Akebia Therapeutics (NASDAQ:AKBA) Q3 2020 Earnings Call

0:00 Good day, ladies and gentlemen, and welcome to Akibia Therapeutics' third quarter fiscal 2020 financial results and business update conference call. As a reminder, this call is being recorded. I would now like to introduce your host for today's event, Kristen Shepard, Senior Vice President of Investor Relations with Akibia. Thank you, and welcome to Akibia's third quarter fiscal 2020 financial results and business update conference call. Please note that the press release detailing our results for the third quarter was issued earlier this morning and is available on our investor relations website. For your convenience, a replay of today's call will also be available on our website shortly after we conclude today's call. Joining me for today's call is John Butler, our Chief Executive Officer, and David Spellman, our Chief Financial Officer.

0:47 Before we begin, I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information regarding these factors is described in the forward-looking statements section of the press release we issued this morning, as well as in the risk factors and management discussion and analysis sections of our most recent quarterly and annual reports filed with the SEC. The forward-looking statements on this call speak only as of the original date of this and we do not undertake any obligation to update or revise any of these statements. With that, I'd like to introduce our CEO, John Butler. John?

1:31 Thank you, Kristen, and thank you all for joining us today. We held an investor briefing webcast two short weeks ago to go over the newly presented data in detail. My comments on today's call will be mainly focused on our regulatory submission for the potential U.S. approval of Atadustat for the treatment of anemia due to CKD. I'll then turn the call over to Dave to review the financial results for the quarter, and we'll conclude with some Q&A. So with that, let's get started. Akiba has made significant progress this year, and I'm proud of our team's resilience, performance, and their unwavering commitment to kidney patients and the community that we serve. especially given the challenges presented by the ongoing global COVID-19 pandemic.

2:19 Our team is leading Akibia through the most dynamic period in its history. And importantly, we believe we're positioning Akibia to deliver on a strategy that we believe will build long-term value for our shareholders. We recently completed our pre-NDA meeting with the FDA. Following this important milestone, We remain on track to submit to the FDA our NDA for Vatadustat as early as possible next year. A key component of this NDA is the positive data from our Global Phase III Innovate program and dialysis, which we first announced in May and then shared more recently at ASN Kidney Week. These data were clear and consistent across both efficacy and safety.

3:04 the data showed that Vatadustat achieved both the primary and key secondary efficacy endpoints as well as the primary and key secondary safety or MACE endpoints of the INOVAIT program. More specifically, the data showed Vatadustat achieved and maintained patients in the target hemoglobin range while minimizing excursions above that target range. In addition, Vatadustat achieved non-inferiority to darbopoietin alpha on key secondary safety endpoints that included expanded MACE, cardiovascular MACE, cardiovascular mortality, and all-cause mortality. We believe these data underscore Vatadustat's potential as a new oral standard of care for treating patients with anemia due to chronic kidney disease, or CKD, on dialysis, marking a significant milestone for Akebia.

4:00 And we believe an even more significant milestone for people on dialysis and their care teams. Based on our pre-NDA meeting, we remain confident that the INOVATE results place us on a straightforward path to advance Vatadustat to potential approval for the treatment of anemia due to CKD in patients on dialysis. And we're on track to complete an NDA submission as early as possible in 2021. Upon approval, we believe we have a significant opportunity to advance our mission and help address the unmet needs of the 500,000-plus adult patients with anemia due to CKD on dialysis in the U.S., including both incident and prevalent dialysis patients.

4:46 We believe this could translate into a potential $2 billion market opportunity in the U.S. alone. We are equally excited with Vatadustat's opportunity in dialysis beyond the U.S. market and we're working in close collaboration with Otsuka to prepare a marketing authorization application, or MAA, for submission to the European Medicines Agency next year following our NDA. We look forward to leveraging our renal expertise and existing nephrology-focused commercial organization to support a strong Vatadustat launch in dialysis upon approval. We believe we are also well-positioned with our partner Otsuka sharing in the launch costs and responsibilities and the unique reimbursement system in the U.S.

5:32 dialysis market that encourages the adoption of innovative therapies. These go-to-market strategies, coupled with the unique reimbursement structure, represent opportunities to meaningfully enhance the potential of bringing that induced death to patients on dialysis as quickly as possible, subject to regulatory approval. A great example of this is where our team is already supporting the commercialization of Atadustat in its first major market, Japan, under the trade name Vafseo. I'd like to pause here and say how incredibly rewarding it is to all of us to see the promise of Atadustat realized in Japan, where it's commercially available with a broad label to treat adult patients both on dialysis and not on dialysis.

6:20 Both MTPC, our partner in Japan, and Akibia worked hard to achieve this goal, and we look forward to future commercial success in this market and potentially others. Which is a nice segue to say that I'm very pleased with the strength of our MTPC partnership, as well as our more extensive collaboration with Otsuka. I'm encouraged by the confidence and enthusiasm they continue to demonstrate in both Vatadustat and Akibia. While our highest priority in 2021 remain submitting their NDA. We're continuing to execute across many different work streams focused on areas such as medical affairs, scientific communications, disease state education, patient services, and manufacturing to ensure commercial readiness upon approval.

7:11 Together with our partner, Otsuka, we recently launched a comprehensive campaign designed to increase awareness and education of anemia due to CKD among healthcare providers all with the goal of improving the management of this disease for patients. Again, there's a significant unmet need among patients with anemia due to CKD, and we see a promising opportunity in Vatadustat to advance the standard of care for patients on dialysis. And as Dave will discuss, we're pleased to be doing all of this from a place of financial strength with a cash runway that extends beyond the expected U.S. launch of Vatadustat. While our commercial team executes on pre-commercialization activities, our medical team continues to support Vatadustat's potential with a robust publication plan.

8:00 In addition to all of the data presentations at ASN, we look forward to the publication of the full Innovate data in a prestigious peer-reviewed publication, as well as many other publications moving forward. I'd also like to touch on our non-dialysis opportunity. The non-dialysis indication will also be part of our NDA submission. A pre-NDA meeting confirmed that, as we expected, the FDA will need to review our global Phase III data to determine whether it's sufficient to support approval of Atadustat for the treatment of anemia due to CKD in adult patients not on dialysis. So we are being appropriately cautious in our outlook for approval in the non-dialysis indication, and we suggest you are as well.

8:48 Importantly, based on all of our regulatory interactions, including the pre-NDA meeting, we believe this review issue in non-dialysis will not impact the potential approvability of Vatadustat for the treatment of adult patients with anemia due to CKD on dialysis. In summary, given the strength of our dialysis data, we remain confident that subject to approval, Vatadustat has the potential to be a new oral standard of care to help address the unmet needs of adult patients with anemia due to CKD on dialysis, and that this is currently a $2 billion market opportunity in the U.S. alone. Together with our collaborator Otsuka, we look forward to bringing this innovative therapy to patients on dialysis globally, if approved.

9:35 Now, I'll turn the call over to our CFO, Dave Spellman, who I think many of you know. Dave joined Akibia back in July and brings with him an extensive background in commercial companies, We are very excited to have him on board. Dave?

9:52 Thank you, John, and good morning, everyone. After completing my first full quarter as a Kibia's Chief Financial Officer, I would just like to say how inspiring it's been to be part of a company and more so a tightly knit community of really talented people pursuing a deeply held mission to better the lives of people impacted by kidney disease. I'm excited to be here, and I'm looking forward to speaking with all of you as we continue to advance both Akebia and our Vatadustat development program. With that, I'll jump right into the quarter's results. Total revenue for the third quarter of 2020 was $60 million compared to $92 million for the third quarter of 2019. The decline versus the prior period was driven by lower collaborative revenue consistent with the company advancing the Vatadustat development program in completing both the Innovate and Protect studies.

10:48 As you may know, 80% of our Phase III Vatadustat development costs are reimbursed by our collaborator, OTSUCA, and these corresponding payments are recorded as collaborative revenue. So as these costs decline, so will the corresponding payments. Separately, note that subject to the terms of our collaboration agreements with OTSUCA, Akiba has the potential to receive development and regulatory milestone payments from Otsuka upon approval of Vatadustat in both the U.S. and in Europe. As John mentioned, the third quarter marked the first commercial availability of Vatadustat under the trade name Vaseo in Japan. I'm pleased to report that since launching in late August, we recorded $373,000 in royalty revenue related to the sale of SAO by Mitsubishi Tanabe, our collaboration partner in Japan. We're pleased with this early commercial performance and continue to believe that Japan represents a meaningful growth opportunity for Vatadustat.

11:57 In terms of Akibia's commercial performance, net product revenue for Orixia increased 14.6% to $34.4 million for the third quarter of 2020, compared with $30.0 million for the third quarter of 2019. While this is encouraging performance, we remain cautious in our planning for Erixia revenue due to the fundamental impact that CMS's non-coverage decision continues to have on our business, as well as uncertainty from COVID-19. Cost of goods sold associated with the manufacture of Arixia was $30.3 million for the three months ended September 30, 2020, and includes the impact of $9.9 million in non-cash inventory write-downs, largely related to a previously disclosed manufacturing quality issue with Arixia.

12:51 Moving to our research and development expenses. R&D expenses were $46.9 million for the third quarter of 2020 compared to $74.5 million for the third quarter of 2019. As I just mentioned, the decline here was primarily driven by a decrease in costs consistent with the company completing the Innovate and Protect studies. Selling, general, and administrative expenses were $40.2 million for the third quarter of 2020 compared to $34.2 million for the third quarter of 2019. The increase was primarily a result of higher professional service fees related to some of the pre-commercial activities currently underway to support Vatadustat's introduction in the U.S. subject to approval. We expect to continue to focus our investments in our potential market opportunity with Vatadustat in patients on dialysis where we see significant potential to help patients and drive future growth.

13:51 For our bottom line, the company reported a net loss of $60 million for the third quarter of 2020 as compared to a net loss of $54.6 million for the third quarter of 2019. Turning to our capital position, we ended the third quarter of 2020 in a strong financial position with cash equivalents and available-for-sale securities of $269.3 million. We expect our cash resources to fund our current operating plan beyond the expected U.S. launch of Vatadustat, assuming regulatory approval. And lastly, we ended the quarter with approximately 143 million shares outstanding. With that, we'll open the line for questions. Operator?

14:37 Thank you. Ladies and gentlemen, as a reminder to ask the question, you will need to press star then 1 on your telephone. To withdraw your questions, Press the pound key. Again, that's star one to ask the question. Our first question comes from the line of Chris Raymond with Piper Sandler. Your line is open.

15:02 Hi. This is Allie Brathelon for Chris this morning. Thanks for taking the questions. So just first on the regional PROTECT-MACE analysis, I think we had been expecting the PROTECT data cuts would all be pre-specified, and it's our understanding that for the regional MACE analysis presented at ASN, rescaling age from a dichotomous to a continuous variable increased the power, but that change wasn't actually pre-specified in the stats plan. Just hoping you could talk about how you get comfort that FDA will accept the non-pre-specified analysis. And then also, just from your prepared remarks, it sounds like FDA is mainly interested in global rather than regional lease analysis and predialysis.

15:48 So maybe just help us out. Do we hear that right? And could you expand on that?

15:55 Sure, Allie. Thanks for the question. When it comes to the age as continuous variable analysis, it's important to recognize that age was a pre-specified part of the model. Now, the SAP had dichotomous looking at kind of old versus young, if you want to call over 65 old. Now, using the continuous age as the continuous variable is a tool to give you more specificity. So it is actually the way it's normally run. If you look at it as a dichotomous variable, you have a hazard ratio of 1.06 and a top end at 1.29, not meaningfully different. This is safety data, and ultimately what you're demonstrating there is that you're not increasing cardiovascular risk.

16:48 Now, I want to make sure that you're interpreting correctly what I said. We have confidence in this analysis and what we're going to put in front of the FDA on non-dialysis, but we absolutely recognize that we missed the primary safety endpoint. And given that, there's clearly significant risk. and we think it's just best for you all to approach it that way as well. What I really think is an important message today to deliver is that the dialysis data and based on our pre-MDA meeting and frankly every regulatory interaction that we've had They look at that as a separate population with a separate risk benefit, and given the data that we presented in Innovate, we feel very confident in our path forward for dialysis.

17:44 Okay, thanks. And maybe just one more question. Now that you've had the pre-NDA meeting with FDA, have your thoughts on the chances for an adcom for VADIS D-STAT change? and just maybe clarify in your view, is this at all dependent or even related to the approval decision for Roxodustat in dialysis and predialysis next month?

18:13 Yeah, I mean, I really can't comment on Rock's Deuce. I think we're all going to know what happens there in six weeks or so. Honestly, the pre-NDA meeting, very constructive, productive meeting that really simply kind of confirmed everything that we had been working towards already. We are preparing for an ADCOM. Frankly, we'd welcome an ADCOM. You know, we think that, you know, describing the benefit that patients would get from treatment without a do-step non-dialysis we think would be important. But that's, of course, up to the FDA. But I don't think it changed our view at all. We've always been preparing for an ADCOM.

18:54 Okay. Thank you.

18:56 Thanks, Allie. Thank you. Our next question comes from the line of DeFay Yang with Mizuho. Your line is open. Hi, good morning, everyone. This is Alex on for DeFay. Thank you for taking the questions. I'm wondering if you could comment on whether you still plan on filing for regulatory approval early next year using a priority review voucher for Vatadustat. And then secondly, I'm wondering if you could give us a sense of how quickly you would expect to be able to apply for TDAPA following potential approval in the dialysis setting. Thank you.

19:35 Sure. Thanks for the question. So we still have the option to use the PRV. Of course, that's not our decision alone. That's, you know, our partner V4, and we have to agree on that. So those discussions are ongoing. So we haven't made any determination yet as to whether or not we'll use that. As far as PDAPA goes, The, you know, basically the process is you file once you have your approval and it takes, you know, kind of depending on when the approval comes, there's a, you know, they do these kind of once a quarter, I think, is when they grant the HCPCS code that you need to be part of TDAPA. So, you know, we'll be able to get a little more granular on that as we get closer to knowing exactly when approval will be. But there's a clear process for how you go about getting that code you need to be part of TDAPA.

20:34 It doesn't happen instantaneously on approval. There will be some months of, depending on when you get your approval, some months of delay. Great. Thank you. Thank you. Thank you. Our next question comes from the line of Ed Arc with HC Wainwright. Your line is open.

20:56 Hi, good morning, everyone. This is Thomas Yip asking a couple of questions for Ed. First, a couple of questions about abuse debt to NDAs, one in dialysis patients and one in non-dialysis patients. Do you expect to file them together, perhaps in the first half or second half of 2021? And following on the question on the PRV, if they are indeed filed separately, how does the PRV come into play?

21:36 Thanks for the question. So very important to note, this is one NDA. The one NDA will include... both the dialysis and non-dialysis population as part of the new drug application. And FDA can determine that the drug is approved for both populations or just for one. So that kind of, I think, makes your second question moot. I mean, it's whether we decide to use the PRV or not, along with our partner, it'll be determined on the one NDA. and, you know, let me point out, we're planning on filings as early as we can next year. You know, we haven't guided beyond that, you know, this idea of, you know, first or second half. We're going to move as quickly as we can to get that done.

22:26 So, you know, I don't think you should look too far out to that filing.

22:34 Okay. Thanks for the clarification and the spirit. and then following on the pre-NDA meeting, did the FDA request any additional analysis for the non-balancers population and if not, what else is needed before you can submit the NDA?

22:58 I don't think there were any specific Additional analyses, there will be additional analyses that are part of the NDA. I mean, it's, you know, obviously, you know, what they receive is the briefing book for the pre-NDA meeting versus the NDA is dramatically different. So, you know, we're still analyzing the data. We're still, you know, doing analyses. And if those support the NDA, then we'll include those.

23:28 Okay, got it. And then one final question. First, congratulations on the launch with Mr. Bishi in Japan. So we see that there's 0.4 million of worthy revenue from Mr. Bishi already, and that was launched in August. So it's about a month of sales. If so, how should we look at Bestseo's royalty revenue in fourth quarter 2020?

24:00 Yeah, thanks for the question. So, yeah, it is about a month, four or five weeks of sales that are in that royalty calculation. There is some pull-through and selling, but as you would expect with any launch, there is some inventory built. We're not guiding to the fourth quarter amount, but hopefully that gives you a little bit of direction.

24:26 Okay, got it.

24:27 I think I would characterize our partner as pleased with the launch, so we are as well.

24:35 Okay, completely understood. Once again, congratulations. on the launch in Japan. Thank you for the kind of questions, and we look forward to a very eventful 2021 for that. We do as well. Thank you. Thank you. As a reminder, ladies and gentlemen, to ask the question, you will need to press star then 1 on your phone. Our next question comes from the line of Bert Hazlett with BTIG. Your line is open.

25:07 Yeah, thanks for taking the question. Most of mine have been addressed, but just one that's just slightly different than what was just asked. In your interactions with FDA regarding the non-dialysis population, were there any other specific requirements that you got the sense would be necessary?

25:28 No, Bert. As I said, I mean, it was pretty much, you know, it was constructive, and it was We got clarification on a lot of technical things also, but there was no small things, but nothing that would be significant other analysis that they said we needed to do. I feel like they understood what we were presenting to them and understood that we were going to be submitting all of it together, and they were going to review all of it together Anyway, so there was nothing kind of that came out of that that was a surprise or a big change for the way we were approaching things.

26:17 It's very much as we had been communicating to you before.

26:23 Okay, thanks. And you've spoken just one other on partnerships. You've spoken a couple of different times about V4 and Otsuka and Mitsubishi partnerships. Can you just in general characterize the interactions you're having with your partners in this current environment? Thanks.

26:45 Sure, Bert. Thanks for the question. I mean, we are incredibly pleased with the partners that we've chosen. You know, I'll point to Otsuka most directly since we have the most interaction with them, obviously. We're working side-by-side with them on the NDA. We are leading the NDA. They'll be leading the MAA, but we are kind of lockstep from a strategy standpoint. Obviously, OTSUGA representatives were on the pre-NDA call with us as well. Our strategy is aligned, and they've just been great to work with throughout. As I say, Mitsubishi V4, we have obviously fewer kind of day-to-day interactions with, but they've been great through the process.

27:40 Okay, thank you. Thanks, Bert. Thank you. Our next question comes from the line of Chad Messer with Needleman Company. Your line is open. Hello, everyone. This is Gil on for Chad, and thank you for taking our question. Although I feel you might have kind of addressed this already, So with the FDA feedback, is there any indication that the FDA would be looking at additional studies and non-dialysis that they would ask you to do? I mean, there's no previous studies performed against ESA, not this large, so it's a valid kind of direction.

28:23 Well, I'm not sure I understood exactly the question, but I will say that there was no indication, nor what I expect there to be, in a pre-NDA meeting that any additional studies would be necessary. But again, I mean, that would be extraordinarily unusual for a pre-NDA meeting. But I'm not sure I understood your characterization of that comparison question. It's just because... The program we did, we did with the guidance of the FDA. This is what they asked for and this is what we're giving them.

29:01 And I think you see

29:18 from the results why they want that direct comparison. So again, we'll see how things roll out here, but again, we're certainly comfortable with the program that we've done, and we are cautious about our ability to have an approval in non-dialysis, but we're pleased with the package that we're able to put together based on the data. Thank you for answering our questions and good luck with all the upcoming milestones. Thanks very much. Thank you. Our next question comes from the line of Kenan McKay with RBC Capital Markets. Your line is open.

30:04 Hey guys, thanks for taking our questions. This is Bikram on for Kenan. We had a couple of questions. First, on the ASN presentation for Protect We're just trying to better understand the US versus ex-US differences in cardiovascular events. And other than just the treatment hemoglobin range of 10 to 11 versus 10 to 12, is there anything else that stood out to you from the data? Or did you see any correlation between The patients which achieved a higher hemoglobin outside of that range and they had higher cardiovascular events. I guess we're just trying to better understand what could be driving this difference between US and ex-US patients.

30:59 It's a great question, and again, I mean, the geographic analysis was pre-specified analysis, and that's one of the reasons why it was a pre-specified analysis, because there's a different hemoglobin target in the U.S. versus the rest of the world. So the data kind of showed the data, right? I mean, the difference in MACE was driven by ex-U.S. patients who were treated to a target range of 10 to 12, That's why we performed the post hoc analysis that looked at patients who actually achieved the hemoglobin level during the primary efficacy endpoint of under 11 versus over 11. And you saw that same effect. If they were managed to a lower hemoglobin range, within 10 to 11, there was no increased cardiovascular risk. All of the increased cardiovascular risk showed up when you treated patients to eye or hemoglobin.

31:58 So it really does lead us to the conclusion that if you treat patients to a hemoglobin target of 10 to 11, which is the target in the U.S., you don't increase the cardiovascular risk. And that's the argument that we will put in front of the FDA with the NDA. Okay. Okay, super helpful. And just to follow up on that, I think I'm looking at the curves in the U.S., the pre-specified sub-curve analysis just in the U.S. There's a split happening between the curves for Vedetta stat and the control around week 120. So could you comment on maybe why the curves are splitting at that point, or is there anything you saw that could be driving that?

32:54 No, I mean, the important thing is that they come back together again. They don't maintain a split, and that's why, you know, you look at the overall MACE, you know, there's clearly no increased cardiovascular risk there. I mean, that's not something unusual to see where you're non-inferior. Got it. I was just thinking in terms of duration of exposure of the drug could be maybe driving the cardiovascular events or that's correct me if I'm wrong, if something like that is happening.

33:28 No, it's not. I mean, you wouldn't see it come back together again then if that was the case. I think what you start to see is that the ends start to get smaller, and so you start to see that separation. But the fact that they come back together when the ends are even smaller kind of demonstrates it. All of the statistics demonstrate that there's not an increased cardiovascular risk in that population. Okay, got it. Thank you so much, and congrats on the progress, and thank you so much again. Thank you.

34:01 Appreciate it. Thank you. I'm sure no further questions in the queue now. I would now like to turn the call back over to Mr. John Butler for closing remarks.

34:12 Thank you, Twanda, and thanks to everyone for joining us this morning. We look forward to continuing to update on Akebia's progress. Thanks. Have a good day. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.