Welcome to the 19th Annual Morgan Stanley Healthcare Conference. I'm one of the Biotech Analysts, David Lebovitz. 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. With that, I'm happy to have with me for the next session from Akebia, the CEO, John Butler, President, 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. 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, that's to better the life of each person impacted by kidney disease. We're 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 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 non-dialysis patients potentially. 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. You were just talking about the NDA recently accepted by the FDA. PDUFA date is March 29th. 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 and in both the dialysis and the non-dialysis populations, and how does that compare to the standard of care, which has been ESAs for 20+ years? Right. 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 non-dialysis represents over 7,500 patients studied. These trials were MACE trials, hence the big numbers, major adverse cardiovascular event trials. We were looking for, first and foremost, non-inferiority for efficacy versus darbepoetin, which is an ESA, as you mentioned, and primary safety endpoint of non-inferiority for MACE overall. We had two studies in each of the dialysis and non-dialysis programs. Each had a primary endpoint for efficacy, and then you combined the events for one primary safety endpoint. 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 met non-inferiority for increase in hemoglobin in patients who were not yet on an ESA and maintaining hemoglobin in patients who were on an ESA. Clearly showed fewer excursions above the target hemoglobin range, which is an important measure commercially and from a regulatory standpoint as well. On the MACE side, in INNO2VATE, you had a very clear non-inferiority demonstrated with an upper bound of, I think it was 1.11, where the target or the upper limit agreed with FDA was 1.25. For non-dialysis, you see a very similar design to the study. Once again, two different studies, each with an efficacy endpoint and a combined MACE endpoint. Once again, on the efficacy side, very clear increase in 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. Obviously, we were disappointed in that, but as we explored that study further, remember there were pre-specified geographic views of the data. We looked at the U.S. patients, Europe, and rest of world as prospective groups because they had different target hemoglobin ranges and the like. In the U.S., we found that the upper bound of the non-inferiority range was 1.28, which was still above the 1.25, but 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 pre-specified view. When we looked at that more closely, really saw that treatment patterns for non-dialysis patients at very different places outside of the U.S. When they start dialysis, if they start dialysis, how they manage patients. The U.S. patients represented just half of the overall study. This wasn't like, we saw 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. We missed the primary safety endpoint. We've always told people, "Be cautious about how the FDA will look at that." We feel it was certainly worth filing. We feel good about that data on review. 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? Yeah. The FDA looks at dialysis and non-dialysis as distinct populations. 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 analyses, they perform some analyses, and they review the data very closely. What's important, and I think is not always understood, it's a single NDA that has both patient populations. This is not quite the exact wording, but the indication would be to treat the anemia of chronic kidney disease in patients on dialysis and not on dialysis. 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 non-dialysis population. That becomes a labeling question for them. Mm-hmm. You have a competitor out there, roxadustat. The FDA called a rather late panel in the game in their application process, and it didn't go well. Ultimately, they received a CRL for the application. How do you compare vadadustat experience to the roxadustat experience? A lot of different ways to answer that question. 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. As you can imagine, there is a tremendous amount of data available for anyone to understand the outcomes that I just discussed before. I think that was a difference. There just wasn't a lot of data available. 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. For instance, doing an active comparator in the non-dialysis program was a very clear ask for us from the FDA, and that's the data that we delivered. You look at other areas where there was questions around the design and the starting dose and the speed of increase in hemoglobin. I think it's a great example where when we discussed 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 mg once a day. When we modeled out the potential increase in hemoglobin that patients might see enrolled in the study, FDA was concerned about, I mentioned it before, about how quickly hemoglobins might rise in some of the patients. Given that, we changed our starting dose to a 300 mg daily starting dose. Once again, we still saw a very nice increase in hemoglobin. It's a titratable drug, remember? You had the primary efficacy endpoint was the average hemoglobin between weeks 24 and 36. You had lots of time to get patients into the range, and we were able to do that successfully. With vadadustat, with that dosing regimen, we didn't see the increase in excursions. 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. When you look at the data, you still ultimately did not achieve non-inferiority on the non-dialysis 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 pre-specified to do a look at just the U.S. patients. As I said, the U.S. patients represented half of the patients enrolled in the trial, so over 1,700 patients. It's a very robust analysis. What was post hoc that we talked about was, in the pre-specified 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. 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? They would be considered the same in the pre-specified analysis. When we did that post hoc analysis, it did show that the upper limit was below 1.25. It is post hoc. 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. They're going to get to the right answer for them. Whether they can get there on the U.S. analysis or not, we'll know that on March 29th. We believe there isn't an increased risk. One thing you heard at the roxadustat panel is that the unmet need, particularly in that non-dialysis population, is high. We think the FDA heard that as well and recognizes that unmet need. We're working with them to answer all of their questions so that they do a robust review. 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 in the dialysis population as non-inferior, 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 non-dialysis environment. How does that work from a market perspective? Right. We're actually incredibly excited about it from a market perspective. I think physicians have been anxious to have alternatives to ESAs. When you look at the differences, the study showed non-inferiority, 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, for one, because that's been associated previously with increased cardiovascular risk. It's 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. 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. We have physiologic EPO levels with vadadustat. 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. They created this TDAPA, this Transitional Drug Add-on Payment Adjustment, so that physicians and dialysis providers can use of vadadustat, be paid for it outside of the bundle. Their bundle payment remains intact, 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. 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%. 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. That oral once-a-day product in vadadustat is ideal for that home population. While we'll have a daily dose as our launch dose, when we launch vadadustat, we are running 3x weekly studies as well. Our partner, Otsuka, is running one called Modify, and we're running a study called Focus. We expect to be able to file for 3x weekly dosing as quickly as possible after approval of vadadustat. How important do you think having that 3x 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. 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 3x 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 three-times-weekly dosing for the dialysis patient in the chair. 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 th ink it's important to point out, we don't have any head-to-head studies with roxadustat. When you see the published data of the EPO levels they achieve versus the studies of vadadustat, we have much more physiologic EPO levels. 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 EPO levels. We have data to support, that's published in the "New England Journal" that supports a gradual rise in hemoglobin without the excursions. We have the data to support the messaging that we'll deliver vis-a-vis darbepoetin. Again, the FDA has all of the information. They have all of the Rox data and ours. Again, I keep going back to the things that they pointed to as real concerns in the roxadustat panel were this differential rate of dialysis access failures, the seizures, and serious infections. You can go back to our New England Journal data, and we just don't see that. When I put all of those things together, I feel like we're in a strong position. This is an FDA review, so you never know. They're doing their own analyses, but we feel quite strongly and comfortable, especially with our dialysis data. That's excellent. Now, looking overseas, international effort, could you tell us about that and your respective partnerships? Sure. Vadadustat is approved in Japan as Vafseo, and our partner, Mitsubishi Tanabe, 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. April Thank you. We're pleased with how that's progressing. 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. I mean, helped significantly with the regulatory filing, though we led the regulatory filing in the U.S. We have a 50/50 partnership on commercialization, so we're in a great spot. 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're helping support them on that, kind of the reverse roles from the NDA. They expect to submit that to the EMA before the end of the year, this year. Let's move on to Auryxia for hyperphosphatemia and IDA. Tell us about the dynamics of those markets. Yep. Auryxia is a great product. We're excited about it. Did about $129 million last year. We expect it to grow this year. 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. Small studies have been published, but the mortality rate for dialysis patients has been in the 20%-30% range. 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 closely to see what happens as we progress through this current wave. Auryxia, as I said, continues to grow across the board, and physicians see this as an important product, and we expect that growth to continue over the next few years. The bulk of the sales are in hyperphosphatemia. You'll recall, CMS has refused to reimburse the product for iron deficiency anemia. We have to get prior authorizations for patients for hyperphosphatemia across that payer spectrum, which is a very significant part of the payer landscape. Most of our sales are coming out of hyperphosphatemia. We're seeing growth, and we expect to continue to see that growth in that market. I think one of the things that's real interesting is as we think about the launch of vadadustat, hyperphosphatemia is in the dialysis population. 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. What is the status of the litigation with CMS regarding that pre-authorization, considering it was the approval of a new indication caused a disruption? Yeah in a previously approved indication? Yeah. Well, the litigation is ongoing. The government tried to have the case dismissed probably a month or two ago, I guess that was, and the judge allowed the case to continue. It continues on. We do think it's important, particularly as you think about, again, when 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. Of course, they expose themselves then to increased risk, and physicians really want access to the product. 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. Those are high bars, of course, but we think it's important to try to continue to get patients access to the drug. With the market itself, there are generics at play. There's calcium at play. Where is the niche for Auryxia? It's actually more than a niche. There are a significant number of patients who aren't achieving goal. I'll address calcium first. 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 say that physicians should avoid using calcium when they can, because calcium is absorbed. It gets into the coronaries and then increased cardiovascular risk for patients. This is something we were saying when I was at Genzyme selling Renagel and Renvela 15 years ago, 20 years ago. It's true today, you're really starting to see the decline in the use of calcium increase. You have generic sevelamer, that's still the most used product in the space. 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. Those are patients who are appropriate for Auryxia therapy for sure. I think that's where a lot of the use of the product comes from, and that's really where we're seeing growth. When physicians start to use Auryxia, they really do 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. 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. Looking forward, clearly, vadadustat is the main focus, are you engaging in business development activities, potentially looking at other ways to expand your pipeline? We absolutely are. Everyone has to know we are absolutely focused on getting vadadustat approved. That's the number 1 focus for most of the company, 1A for the commercial organization selling Auryxia today. We do think about the future of the company, and we do as soon as we have vadadustat approved, the question will be what's next? We did a deal a few months ago with Cyclerion for a product 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 may be FSGS. It was a great deal for us, very small amount up front. More of the back end is being held by Cyclerion and us, and we'll share in it when successful. We'll wait until we have vadadustat approval before we start the continued development with praliciguat. 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. 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. 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? Dave? 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. 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. 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 market is one approach. Are you also considering similar types of activities like what you did with Royalty Pharma? Yeah. David, that's a great example. We're trying to be smart and maintain a strong balance sheet and a deal like 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 product, our partner, Mitsubishi. If we can do deals that strengthen and validate our science, I think that'd be a smart way to move forward. Thank you. 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.