Akebia Therapeutics, Inc. (AKBA) Earnings Call Transcript & Summary

All right. Good morning. I'm Eric Joseph, senior biotech analyst at JPMorgan. And our next presenting company is Akebia Therapeutics. It's my pleasure to welcome CEO, John Butler, to tell us a little bit about the company. Just as a reminder, the breakout Q&A for this session will be in the Olympic Room. With that, John?

Eric, thanks so much. Thanks for the opportunity to present this morning. I just want to remind everyone that I'm going to be making forward-looking statements. So please refer to our SEC filings for more information. It is very exciting to have the opportunity to talk to you about Akebia today. We are a company with a clear purpose and a clear strategic focus, and that's to better the life of each person impacted by kidney disease. This is a huge public health issue. There are 37 million Americans who are impacted by kidney disease. And there's been a lack of innovation in the space. It's very exciting to see new companies forming, new innovation in the space, and we want to be at forefront of that. We really want to be recognized as a leader in taking care of patients with kidney disease, and we think that's a great business opportunity for us as well. Now this isn't a new opportunity for us. The company was founded in 2007, and we've been focused on the anemia of chronic kidney disease pretty much since the founding. And there are many of us at Akebia today who've been working kidney disease for much, much longer than from 2007, but things are accelerating today. And it is very exciting to look at what we accomplished, just in the past year, in 2019. The folks at Akebia executed across multiple areas in a highly, highly effective manner. First and foremost, we saw our first positive Phase III data for vadadustat. Vadadustat is our investigational HIF-Prolyl Hydroxylase inhibitor that's being investigated for anemia of chronic kidney disease, both for patients on dialysis and patients not on dialysis. Our first positive Phase III results came through our partner, Mitsubishi Tanabe, and was presented at the ASN meeting in November. We had our first regulatory filing for vadadustat in Japan. Maybe most importantly, we finally finished enrollment in our global Phase III program, enrolling over 7,500 patients across: INNO2VATE, our dialysis program; and PRO2TECT, our nondialysis program. Now also, I think, worth mentioning here, and of course while it's not an Akebia accomplishment, the fact that the Nobel Prize in medicine was given to the investigators who identified the HIF pathway, we think that just is such a great reminder of the exciting science that we're working in now. And when you think about the Akebia employees, everyone is very excited about the opportunity to take that Nobel-winning science and turn it into something that will help patients every day. So now we're at 2020. This is going to be a defining year for Akebia. We are in the countdown for our global Phase III vadadustat trial results. INNO2VATE, our dialysis program, will have top line data next quarter. We enrolled almost 4,000 patients in the INNO2VATE program, and we're very excited to bring those results to you next quarter. PRO2TECT, our nondialysis program, will be available by midyear. Over 3,500 patients were enrolled in that program. We expect to have our first regulatory approval in Japan. If PMDA takes their regular 1-year review process July of this year, we'll have our first regulatory approval through our partner, Mitsubishi Tanabe. We have a tremendous amount of confidence in our data. So we're, obviously, working very hard on precommercialization activities as well. Again, you have to be prepared. This is a massive market opportunity, and we want to be able to take advantage of it. If we step back just a second, when you think about the unmet need in kidney disease, it is staggering. The government spends $120 billion a year just through Medicare to treat patients with chronic kidney disease, most of that for patients who are not yet on dialysis. This is why the government is truly focused in this area now. They are putting programs in place to encourage innovation, and we'll talk about one of those programs in a little bit. But again, it is a very exciting time to be able to bring solutions for this significant health issue. Focusing more on just where we'll be competing in the anemia of chronic kidney disease, there are over 5 million patients in the U.S. with anemia associated with chronic kidney disease, and there is significant unmet need associated with that. The burden of disease is clear. The quality of life issues, fatigue, weakness, dizziness, shortness of breath, but there's clinical impact as well. Anemia is associated with faster progression to end-stage renal disease with increased cardiovascular risk. But when you think about the burden on the patient, it really hits home for you. My first job in renal was working at Amgen as a sales rep, right after Epogen was introduced. Here, you had dialysis patients who had hemoglobins of 6. Suddenly, they had hemoglobins of 10, 11, 12, and they were able to live life again. When you walked into a dialysis center, it was as if you walked on water. You measure time by other things in your life. I think about when I started there, my oldest daughter was born. She got married last year. She teaches third grade, and nothing has been done to truly improve outcomes for patients with anemia and chronic kidney disease. That's what drew me to Akebia. That is what really -- where we feel we can have a fantastic impact because the current standard of care, erythropoiesis-stimulating agents, or ESAs, simply don't provide what patients need. The risks are clear and identified. They're very well-known, the limitations on ESAs. First and foremost, they center around EPO levels, EPO doses. You can get patients to high hemoglobin levels with low doses of EPO. But once you increase EPO, you increase risk. That's been clearly shown. If you look at the graph in the middle of this slide, you see the starting dose of darbepoetin, Aranesp, which is the comparator in our global Phase III across all of our programs. The initial dose, you see EPO levels that are 5x a normal physiologic level. Those are the kinds of increases that inpatients are associated with cardiovascular risk. On top of that, speed of increase in hemoglobin is associated with risk, hemoglobin cycling, the up and down of hemoglobin is associated with risk and excursions above 12 or 13 hemoglobins. Physicians clearly recognize that these are issues for patients, and this is what you see with the standard of care, ESAs. We believe vadadustat uniquely provides the potential for a solution there. You look at the graph on the left, vadadustat is restoring normal physiologic levels of EPO. Yet with that, very modest increase in EPO, you drive a significant increase in hemoglobin, but you do it in a very gradual, very sustained manner, avoiding the quick rise in hemoglobin, keeping patients in range, avoiding cycling and avoiding excursions above hemoglobin levels of 13. It is a unique opportunity for us to change the standard of care. So one of the questions I get asked most frequently is you're doing noninferiority studies. So how will you compete -- how will you compete with an ESA? What will be the value proposition here? Well, I was just reviewing some independent research on the flight to San Francisco from Spherix, and they asked the question of physicians, what is the advance you want to see in the treatment of anemia? First and foremost, it was we want to see a convenient oral dose for the product. Vadadustat is an oral product, dosed once a day. We're delivering that. Everything beyond that was related to safety. And how did these nephrologists define safety? Maintaining EPO levels within a physiologic range, increasing hemoglobin in a predictable and controlled manner, minimizing hemoglobin excursions and cycling. That is how we can position vadadustat to succeed in the market. That's what we hope to show in the Phase III program that we'll be reporting on this year. So we believe we are uniquely positioned to change the standard of care for patients with chronic kidney disease. And that's a huge, huge market opportunity. We talk about the market opportunity in the U.S., and we say $5-plus billion. I tend to focus on the plus, particularly as we talk about the nondialysis market, and let's focus on that first. As I mentioned before, there are about 37 million people in the U.S. who have chronic kidney disease. Over 5 million of those have anemia associated with chronic kidney disease. Today, because of the inconvenience of an injectable dose, because of the some market access issues and because of the safety concerns, particularly, only about 250,000 patients are being treated today. If, with all of those advantages that I described, we're able to double that number to $500,000, in other words, treat less than 9% of the patients who have anemia associated with chronic kidney disease, that's a $3 billion market opportunity. As you think about the rest of those patients, proving that safety, how large can this product be? How many patients can we positively impact with this drug? This is the market that gets us most excited, the opportunity to grow, and a once-a-day oral product is the best solution for this market opportunity. Now our core package for nondialysis is PRO2TECT. Now as I said, these are 2 studies between them. We enrolled about 3,500 patients. This is noninferiority design for both efficacy and safety. You'll combine the 2 trials for your MACE safety endpoint. Very important thing to point out here is that we are using darbepoetin, Aranesp, as the comparator in this study. So we're comparing to standard of care. Now the most important reason that this matters is because this is what the FDA wanted. This is responsive to the regulators. But on top of that, we have a fundamental belief that to change standard of care, you have to compare the standard of care. That's what physicians want to see. When you talk to them about vadadustat, they say, how does it compare to ESAs? We'll be able to deliver that message. So we're being responsive to the regulators and responsive to the market. Now dialysis is a very interesting market for us as well. It's a $2 billion market opportunity in the U.S. The numbers are very straightforward. There's just over 500,000 dialysis patients in the U.S., about 90% of them are treated with an ESA today, and that's about a $2 billion market opportunity. Now that's where the term straightforward and dialysis part ways. Everything else about dialysis is unique. It's unique in that it's a prospective payment system, a bundled payment system that drives reimbursement. It's unique that there are 2 providers that treat 80% of the patients who are dialyzed in the U.S. today. So our perspective is a unique market demands a unique solution in order to penetrate that market quickly, and we feel that unique solution is a relationship that we've developed with Vifor Pharma. Vifor has done a wonderful job of putting a relationship with Fresenius Medical Care in place. Fresenius treats about 40% of the dialysis patients in the country. That relationship with Fresenius, the strength of that was demonstrated when Vifor brought Mircera into the U.S. in just 9 months. They moved 90% of Fresenius' patients on to Mircera. Fresenius, under a bundled reimbursement environment, they want to manage their patients by protocols as tightly and consistently as possible. So they want to try to drive that through their system. That's what they've done with Mircera. Vadadustat will be the only HIF product that can be sold through that relationship between Vifor and Fresenius. We think that's an opportunity to accelerate growth. I mentioned earlier that the government is also looking for ways to encourage innovation in this space. And CMS introduced a rule at the end of last year called TDAPA, or the Transitional Drug Add-On Payment Adjuster. In TDAPA, innovative product, like vadadustat, will be paid for outside of the bundle for 2 years at cost while the bundled payment isn't impacted. So it's a great incentive for dialysis providers to incorporate innovative products into treatment of patients, and obviously, a great economic incentive for them to do that as well. So between TDAPA and our relationship with Vifor, we think we can penetrate the dialysis market extraordinarily quickly. And of course, it's the same nephrologist prescribing in dialysis who go back to their office and then treat nondialysis patients. And the drug that they're used to using is what they'll use in their office. So we think the carryover from that will be significant as well. Again, our core package in dialysis is INNO2VATE, which has a correction conversion and incident dialysis patient study and then a conversion study of prevalent dialysis patients between them, almost 4,000 patients. Once again, comparing to standard of care. So when you look across our Phase III program, we really feel that we're positioned for success from a clinical, regulatory and commercial perspective. From a clinical perspective, the active control gives us clear data readouts and consistent data readouts. From a regulatory perspective, we have an agreed to noninferiority margin with the FDA. We've met with the FDA and agreed to all of the key statistical parameters in our SAP, and obviously, the active control is responsive to what FDA and EMA have looked for in comparing in nondialysis. And of course, all of those things lead to a great opportunity from a commercial perspective. As I said before, nephrologists want to know how your drug compares to the current standard of care. We will be able to make those direct comparisons because we made those -- we use that active control across our studies. So we really do feel we're extraordinarily well prepared, and we're thinking every day about the commercialization of this product. And I think -- again, I think Akebia is uniquely positioned to be successful here. We have a commercial organization today, selling Auryxia. Auryxia is at the foundation of what we do. This is our drug with 2 indications: phosphate binding and iron deficiency anemia. And with that, we have about 140-person commercial organization supporting that. We're developing relationships with nephrologists, we're growing that product and we're in a very unique position once vadadustat is approved, that we now have a portfolio of products for patients with kidney disease. Layer on top of that, the relationship with Vifor that I referenced earlier. And on top of that, that we have a relationship with Otsuka, who also has a growing renal presence in the U.S., and we will share commercial responsibility with them. We think we're extremely well positioned, uniquely positioned for success in the market with vadadustat. If you think about a company that's having its first Phase III readout right after the next question, the question I get is, okay, how are you going to now finance the launch? We don't have to finance the launch. We have the commercial organization in place, and we have the relationships with Vifor and Otsuka, which will drive revenue and share expenses. Again, we think that puts Akebia in a very strong position once our data reads out. So 2020 is a defining year for us, and we know exactly what we need to focus on. First and foremost, we need to optimize our cash resources. We did a term loan of $100 million in the fourth quarter that drives our cash runway out to Q1 of next year. We continue to look at our operating expenses to try to optimize and maximize that cash. We need to continue to drive Auryxia revenue as the foundation, the springboard to really deepen those relationships with nephrologists, and that community and position ourselves for success with vadadustat. It's always exciting when a company has their first regulatory approval. There's a tremendous amount of work that will happen over the first half of this year to ensure that we have approval for vadadustat in Japan. And most importantly, the team is very focused on executing on our global Phase III data readout. Again, top-line data for INNO2VATE will be available just one quarter. It's so much fun to say that. I think I'll say it over and over again. After having started dosing these trials at the end of 2015, it's exciting to be at the finish line. So Q2 will read out INNO2VATE. And by midyear, we'll read out on PRO2TECT. And then the team is running as quickly as possible to a regulatory filing. So it's an exciting year for Akebia, and I look forward to continuing to update you on our progress in the future. Thank you all very much.

And again, I think we're going to Olympic for questions.

All right. We'll get started. Again, I'm Eric Joseph with JP Morgan. We're in a breakout session for Akebia. John, would just like to present, maybe I can get you to introduce who's at the panel with us, and we'll open it up for Q&A.

Great. Thanks, Eric. I'm John Butler. I'm Akebia's President and CEO. With me are Michel Dahan, who's our Chief Business Officer; and Dr. Steven Burke, who's our Chief Medical Officer.

Great. All right. I guess maybe first question, raise an interesting point when it comes to the differentiated efficacy and tolerability offering with vadadustat as it relates to treatment with ESAs, being able to control EPO rise. Can you maybe elaborate on that a little bit more? And to what extent the Japan Phase III study further speak to that kind of control, particularly whether or not EPO induction was measured in that study?

Right. So in the Japan data, I don't believe we measured EPO in the Japan data, EPO levels. Did we? We haven't presented it.

Yes, we haven't.

Yes. So -- but we have an extensive Phase I data showing that EPO increase. And what you see clearly in the Japan data around hemoglobin increase is that steady increase that you're not shooting up quickly -- hemoglobin shooting up quickly, and then you're able to sustain those and avoid those excursions. I mean that is truly what physicians are looking for. When we spoke with FDA in designing the program, what was most important to them was avoiding quick increases in hemoglobin. So they even wanted us to start at lower doses in order to ensure that, that would happen. And obviously, in Japan, you can see that, that was a very successful strategy.

It goes without saying that a lot of the discussion will lead up to a series of MACE readouts that we've seen in 2019 and also anticipation of your data. A lot of questions focusing on regulatory interactions and around safety margins that were defined in your Cisco analysis protocol. Can you just address that debate and whether there is a -- really speaking to sort of where the upper bound 1.3 has a racial risk sort of originates from the literature and whether that's an appropriate margin to be considering?

Yes. The position that's great for us is there isn't a debate. We spoke to FDA. We negotiated with FDA, and we came to an agreement on a noninferiority margin that we'd use for both INNO2VATE and PRO2TECT. We haven't disclosed that. We won't disclose that. It's obviously a competitive space. So there isn't a standard from our perspective. There is an agreement that we have in place with the regulators. That's what we're using. And when we report data next quarter, that's what we're reporting around.

I think -- and as it relates to the MACE readout, FDA's focus is -- I guess, are there any subcomponents within MACE that FDA is particularly interested in seeing adverse trends in, in order to maintain?

Yes. I mean FDA being FDA appropriately, they will look at the totality of the data. So they were very clear that the endpoint is MACE, all-cause mortality, nonfatal MI, nonfatal stroke. We will be measuring other MACE-plus components like hospitalization for heart failure and adjudicating that. But from FDA standpoint, it's really only looking at MACE. Overall, MACE, obviously, is the primary safety endpoint, but they will look at the components of MACE as well, and they will look at that in the context of all of the data that's presented and make a determination of risk/benefit. We feel quite confident today. And I think the data that's been presented from the competitor only lowers the risk from our perspective.

And maybe just for a little bit larger context here. I mean one of the questions we get is, why is it that, I guess, with -- given the history with EPO use in the nondialysis setting, right, why is it that noninferior MACE would be sufficient for at least docs to be clinically comfortable using the HIF class, assuming that's what the data show?

Right. Well, the program is designed as a noninferiority study. I mean from FDA's perspective, they have a product -- series of products. ESA is available on the market, where the risk/benefit still is favorable. Therefore, they're still on the market. And so from a regulatory perspective, it show us that you are not less safe than products that we continue to support for use in the space. I outlined in my presentation, given that you have a noninferiority design, and we'll see kind of where the data ultimately falls. But physicians think about kind of day-to-day. When asked about what do you need to see to incorporate this innovative treatment into your practice, it wasn't I need to see superiority for MACE. They understand the pieces that add up to risk using ESAs today. And that increased EPO levels, the hemoglobin cycling, the fast increase in hemoglobin and excursions above 13. They want to see a product that doesn't do that. We have demonstrated that in Japan, and we expect we'll be able to demonstrate that with our MACE studies, INNO2VATE and PRO2TECT as well, and we think that will drive the product forward. And of course, extremely important to them is now patients have to come and get an injection or have to give themselves an injection, which is more rare these days. Patients want a convenient oral dose, physicians want to deliver that to them. You put all of those things together and that we have a once-a-day dose, which in nondialysis is the optimal way to deliver the drug. We think we're quite well positioned for commercial success.

Just touching on that point, post top line safety data. Can you kind of just walk us through time lines to NDA/MAA submissions and I think, potential for Adcom panel, looking forward [indiscernible] across there?

So the question was post-data time line for filing approval and if there will be an Adcom. So -- and obviously, I don't know yet exactly when we'll have the data. We are very confident in the timing that we've laid out there, but that's plus or minus months. As I said in the presentation, from a filing perspective, we won't let any grass grow under our feet. I mean we will move as quickly as we can to complete the clinical study reports, put the NDA together. And obviously, we have -- the work on the JNDA is very helpful from that perspective as well. But we will move as quickly as we can. Now really, it's the FDA who will tell you whether or not you need an Adcom. I think that our competitor has said that they expect to have one. I would agree that first-in-class would probably have an Adcom with a second-in-class product. I don't think it's a definitive that you'll have it, but we'll certainly be ready for that.

No. I agree, and that's the -- if the data is clear, which we expect it to be. And we're not first-in-class, it does decrease the probability of having an Adcom.

I just wanted to ask a question about reimbursement for outpatient nondialysis CKD. I don't think there's an EPO traction out there. Will noninferiority get new reimbursement as an outpatient? Curious if you can take this.

Sure. So the question was on reimbursement, particularly in nondialysis, that EPO doesn't have a lot of traction and will noninferiority allow us to be reimbursed. So market access is an issue for the ESAs. And it's an issue for the ESAs, not because there isn't a recognition that the drugs work, but these are injectable drugs, they are generally paid for under the medical benefit. And with guidelines saying that you shouldn't treat with ESAs, unless the hemoglobin is below 10, what happens today is that, for the most part, in the U.S., if a patient shows up at a physician's office, has a hemoglobin of 9.5, they will give them and will be reimbursed for, generally, a shot of Aranesp. If they come back, they're a Stage 4 patient, maybe they're coming back 3 months later, 4 months later, and their hemoglobin is 10.1, they won't be able to get an injection. So what you end up with there is because they're over 10, right? So what you end up with there is basically rescue therapy as the standard of care driven by, frequently, the reimbursement. As an oral product, vadadustat will be on the drug benefit. And I fully expect that we'll have a prior auth, but patients won't be able to start unless hemoglobin is below 10. But generally there, you're going to be able to have refills and maintain hemoglobin above and be able to treat patients. That's -- it will be a very standard, if you will, process of negotiating with Part D providers and commercial suppliers to be on formulary. But we think a nondialysis, we will be able to get very good access for the product.

Do you think you have to keep showing it for less than 10? Do you have refills?

We don't expect that, that will be the case with an oral product. We think that heaping someone treated in the range is what physicians are looking for. And generally, with an oral product, once you have a PA, a prior auth, that's good for at least a year, and they'll be able to continue to treat the patient.

Do you have percentage of patients who are hyporesponders to EPO in your trial? And are you doing any type of substance analysis for those groups?

Would you repeat the question?

All right. So the question was, do we have hyporesponsive patients as part of our clinical trial? Are we doing any analysis of -- for those patients? So within the 17 trial, the conversion trial in dialysis in INNO2VATE, the entry criteria do allow for hyporesponsive patients to be a part of the study. I don't know how many patients we have, but we certainly will be able to look at those patients uniquely and look at their response. That certainly won't be part of top line readout, but that's something that, ultimately, we will be able to look at.

In nondialysis treatment, would you expect that?

You don't generally see that level of hyporesponsive patient in nondialysis.

What is your strategy and time line with regards to commercialization in Europe and other ex-U.S. geographies?

So the question was strategy around commercialization in Europe and other ex-U.S. markets. Michel, do you want to -- you've been quiet, answer that?

Thank you, John. So our partner, Mitsubishi Tanabe, in Japan, as you may know, has filed their JNDA -- our JNDA last year. And if you expect normal regulatory review time lines there, we're expecting to get an approval this year. And so it is one of the very exciting time for us, where we're going to see the first regulatory approval for that age study in a major market. And then in Europe, it's -- it will all sort of start as from the top line data readout because we are working closely with our partner, Otsuka, in order to prepare for commercialization -- well, filing and commercialization in Europe.

Is Japan a useful proxy to think about commercial uptake of vadadustat in the U.S. in nondialysis?

That's an interesting question. The -- when you think about the HIF market, if you will, in Japan, because they don't demand a MACE outcome study, you do have more HIF players who'll be on the market. Now the first HIF product, roxadustat, has been approved for dialysis in Japan. We are the first product -- HIF product to file for both dialysis and nondialysis. So as Michel referenced, if we have a regular review, we could be first to market in nondialysis. But there are a number of players who are coming after. So I think that might change the dynamics versus what you'd see in the U.S. Do you have anything to add to that, Michel?

No, I think that covers it.

Coming back to INNO2VATE and PRO2TECT. Well, particularly PRO2TECT actually, where one of the key secondary endpoints you're interested in seeing is progression of CKD. Would that type of information be included in the top line readout? Or we've get to look to a subsequent data presentation?

No. Thanks for that question, Eric. That allow us to kind of clarify top line. I mean, top line, you, obviously, want to protect your ability to publish and present it to a large congress. So expect top line to be very much that. The efficacy endpoints for each of the 2 trials, the combined MACE endpoint, which is the primary safety endpoint and general safety, a good understanding of the safety of the compound. If you look back at previous press releases of data we've presented in the past, we are very -- we disclosed very appropriately, I think, and you'll see the same. So things like progression, I wouldn't expect to be part of the top line. Yes?

The slide on the y-axis, where you have 20 units of EPO, is there anything to suggest that it's a, forgive me for saying it, potentially carrier profile from an efficacy standpoint, the FTE for the most part? Or do you have more nonresponders? It's 20 [indiscernible] here [indiscernible].

Right. So the question referenced the slide in the presentation that showed the EPO levels that vadadustat achieved in that Phase I study. So -- and the question was, is that an inferior profile to someone who drives a higher EPO level? So the measurement of success for the product is the hemoglobin that you drive, right? And what we've clearly demonstrated in every Phase II, Phase III study is that we drive significant hemoglobin response. Quite frankly, we think this is one of the strongest points of differentiation that we'll have, that -- with that very modest increase in EPO or restoration of a normal EPO level, we're able to drive that very gradual, but substantive increase in hemoglobin. I mean it's -- the product was basically built for purpose. I mean it's ideal for the chronic kidney disease market, where you're really looking for 1 gram, 1.5 gram of hemoglobin increase, and we know that it's those EPO levels that drive the added risk that we can do. That, with that modest increase in EPO, we think, is a really significant benefit for the product.

Maybe just one additional commercial question for nondialysis. How -- I guess, how to think about the concentration of the target or how to think about the physician base that you'll be targeting at launch and the coverage that you've currently have with your commercial team.

Well, that's one of the strengths of the merger that we did last year. We have a commercial organization in place who are covering the targets that we are -- that we'll be focusing on for vadadustat. We have and are continuing to develop relationships, but those -- we have a product that has an iron deficiency, anemia indication. So we're talking about the consequences of not treating anemia in chronic kidney disease patients, all of which will be extraordinarily helpful in accelerating the launch of vadadustat. On top of that, it has been mentioned a couple of times, we have -- 50% of the effort will be put in by Otsuka, who has a JYNARQUE for polycystic kidney disease, which is a fast-growing product in the space, and they have a clear commitment to renal as well. So particularly, right out of the shoot, if you will, of launch, we have extraordinarily strong coverage of the nephrology population.

Okay. There are no further questions. I think we'll wrap it there. Thanks very much for your time.

Thank you very much.