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

Ladies and gentlemen, thank you for standing by. Welcome to Akebia Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn your conference over to Mercedes Carrasco, Senior Director, Investor Relations. Please go ahead.

Thank you, and welcome to Akebia's Commercial Update Conference Call. Please note that a press release was issued today, Thursday, July 11, and that release is available on the Investors section of our website. For your convenience, a replay of today's call will also be available on our website after we conclude. Joining me for today's call, we have John Butler, Chief Executive Officer; and Nicholas Grund, Chief Commercial Officer. We also have Erik Ostrowski, Chief Financial Officer and Chief Business Officer, joining and available for questions. I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information describing these risks is included in the press release that we issued on July 11 as well as in the Risk Factors and Management Discussion and Analysis section of our most recent annual and quarterly reports filed with the SEC. The forward-looking statements on this call speak only as of the original date of this call and except as required by law, 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.

Thanks, Mercedes, and thanks, everyone, for joining us this morning. It's great to be here today to provide you with some important updates on our ongoing Vafseo launch. Now we're going to cover a lot of ground today. First, I'll review positive changes to our relationship with CSL Vifor. Then Nick will discuss our WAC pricing decision, TDAPA filing and progress on contracting for both Auryxia and Vafseo. We are very pleased with the progress we've made in just 3 months. As I've previously outlined, our launch is centered around 3 initiatives: first, driving prescriber demand; second, effectively contracting with dialysis organizations; and third, generating clinical data to identify additional areas of potential benefit to patients to ensure long-term growth and move Vafseo towards being the oral standard of care for patients on dialysis. Now we're making great progress on our third medical initiative. But today, we want to focus on the progress we're making on our commercial initiatives to drive prescriber demand and contract effectively. In a moment, I'll turn it over to Nick to discuss the significant progress we've made in these areas of the launch. But first, I want to review an important and positive change to our relationship with CSL Vifor that will streamline our launch initiatives. Today, we announced that we've created a new structure to our relationship with CSL Vifor, terminating our license agreement and putting a royalty agreement in place. We believe this change will significantly simplify our operational approach to market access which we believe will facilitate and accelerate the contracting process and all other aspects of a successful launch. With the royalty-based termination agreement, we regained full rights to Vafseo in the U.S., and in exchange, will pay CSL Vifor tiered royalties on Vafseo U.S. net product sales. The details of the agreement are available in the 8-K that we filed today. But to summarize, all Vafseo annual net product sales under $450 million will be subject to a high single-digit royalty to CSL Vifor. Vafseo annual net product sales over $450 million will be subject to a mid-single-digit royalty. Now we have the option to buy down the royalty at any time beginning in July 27. If we execute the buy-down option, the new royalty structure would be a mid-single-digit royalty up to $450 million of Vafseo annual net product sales, and there'd be no royalty on annual Vafseo sales over $450 million. The buy-down option and the new agreement overall is a reflection of the very significant value we believe is possible for Vafseo. And separately, recall that in May of this year, we revised the license agreement with CSL Vifor to modify the method of repayment for the working capital fund through tiered royalties to CSL Vifor based on Akebia's net sales of Vafseo in the U.S. Those repayment terms are simply carried over into this new termination agreement. CSL Vifor has been a great partner over the past years. We appreciate that when we approach CSL Vifor to discuss the royalty-based termination agreement, the company was agreeable to a simplified arrangement. They've contributed significant capital to getting Vafseo to market, and under the agreement, have the opportunity to generate a return on that investment while at the same time, Akebia achieves economic and most significantly, operational benefits. We look forward to operating under our new relationship with CSL Vifor moving forward. Now with that, I'd like to pass it to Nick to discuss overall launch progress. Nick?

Thanks, John, and thank you all for joining the call. It has been 3 months since Vafseo approval and our launch is in full swing. We're all pleased that the market reception has been strong. It is clear that prescribers are looking forward to having a new tool to manage anemia for dialysis patients. To highlight the recent accomplishments, we have seen unaided awareness of Vafseo increase approximately 60% since the time of approval. Additionally, prescribers are eager to learn more. We have accelerated our Vafseo messaging, moving beyond general awareness of the product and label to educating prescribers on the clinical aspects of the product. We validated our presumptions that physicians have patient populations in mind for first experience with Vafseo. We continue to hear that upon availability in January, prescribers are willing and eager to begin to adopt Vafseo in home or peritoneal dialysis or PD patients, and in patients treated in-center who are on high doses of ESAs, as well as those patients who are not achieving appropriate hemoglobin levels. These segments represent a very large opportunity for Vafseo and Akebia, and our clinical evidence strongly supports treating these patient population subgroups. Recall, our pivotal INNO2VATE studies were published in the New England Journal of Medicine in 2021, and we have a robust publication plan in place. Efforts to drive prescriber demand will continue through for the product availability in January 2025 and beyond. Driving prescriber demand is as important as effective contracting to make Vafseo available to patients. As part of the contracting process, we set price and to be eligible for reimbursement, we filed our Transitional Drug Add-on Payment Adjustment or TDAPA application in June and expect TDAPA designation in January 2025. Vafseo is a unique product based on Nobel Prize winning science, and that we believe meaningfully changes today's treatment paradigm of anemia for dialysis patients and for physicians who are used to using injectable ESAs. As a once-daily oral tablet that activates a physiologic response for anemia management, we believe Vafseo clearly brings significant value to a space where innovation was previously lacking. Today, we announced our Vafseo wholesale acquisition cost at $1,278 for our 150 mg 60-count bottle or approximately $15,500 per patient per year based on the starting dose in the label. We have tested this pricing level with our stakeholders and believe that it will be compelling to physicians and dialysis providers operating in the TDAPA environment who want to use Vafseo. The price reflects the value we believe Vafseo can provide to dialysis patients upon market availability as well as the potential value we believe is possible for a pre-dialysis CKD population if approved. Our expectation is that our medical and regulatory teams will engage with the FDA this year on a path forward to potentially making the product available for non-dialysis patients. We expect we would be reimbursed by Medicare Part D and commercial plans. This was an important consideration when making this strategic pricing decision. We're extremely pleased with the progress we've made towards contracting the product portfolio with dialysis organizations. Our existing renal-focused commercial team is in place and has extensive experience contracting in this space as demonstrated by the fact that we already have an Auryxia contract in place with one of the largest dialysis organizations in the U.S. that extends through to 2024. We know how to contract efficiently and effectively. The relationships and contracting expertise is broad-based across all dialysis organizations and will now be focused on the entire portfolio. We believe we have the key building blocks in place to contract Vafseo prior to product availability and Auryxia prior to the start of TDAPA, namely the people and our portfolio. There is significant value in the portfolio. Auryxia is entering the dialysis bundle in 2025, which has allowed us to start having conversations, and importantly, contracting with dialysis organizations or DOs, and it has yielded 2 benefits. First, it reaffirms that the pricing structure and strategy in place for Auryxia, which will serve as the basis for a similar structure and strategy anticipated for Vafseo contracts, is solid. Second, it reaffirms DOs' desire to contract directly with Akebia around our portfolio. Our credibility is further demonstrated today by noting that we signed our first multiyear Auryxia TDAPA contract, which starts in 2025 with one of the largest DOs in the U.S. This first contract serves as a springboard to engaging further with all DOs around the portfolio. In coming months, I look forward to updating you on the progress on the percent of patient lives managed by DOs under contract for both Auryxia and Vafseo. As a reminder, as we discussed in previous calls, our product supply contracts with dialysis organizations will include an off-invoice discount and a volume-based rebate, meaning as volume of Vafseo purchased by DOs goes up, the net price goes down. We've had many conversations with DOs about this structure which is the type of familiar arrangement they anticipate and welcome. Dialysis organizations are looking for 2 major items in these agreements: first, economics during to TDAPA to cover the operational costs associated with Vafseo availability; second, predictability throughout the term of the agreement to allow for them to prescribe products without the fear of having to switch patients at a later date. In January, when the product is available, we expect to see net pricing to reflect the off-invoice discount and a rebate reflective of the initial volume. As prescribers gain confidence with Vafseo, we expect adoption to accelerate, and this will trigger higher percentage rebates to dialysis organizations. To ensure predictability post TDAPA, we expect the net price post TDAPA to be similar to the price of an ESA. Again, with a strong offering, we expect initial contracting to occur between now and the beginning of next year when both Auryxia and Vafseo become eligible for TDAPA reimbursement. We're off to a great start. We're driving prescriber demand and there's an increased interest in HIF and specifically, Vafseo. We are contracting both of our products and we have a plan to generate additional clinical data for Vafseo, which may facilitate additional clinical utilization. What's best is we still have several months to continue to execute and to amplify revenue potential upon Vafseo availability in January 2025, and we will be extremely productive during this period. So let's open the line for questions.

[Operator Instructions] And the first question will come from Allison Bratzel with Piper Sandler.

Thanks for the update and holding the call and for taking my questions. So a couple for me. First, just on the Vafseo pricing decision, I think you mentioned that factors in the potential non-dialysis opportunity. Could you just expand on that? Any new interactions you've had with regulators that give you confidence that label expansion could be on the table or just when we could expect an update on the path forward there? Second, just on the changes to the Vifor deal. Just walk us through how this came about, operationally, what this simplifies and just if this fundamentally changes the actual economics on Vafseo sales realized by Akebia and Vifor. And then third, just what kind of news flow or visibility do you plan to share on progress on the deal contracting strategy as we get closer to January 1?

Great. Ally, thanks for joining, and thanks for the questions. So NDD -- so we are preparing to discuss NDD with the FDA this year, and we said that before. We expect that we'll engage with them and have a path forward. The great thing is, if you recall from the roxadustat and the daprodustat Adcoms, FDA agreed that this is a high unmet medical need area. Frankly, that's different than when we spoke to them 5 or 6 years ago. I think it was a real recognition that NDD patients need to be treated. And what's really interesting, in the U.S., is almost 75% of patients aren't treated with ESAs today though they're available. So the idea of a once-a-day oral product really just makes tremendous sense. And when you look at the results of the PRO2TECT study, and you look at -- I mean I know years ago, Ally, you were around then. When you look at the U.S. data and the fact that when you treated patients to a hemoglobin of 10 to 11, you didn't see an increased MACE risk. We think that really supports -- and particularly when you look at different GFRs, and when you look at a GFR below 15, the patients who are really near dialysis, they didn't have an increased MACE risk. And yet if they're not treated before they start dialysis, they do terribly. And this is what really is driving that opportunity. So with the IRA now, you really can't change your price when you get a new indication. You have one opportunity to price your drug. So we really have to think about that expanded label as we thought about the strategic pricing and getting outside of dialysis where you have a more standard Part D and commercial payer mix, there's an opportunity for the price to reflect the value that the product is bringing. So again, we're working on the briefing document now. Expect to have that conversation with the FDA first and then EMA after, but have that FDA feedback before the end of this year. So -- and the second question was on the Vifor deal, and it was kind of operational benefits and then economics. So I'll ask Nick to comment on operational and Erik to comment on economic.

Yes. Thanks for the question. It really starts with Akebia now controls the pricing for the entire market, right? And then with that control, it simplifies decision-making around pricing and contracting. It allows complete transparency to what's going on with every single customer. And importantly, it lets us manage the ASP in a way that we hadn't had previously. Just to remind everybody, we've been detailing physicians all along. We've been detailing all physicians all along. Customers, though, were asking why would I contract with Vifor when Akebia is in here detailing the product. This eliminates confusion in the customer's mind, so critically important, not only operational efficiencies but clarity for our customers on who they're working with. And that's important moving forward. Erik?

On the economics, under the new royalty-based arrangement, we expect Vafseo related contribution to the bottom line to be modestly higher as compared to the prior arrangement, which, as you may recall, was a profit share. So I really think this just simplifies things to kind of the second element of your question. We book 100% of the revenues. There's a deduction for the royalty. So it's getting much cleaner, [ et cetera ].

And Ally, one other point on your first question that I should have mentioned why we want to engage with the FDA, remember in our CRL, the FDA suggests that we come back and talk about patient populations where the benefit/risk is positive. So they very much opened the door to this conversation as well. So we want to -- obviously, we want to walk through that door and make this product available because we think that, that opportunity is very significant and I think more than doubles the opportunity that we have in dialysis. So your last question was around visibility that we'll provide. So there's going to be ongoing process. We have lots of opportunities to talk to you all between now and the end of the year. Our regular earnings calls in August and November and then September, October are very busy months for banking meetings and conferences and the likes. So I think we'll have lots of opportunity. We'll take advantage of those opportunities to keep updating you as we contract for both Auryxia and Vafseo.

The next question comes from Ed Arce with H.C. Wainwright.

This is Thomas Yip asking a couple of questions for Ed. So first question, in addition to the ability to control ASP, as mentioned earlier, can you discuss what the major rationale for terminating the CSL agreement, especially given that about 60% of dialysis center were -- including all Fresenius centers were already wrapped up on the previous arrangement of CSL.

Thomas, thanks so much for the question. So the market has changed a lot over the last few years. We really are the only HIF activator that's being promoted in the market and available for -- will be available for patients. We have a commercial organization in place. We have a relationship with dialysis providers. When you think about Fresenius, we have had a relationship with Fresenius for years. And I'm going to ask Nick to make a few more comments about that because he's closer to it in the field now. But we're very, very comfortable with our ability to manage this process ourselves. And this simplification is, we think, very important for driving success. But Nick, maybe give a little more color there.

Yes. I mean the Fresenius, let's kind of take that one down. They're our largest customer today and they have a contract, an active contract with us today. They've been a wonderful partner with us on Auryxia as demonstrated by their volume that we do with them. When I think about our engagement with them, we've already had a number of conversations around Auryxia TDAPA. This announcement today allows us to talk to them around Vafseo contract. We've had a lot of discussions with them around protocol development from our medical team. They've welcomed any insights we might have on the patient populations that need to be treated. And this allow us on the commercial front to now engage them with Vafseo around the contracting. In fact, we already have a meeting next week with them to talk about it. I'm very confident in our ability to work with Fresenius moving forward as they've already demonstrated a willingness to partner with us on Auryxia and that will apply to Vafseo as well.

Yes, I think that needs to be amplified. I mean the ability for us now to go in and talk about contracting with Auryxia and Vafseo together, there is incredible power in that portfolio in those conversations. And now we have the ability to do that directly. Under the agreement, Vifor was -- we were always responsible for the commercial execution, the sales. Our reps were the ones calling on Fresenius physicians. It was just the contracting process really that Vifor is responsible for at Fresenius and most of the small and medium providers. And having the ability to go to all of them ourselves with both Auryxia and Vafseo is very, very powerful and will benefit both products. So we're really excited about this new arrangement.

Understood. And then perhaps on operational level, you already mentioned that a robust commercial op in place with you guys. What kind of headcount increase do you anticipate that will be needed to handle the major contracting with dialysis centers?

Nick, do you want to take that?

Yes. No, as we said, we have a full commercial team that's actively building, has relationships with all dialysis organizations. We need, if any, 1, maybe 0 additional headcount for the change that the Vifor agreement brings about. And so we're very confident that the people we have in place have the relationships and the ability to do this effectively.