we could do or actions. And then Chris, I'm going to give it to Chris to discuss our exclusive position and in particular, the IP question and the crystal informs.

Hey, Andy, how are you? This is Juan. With regards to your question, I think with regards to the royalty, I think the way to think about it more generally would be that we are under the context of the Astellas deal. We're basically entitled to a 20% royalty. Clearly, As you have probably been following, we're in launch mode in Europe, so it's difficult to talk about numbers at this point in time, but clearly we expect Europe to be fully reimbursed in the next couple of months or in the next few months in the key territories there, which will enable, obviously, growth in revenue and, therefore, growth in a royalty rate. So that's, I think, the way to think about that piece. And I think, I don't know if I mentioned, but we're entitled to around 20% royalty from that transaction. In terms of future milestones, I think there are just sales-based milestones out in the future. And yes, there would be a portion that would be attributable here as well in this transaction. So I think those are the two components.

Yeah, so your question about IPF and the difference between the readouts of Zephyrus 1 and Zephyrus 2, yes. So we've previously communicated and continue to assert that the base case is we'll need both Zephyrus 1 and Zephyrus 2 for filing in the U.S. That said, you know, with a positive Zephyrus 1 trial, we would go to FDA if the data are strong and compelling and discuss with them the potential for filing one pivotal trial. I think there's precedent for that in a rare or severe disease like IPF. So base case, two trials, but we do everything possible to discuss with FDA whether one pivotal trial could suffice for approval.

And with respect to market, to exclusivity, we have multiple avenues to protect our exclusivity in China. Patents are, of course, one form of exclusivity. where we have a robust portfolio, including composition matter and, yes, crystalline patents and other method patents. So this is just one form of exclusivity. We also have regulatory and administrative exclusivity by virtue of being a domestic class one innovative drug. With respect to the specific question about the crystal form patents, yes, this is the first round of invalidation hearings. we had three crystalline patterns that publicly available information were invalidated, which is consistent with expectations as contacts in China during the first round, the invalidation rate is 90%. So we now go on to appeal. There are two rounds of appeals through the courts. We expect that to take two to three years to get resolved, so we're still very early on in that process.

Thank you, Andy.

Hey, Chris, just a follow-up. So during the process of appeal, are all the patents still enforceable, just like in the U.S.?

They are. They are. They remain in effect until the appeal process is concluded.

Got it. Got it. Great. Thank you so much.

One moment for our next question. Thank you.

Our next question comes from Paul Choi from Goldman Sachs. Your line is now open.

Hi. Thank you, and good afternoon, everyone. Thank you for taking our questions. I want to switch gears maybe for a moment to DMD. And I know you've historically been somewhat cautious with regard to the prospects for the non-ambulatory trial. But in the case that it hits on the upper limb assessment, can you maybe just remind us what the regulatory feedback here has been on the approvability of that particular endpoint? I think it's a little less well understood relative to the ambulatory population and other drugs that have filed, for instance, on just driven endpoints.

Good question, Paul. It's Mark. We believe that positive clinical data for either Lolantos 1, the non-ambulatory population, or Lolantos 2, the ambulatory population, could support regulatory filing. This is a disease with a very high medical need. There are really no therapies approved based on clinical endpoints. The currently available therapies are approved on dystrophin biomarker. So we believe that either trial could support filing by itself. So that, of course, would be a discussion we would have to have with the FDA based on the data, but that's our current Okay.

Any questions on the, I think he was asking also about regulatory interactions related to the endpoints.

Yeah. So, right. So, FDA has supported both the performance of the upper limb for the non-ambulatory population and the North Star for the ambulatory population. You're probably aware there's a draft guidance or actually guidance on DMD endpoints. where they're pretty nonspecific, but these are both endpoints that are supported in the guidance that have been used in other trials. So we're very confident about the endpoints.

Okay. Thanks for that, Mark. I did also have a financial question for Juan here. I appreciate the cash burn guidance for the remainder of the year, but as you look to next year, you'll obviously have several late-stage trials rolling off. And I just wanted to maybe ask, you know, what's the maybe initial thinking on the rate of burn or just how you think about paring down OPEX as some of these, you know, trials come to end stage or completion?

Hey, thanks. Thanks, Paul. I think as you called out, probably a little bit, you know, as we're going through clearly all of our financial processes, planning, and so on, you know, we're looking at 2023 and we will come back, you know, in a subsequent earnings call to provide more visibility. But, you know, clearly there's a lot of activity happening in 2023 with clinical trials, as you pointed out, you know, rolling off, you know, but potentially as well, we would potentially start ramping up for launch, you know, depending on the readouts. So I think all of those components is what we're currently discussing and we will provide further perspective over the coming months to what 2023 looks like.

As you can expect, Paul, there are important dynamics here. On one side, you correctly state we will have lower trial expenses as some of those trials conclude. But in some, assuming positive trials, we will also have additional expenses related to bringing those products to market. So we need to think about how to, as we prepare for next year, we need to be thinking about how we're going to provide that type of cash guidance, given some of those dynamics. But it's an exciting time. It's an exciting time for Fibrogen, an exciting time for patients to have so many readouts of pivotal data coming in 2023.

Okay, great. Thank you for taking our questions.

One moment for our next question. Thank you. Our next question comes from Yaron Werber from Cohen.

First, can you just remind us what kind of efficacy you saw in the Phase II Whitney study in CAA? and if we might see some more of that data when you report the china study next year and then just quickly on the european launch rock to do set when you say it's been a little bit slower than expected is that mostly a reflection of just kind of negotiations with individual country reimbursement processes or is there really something about the actual clinical or commercial opportunity in europe that's also contributing to some of these launch dynamics thank you for that question i'll have um

Mark answered the chemotherapy-induced anemia questions, and Zane answered the European performance questions.

Sure. So the Phase 2 Whitney study was an open-label study that looked at two doses of roxidustat, and what we showed there is we can, in fact, increase the hemoglobin and improve the anemia, and we selected the 2.5 mg per kg dose to take forward into the China Phase III study, which is a head-to-head study versus ESA to non-inferiority design. And that will read out mid-next year. And that study is exclusively aimed at China and the China population and the China market.

And then regarding the EU performance to date, It is still early in the game. Reimbursement in Germany and through NICE in the UK and then awaiting reimbursement decision in France, Italy and Spain, as Juan said in his previous remarks and as Astellas has guided, they expect reimbursement decisions in those other three markets by the end of their fiscal year, which would be between now and the end of March. As we have stated in terms of the performance being slower than expected, that primarily relates to Germany because it's still early in the UK. NICE approval was granted in July. Hospitals have 90 days to then adopt that NICE guidance, and so it's still really early in the UK. And I think what we're looking at and what we're experiencing is the reality of a standard of care that's been in place for 30 years. the fact that physicians are so used to using ESAs that it's just been a bit more difficult than anticipated breaking into that standard of care habit. As Enrique said in his remarks, when physicians have replayed back to Astellas, their experience in using Roxidus, it's been very favorable. And so just as we've seen in China where the drug has performed phenomenally well, There's no doubt about the clinical relevance and the benefits of roxidustat relative to an ESA. I think it's just going to take a little bit longer to penetrate into that standard of care habit than perhaps we anticipated.

Maybe just to add, we recently conducted some market research in a number of European countries looking at intent to prescribe. Clearly, reimbursement is a huge catalyst, but the intent of prescribers tends to be really, really high. So we need to get the reimbursement that's a critical catalyst. But as we look at the future, we remain, we continue to remain very excited about the overall opportunity for Roxadustin in Europe. We think it's very significant.

All right, great. Thanks, guys.

Thank you. I would now like to turn it back to Enrique Quintero, Chief Executive Officer.

Well, thank you. I want to thank everyone for your participation in today's investor call and your interest in FibreGen. And I hope you very much enjoy the rest of your day. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.