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

Welcome to the 19th Annual Morgan Stanley Healthcare Conference. I'm one of the biotech analysts, David Lebowitz. Before I get going, let me read through the requisite disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, I'm happy to have with me, for the next session, from Akebia, the CEO, John Butler, President and CEO; and the CFO, David Spellman. Clearly, a lot going on in your space these days with you and your competitors. I guess, if you could start off by just talking about the company, your overall mission and where you see the company heading.

Sure. First, David, thanks so much for the invitation. It really is a pleasure to be here. At Akebia, we have a very clear strategic purpose, and that's to better the life of each person impacted by kidney disease. We are a commercial company already with a product, Auryxia, that is available to help patients with hyperphosphatemia on dialysis and iron deficiency anemia for patients not on dialysis. I think maybe we're most excited, and probably I'll spend a lot of time today talking about our second program, vadadustat, which is a product with the opportunity to be the first-in-class HIF prolyl hydroxylase inhibitor to treat CKD patients with anemia, both dialysis patients and nondialysis patients potentially. So we're excited about that. This is a product that's under review by the FDA today, with a PDUFA date late in March. Already approved in Japan, and we expect our partner, Otsuka, to file in Europe later this year.

So you were just talking about the NDA, recently accepted by the FDA, PDUFA date is March 29. This could put the company on track given what's happened with your competitor to become the first-in-class HIF inhibitor on the market. Could you briefly talk about what data has been produced from your trials to this point in both the dialysis and the nondialysis populations? And how does that compare to the standard of care, which has been ESAs for 20-plus years?

Right. So the NDA is informed by, I think, it's 36 clinical trials. We'll spend our time talking about the Phase III program, which between dialysis and nondialysis represents over 7,500 patients studied. And these trials were MACE trials, hence, the big numbers, major adverse cardiovascular event trials. We were looking for, first and foremost, noninferiority for efficacy versus darbepoetin, which is an ESA, as you mentioned, and primary safety endpoint of noninferiority for MACE overall. And we had 2 studies in each of the dialysis and nondialysis program. Each had a primary endpoint for efficacy, and then you combine the events for 1 primary safety impact. So INNO2VATE was our dialysis program. And in INNO2VATE, the data was extraordinarily clear, consistent and, we think, quite compelling as well. The primary and key secondary endpoints on efficacy noninferiority for increasing hemoglobin in patients who were not yet on an ESA and maintaining hemoglobin in patients who were on an ESA. It clearly showed fewer excursions above the target hemoglobin range, which is an important measure commercially and from a regulatory standpoint as well. And on the MACE side, in INNO2VATE, you had a very clear noninferiority demonstrated with an upper bound of, I think, it was 1.11, where the target or the upper limit was agreed with FDA was 1.25. So in -- for nondialysis, you see a very similar design to the study. Once again, 2 different studies, each with an efficacy endpoint and a combined MACE endpoint. Once again, on the efficacy side, very clear, increasing hemoglobin into the target range, maintaining it there or maintaining it in patients who are already being treated both for primary efficacy and secondary efficacy endpoints. Similarly, we saw fewer excursions above target range for vadadustat patients as well. Unfortunately, we did not hit the primary safety endpoint for MACE, where the upper bound was just over 1.36, where we were targeting 1.25. So obviously, we were disappointed in that. But as we explore that study further, remember, there were prespecified geographic views of the data. So we looked at the U.S. patients, Europe and rest of world as prospective groups because they were -- we had different target hemoglobin ranges and the like. So in the U.S., we found that the upper bound of the noninferiority range was 1.28, which was still above the 1.25. Though with a hazard ratio of 1.06, it was clear there wasn't an elevated cardiovascular risk in that patient population, and that was a prespecified view. Now when we looked at that more closely, it really saw that treatment patterns for nondialysis patients are very different in places outside of the U.S. When they start dialysis, if they start dialysis, how they manage patients. So the U.S. patients represented just half of the overall study. So this wasn't like we saw in 10% of patients were U.S. patients and saw a positive result, this was over 1,700 patients. And we think it clearly demonstrated that there isn't an increased risk of cardiovascular events in the vadadustat group. Now we missed the primary safety endpoint. So we've always told people be cautious about how the FDA will look at that. But we feel it was certainly worth filing and we feel good about that data on review. And we'll see where the FDA comes down on that.

When the FDA looks at the submission, do they look at both data sets as completely distinct? Will there be some aspect of pooling? For example, sometimes you might see the safety data be entirely pooled together and looked at that way. How will the FDA review?

Yes. So the FDA looks at dialysis and nondialysis as distinct populations, right? But of course, when you submit your NDA, you're submitting all of your data that you've generated. You give them the raw data. And of course, they can perform any analysis that they want. They have the data, they ask us to perform some analysis, they perform some analysis and they review the data very, very closely. What's important, and I think is not always understood, it's a single NDA that has both patient populations. So the -- this is not quite the exact wording, but the indication would be for -- to treat the anemia of chronic kidney disease in patients on dialysis and not on dialysis. So the FDA can choose to agree with us completely and give us that indication, they can choose to limit that to the dialysis population and strike the nondialysis population. But that becomes a labeling question for them.

Now you have a competitor out there, roxadustat. They had -- the FDA called a rather late panel in the game and their application process, and it didn't go well. And then ultimately, they received a CRL for the application. How do you compare vadadustat experience to the roxadustat experience?

So you know, a lot of different ways to answer that question. I mean, first and foremost, for everyone listening on the call, our data is published, both INNO2VATE and PRO2TECT are published in the New England Journal of Medicine. So as you can imagine, there is a tremendous amount of data available for anyone to understand kind of the outcomes that I just discussed before. I think that was a difference. There just wasn't a lot of data available. So when we got to the AdCom, we learned a lot. One thing we've talked about additionally is we worked very closely with the FDA and EMA on the design of the Phase III program. And for instance, doing an active comparator in the nondialysis program was a very clear ask for us from the FDA, and that's the data that we delivered. When you look at other areas where there was questions around the design and the starting dose and the speed of increase in hemoglobin, and I think it's a great example where when we discuss with the FDA our Phase III program, we brought a starting dose that was the same as the starting dose in our Phase II program, which was 450 milligrams once a day. When we modeled out the potential increase in hemoglobin that patients might see enrolled in the study, the FDA was concerned about -- I mentioned it before, about how quickly hemoglobins might rise in some of the patients. So given that, we changed our starting dose to a 300-milligram daily starting dose. And once again, we saw -- we still saw a very nice increase in hemoglobin. It's a titratable drug, remember, so you had -- the primary efficacy endpoint was the average hemoglobin between weeks 24 and 36 weeks, so you had lots of time to get patients into the range, and we were able to do that successfully. So with vadadustat, with that dosing regimen, we can see the increase in excursions. And clearly, some of the things that were expressed as concern, the rate of dialysis access occlusion, seizures, serious infections, we simply didn't see that in our data at all.

Now when you look at the data, you still ultimately did not achieve noninferiority on the dialysis -- on the nondialysis side of things. Will the FDA be amenable to a post hoc analysis on the geography question? Or is that something that you probably have to investigate going forward?

Well, we're in the middle of the review now, so I definitely don't want to try to do play by play. I will remind you that the geographic analysis that I referenced first was a prospective analysis. That was prespecified to do a look at just the U.S. patients. And as I said, the U.S. patients represented half of the patients enrolled in the trial. So over 1,700 patients. So it's a very robust analysis. What was post hoc that we talked about was in the prespecified analysis, we looked at age as a dichotomous variable. You were either over 65 or under 65. When you look at just the U.S. population, well, you lost a lot of events because you weren't including the events outside the U.S. So we said -- another technique you can use to give more power to the analysis is to look at age as a continuous variable. Someone who's 65 has a lower risk of an event than someone who's 75, right? But they would be considered the same in the prespecified analysis. So when we did that post hoc analysis, it did show that the upper limit was below 1.25. But it is post hoc. And what I have -- what we're seeing with the FDA and what we expected with the FDA is they're going to look very robustly at the data, and they're going to get to the answer -- the right answer for them. Whether they can get there on the U.S. analysis or not, we'll know that on March 29. We believe there isn't an increased risk. We believe that the one thing you heard at the roxadustat panel is that the unmet need, particularly in that non-dialysis population is high, and so we think the FDA heard that as well and recognizes that unmet need. And we're working with them to answer all of their questions so that they do a robust review.

Now looking forward, the drug is being reviewed by the FDA, could be getting approved next year. How does that drug launch into a market where there's been a long established competitor that the safety has essentially been declared as -- in the dialysis population, as noninferior? And while in that population, these patients are already going in for dialysis all the time. So the oral aspect is not quite as great an advantage as it would be in a nondialysis environment. How does that work from a market perspective?

Right? So we're actually incredibly excited about it from a market perspective. It is -- I think, physicians have been anxious to have alternatives to ESAs. And when you look at the differences, so the study showed noninferiority, and that's clearly the outcome of the dialysis trial. When you look at what physicians define as things they're concerned about and they equate with safety, high EPO levels are one, because that's been associated previously with increased cardiovascular risk is these super physiologic EPO levels that you see with ESAs. Those excursions above the target hemoglobin level are very, very important. They spend a lot of time managing EPO dose to keep patients from having those excursions. Those are -- and the cycling of hemoglobin as well. The ups and downs, you give a once-monthly dose, you see a quick increase, and then it comes down over time. And that cycling is also associated with safety and risk issues. So we have physiologic EPO levels with vadadustat. We have -- we don't see the excursions. It's very easy to manage these patients and you don't see the cycling of hemoglobin. I think those are things that are still exciting for physicians to want to try this drug. We're also aided by the fact that CMS recognizes that they need to create an environment where novel drugs can be used in dialysis patients. Remember, you have this bundled reimbursement environment there. So they created this TDAPA, this transitional drug add-on payment adjustment, so that physicians and dialysis providers can use vadadustat, be paid for it outside of the bundle, their bundled payment remains intact. So it's very easy for them to be able to try that without an economic consequence, if you will. They're still being paid for anemia management within the bundle. And we think that gives them the opportunity to try it. The other area to focus on, it's a smaller part of the dialysis market, but it's the fastest-growing part, is home dialysis. Home dialysis now represents about 15%. But there is -- if you look at any of the discussions from the dialysis providers from the Federal Government, they're looking to move patients to the home setting and that's growing quickly. And that oral once-a-day product in vadadustat is ideal for that home population. And then while we'll have a daily dose as our launch dose, when we launched vadadustat, we are running 3-times-weekly studies as well. Our partner, Otsuka, is running one called [ MODIFY ] and we are running a study called [ FOCUS ] and we expect to be able to file for 3-times-weekly dosing as quickly as possible after approval of vadadustat.

How important do you think having that 3-times-dosing formulation is important given the nature of the dialysis market?

We think it's important. We think that physicians want to control compliance in patients and being able to hand them the drug during dialysis allows them to do that. But as we talk to physicians, we also see a willingness to do once-a-day dosing. I think it's going to really vary. The great thing about having 3-times-weekly and once-a-day dosing is that you give them the opportunity to do either. Their growing home population can have once-daily dosing and ultimately, the 3-times-weekly dosing for the dialysis patient in the chair.

Now you alluded to the EPO levels as being a key metric that physicians do follow. When looking at the roxadustat panel, they seem reluctant to conclude that was the cause of the MACE events, and they were uncertain whether to assign blame in that regard. How do you think physicians will look at this? And how does that view affect you in your FDA submission?

Well, I mean I think it's important to point out. I mean, we don't have any head-to-head studies with roxadustat. When you see the published data of the EPO levels they achieved versus the studies of vadadustat, we have much more physiologic EPO levels. And again, I don't know -- they certainly weren't wrong to not attribute it to something. There was no direct evidence that it was EPO levels or it was the rise in hemoglobin or it was the starting dose that drove that rise in hemoglobin with roxadustat. What I know is with vadadustat, we have data to support physiologic people levels. We have data to support that's published in New England Journal that supports a gradual rise in hemoglobin without the excursions. And so we have the data to support the messaging that will deliver vis-a-vis darbepoetin. And again, the FDA has all of the information. They have all of the roxa data and ours. And again, I keep going back to the things that they pointed to as real concerns in the roxadustat panel where this differential rate of dialysis access failures, the seizures and serious infections. And you can go back to our New England Journal data and we just don't see that. So when I put all of those things together, I feel like we're in a strong position. I mean this is an FDA review, so you never know. They're doing their own analysis, but we feel quite strongly and comfortable, especially with our dialysis, David.

That's excellent. Now looking overseas, international effort. Could you tell us about that and your respective partnerships?

Sure. So vadadustat is approved in Japan as VAFSEO. And our partner, Mitsubishi Tanabe is licensed -- is selling a product there and happy with how that's going. You may remember that we monetized that Royalty stream with HealthCare Royalty partners a few months ago, I can't remember exactly when that was, Dave, but...

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Thank you. We're pleased with how that's progressing. Europe is -- Otsuka is our partner in Europe as well as in the U.S. The U.S. deal is a 50-50 profit-sharing deal. So they're helping significantly -- would help significantly with the regulatory filing but we led the regulatory filing in the U.S. They -- we have a 50-50 partnership on commercialization, so we're in a great spot from a -- we already have a commercial team, but have a larger team at Otsuka that we can tap into also as needed for commercialization. Europe is a more traditional licensing deal with Otsuka. So they're responsible for the MAA filing, and we are helping support them on that, kind of the reverse roles from the NDA. And they expect to submit that to the EMA before the end of the year this year.

Now let's move on to Auryxia for hyperphosphatemia and IDA. Tell us about the dynamics of those markets.

Yes. So Auryxia is a great product. We're excited about that. It did about $129 million last year. We expect it to grow this year. And we don't say that lightly, this has been a very challenging year in the dialysis space because of COVID. The hyperphosphatemia phosphate binder market has decreased 14% year-on-year. And that's really driven by the mortality rate in the dialysis population with COVID-19. I mean it's small studies that have been published, but the mortality rate for dialysis patients has been kind of in the 20% to 30% range. So we're encouraged that, I think, the last number I saw was about 75% of the population is vaccinated now. Hopefully, this delta wave won't have as much of an impact, but we're watching it closely to see what happens kind of as we progress through this current wave. But Auryxia, as I said, continues to grow across the board. Physicians see this as an important product, and we expect that growth to continue over the next few years. And the bulk of the sales are in hyperphosphatemia. Europe, recall, CMS has refused to reimburse the product for iron deficiency anemia. So and then we have to get prior authorizations for patients for hyperphosphatemia across that payer spectrum, which is a very significant part of the inner landscape. So most of our sales are coming out of hyperphosphatemia, but we do -- we're seeing growth, and we expect to continue to see that growth in that market. And I think one of the things that's really interesting is, as we think about the launch of vadadustat, hyperphosphatemia is in the dialysis population. So we are -- we have a commercial organization firmly entrenched in dialysis. And when we add vadadustat to their bag, we're going to get tremendous leverage out of that organization.

So what is the status of the litigation with CMS regarding that preauthorization? Considering it was the approval of a new indication caused the disruption in a previously approved indication.

Yes. Yes. Well, the litigation is ongoing. The government tried to have the case dismissed for probably a month or 2 ago, I guess, that was. And the judge allowed the case to continue, so it continues on. We do think it's important particularly as you think about -- again, we go back to COVID-19 and these CKD patients who could benefit from an oral drug to increase their hemoglobin levels with iron deficiency anemia. Now if they want to be treated, they have to go into an infusion center and get an IV iron product. And of course, they expose themselves then to increased risk and physicians really want access to the product. So we're doing beyond. We continue to talk to CMS. We continue to pursue our legal remedies. And we also look at legislative remedies as well where we can clarify that. I mean those are high bars, of course, but we think it's important to try to continue to get the patients access to the drug.

Now with the market itself, there are generics at play, there is calcium at play. Where is the niche for Auryxia?

It's actually more than a niche. I mean, there are a significant number of patients who aren't achieving goal. And I mean, I'll address calcium first, I mean that's where -- when you see the shifts in the market, generally speaking, the shifts are away from calcium. The guidelines that have been published for a number of years now saying that physicians should avoid using calcium when they can because if calcium is absorbed, it gets into the coronaries and increase cardiovascular risk for patients. And there is -- this is something we were seeing when I was at Genzyme selling Renagel and Renvela 15 years ago, 20 years ago, it's true today, and you're really starting to see calcium -- the decline in the use of calcium increase. So you have generic Sevelamer and that's still the most used product in the space. But as much as that product is very near and dear to my heart from my past life, there are many patients who don't achieve goal with that product. And those are patients who are appropriate for Auryxia therapy for sure. And I think that's where a lot of the use of the product comes from. And that's really where we're seeing growth. And when physicians start to use Auryxia, they really do kind of understand the benefit that they're getting. It's tolerable for patients. They're seeing absorption of iron and they're seeing, most importantly, decreases in phosphorus, and we get converts. So having our sales force all be virtual for a long period of time certainly didn't help, but most of them are back out now, live, and we're encouraged by what we're seeing in the market. Again, against the backdrop of a declining market, we're growing.

Now looking forward, clearly, vadadustat is the main focus. But are you engaging in business development activities, potentially looking at other ways to expand your pipeline?

We absolutely are. I mean I don't want to let everyone -- everyone has to know we are absolutely focused on getting vadadustat approved. That's the number one focus for most of the company, 1a, for the commercial organization selling Auryxia today. But we do think about the future of the company. And we do kind of as soon as we have vadadustat approved, the question will be what's next. And we did a deal a few months ago with Cyclerion for a product where we're actually quite excited about, praliciguat, which is a product that has the potential to treat some of the orphan kidney diseases, first disease, maybe FSGS. We are -- it was a great deal for us, very small amount upfront, more of the back end is being held by Cyclerion and us, we'll share that when it's successful. We'll wait until we have vadadustat approval before we start the continued development with praliciguat. But we're excited about the potential of that product. It's early days. Obviously, we haven't talked a lot about it. We'll talk more about it as we get through the vadadustat review, but those are the kinds of deals we are looking to do. We want to maintain a strong balance sheet, but we are thinking about the future of the company as well.

And coming up to the last question here. On balance sheet, what is the cash situation going into the launch? How are you thinking about being prepared financially for the launch?

Yes. I got this one. Yes, we ended the second quarter with about $247 million in cash, that takes us well into the launch of vadadustat and greater than 12 months of cash at that reporting date, which is really great from a disclosure perspective that anything from a success perspective with vadadustat would just be additive to that runway. We're ready to deploy our cash. We're spending some money to develop vadadustat further. We are building out our supply chain. We've got a lot of leverage in our SG&A, so our cash position is really strong given all those things.

Would you be looking forward potentially to bolster the cash position at some point? Certainly, going to the public markets is one approach, but are you also considering similar types of activities like what you do with Royalty pharma?

Yes. So David, that's a great example. So we're trying to be smart and maintain a strong balance sheet and a deal like the Royalty -- the HCR deal. That actually really helped us in a lot of ways. It strengthened the balance sheet, great validation that vadadustat is a great product in Japan with great prospects with our partner, Mitsubishi. If we could do deals that strengthen the company and validate our science, we would be -- I think that'd be a smart way for us to move forward.

Thank you. And with that, we've come to the end of our session. Thank you very much again for attending via video and look forward to chatting again soon.

Thanks for having us, David.