Good day, ladies and gentlemen, and welcome to the Akebia Therapeutics Q1 Fiscal Year 2019 Financial Results and Business Highlights Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kristen Sheppard, Vice President of Investor Relations. You may now begin.

Thank you. Good morning, and thank you for joining us to discuss Akebia's first quarter 2019 financial results and our recent business highlights. The press release containing the company's financial results for the first quarter was issued earlier this afternoon and is also available on our investor relations website. For your convenience, an audio replay of today's call will also be available on our website shortly after we conclude today's webcast. Joining our call are John Butler, President and Chief Executive Officer of Akebia; and Jason Amello, Chief Financial Officer. Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information regarding these factors is described in the Risk Factors and Management's Discussion and Analysis sections of our most recently quarterly and annual financial reports filed with the FCC. The forward-looking statements on this call speak only as of the original date of this call and we do not undertake any obligation to update or revise any of these statements. With that, I'd like to turn the call over to our CEO, John Butler. John?

Thank you, Kristen. Good morning, everyone. It's been just a little over a month since we presented our 2018 results and business highlights, so I'll keep my remarks brief. The first quarter marked the achievement of another important milestone for Akebia with the announcement of top line results from two Phase 3 active control pivotal studies evaluating vadadustat, our investigational oral HIF-PHI, in Japanese patients with anemia due to chronic kidney disease. We're excited by these results as they increase our level of confidence in the HIF pathway, and more specifically, vadadustat's clinical program. They also bring us that much closer to our goal of improving the standard of care with anemia due to CKD. Importantly, these results are expected to serve as the basis for Mitsubishi Tanabe's new drug application for vadadustat in Japan in 2019. I'm also pleased to announce that we've completed enrollment in INNOVATE, our global clinical studies designed to enable potential NDA and MAA filings for vadadustat for the treatment of anemia due to CKD in dialysis-dependent patients. We enrolled a combined total of over 3,900 patients across these two studies, exceeding our most recent expectations by 300 patients. We continue to expect top line data readout in Q2 of next year, subject to the accrual of MACE. With respect to PROTECT, our global clinical study is designed to enable potential NDA and MAA filings for vadadustat for the treatment of anemia due to CKD in patients not on dialysis. Enrollment continues to track in line with our expectations and we continue to expect top line data readouts in mid-2020, subject to the accrual of MACE. The goal of treatment with vadadustat and all HIF/PHIs in general is to raise patients' hemoglobin levels into the target hemoglobin range and keep the hemoglobin stable over time,…

Thank you, John, and good morning. As we successfully closed our merger with Keryx on December 12th, 2018, this is the first time we are reporting a full quarter of financial results as a fully integrated biotechnology company. The results for the quarter demonstrate that we are making significant progress on our commercialization and development efforts and we are one quarter closer to achieving our strategic vision. The company reported total revenue of $72.7 million in the first quarter of 2019 compared to $45.9 million in the first quarter of 2018, which included only collaboration revenue. Looking at the components of our revenue, net product revenue from the sales of Auryxia for the first quarter of 2019 was $23.1 million compared to $22.6 million as reported by Keryx pre-merger during the same period of 2018. This represents a 12.1% increase from the first quarter of 2018. We believe that the majority of Auryxia's revenue is within the hyperphosphatemia indication, which we expect to remain the case for at least the near term. As a reminder regarding our licensing collaboration revenue, our collaboration agreements with Otsuka and Mitsubishi Tanabe are considered multiple element arrangements under the revenue recognition guidance. This generally means that committed future payments that are probable of being received by the company are recognized over the life of the arrangement on a percentage of completion basis to the extent the activities under the arrangement are performed and delivered by Akebia, rather than when the payments are actually received. The company also recognizes royalties earned on net sales of ferric citrate in Japan under a sub-license agreement with Japan Tobacco and Torii, which generally gets recognized when related sales occur. With that said, license and collaboration revenue for the first quarter of 2019 was $49.6 million compared to $45.9…

Thank you [Operator Instructions]. Our first question comes from Chris Raymond with Piper Jaffray.

Just a question on Auryxia. John, I heard your comments about gaining traction with respect to helping physicians work through the existing limitations, I guess, with respect to what Medicare Part D did, but I remember you guys talking about working hard to sort of reverse that decision. Can you maybe talk about progress there? I think you said earlier that there could be resolution this year. Is that still a reasonable assumption?

Thanks, Chris, for the question. We have been working extremely hard, not just us, but other members of the renal community and a number of patient organizations have been working with us, key opinion leaders, and practicing nephrologists have written letters. It's a very active effort, both with CMS and on the hill, as well, to help exert pressure on that side. It's very difficult, as I'm sure you know, to predict the timing of when something like that's going to happen, but we've had multiple meetings with CMS. I feel very positive about the direction this is going in, but it is too early to say exactly when we'll resolve it, but we're not taking our foot off the gas there.

Okay, and then maybe back on the vadadustat. We're getting feedback from investors. A lot of folks, I think, are just questioning what the read-through is with respect to the FibroGen data, and I know you guys have talked about this at length. Maybe, could you just remind folks, whether there is or isn't, why a read-through, particularly in the pre-dialysis population when we do get that data? Thanks.

Sure. Again, thanks for the question, Chris. Of course, we don't have the data yet, so we're all anxiously awaiting it, and we're really looking forward to seeing it. There's no one more positive about the HIF class than I am, I think, and our perspective is when you see positive data for one product, that's good for the class. We think, generally speaking, that is certainly the way we thing about seeing data from any other product being developed in this space. There are significant differences in the programs, so I think you have to take that into account as you look at the results. As you mentioned, you have a placebo control that AstraZeneca is using in their non-dialysis trial versus an active control that we're using. Again, we have very clear feedback from regulators that that was the right comparator to use and we think ultimately this is going to not only set us up for a positive regulatory outcome, but will give us opportunities to compare the drugs so that you have more direct ability to differentiate commercially.

Thank you. Our next question comes from Difei Yang with Mizuho.

This is Alex on for Difei. I was just wondering if you could comment on the Hy's law disclosure, maybe if you could elaborate a little bit, and what gives you confidence that you will not encounter a second case.

Thanks for the question. Again, this was an update that we had through our disclosure in the 10K. This is a case that we previously disclosed from our Phase 2b study from about five years ago, the same case, no new data, but we're always looking at the data, and the current medical team, clinical team updated their -- I remember this was a possibly related case when it was first reported. The current medical team updated that to call it a probably related case and nothing really changed with the data, just the way they looked at it, and with that, we felt appropriate to update our disclosure. Nothing has changed in our view of the safety of the product.

And just related to the Japan NDA submission in 2019, do you have a sense for the timing of that?

That, obviously, is Mitsubishi Tanabe who will be doing that filing. We've been working very hard to give them all of the information they need to then translate it and submit it to the PMDA. The guidance right now is 2019 and we're confident that they're on target to do that.

Thank you. Our next question comes from Eric Joseph with JP Morgan.

I'm just wondering if you could comment on recruitment timelines in the FORWARD 2 trial evaluating three-times weekly dosing for vadadustat. Whether you can provide narrow timelines on a tip line readout, and with a focus broadly here on minimizing hemoglobin excursion, what's the expectation that you might observe some widening of the range with a three-times-weekly dose regimen and what level of tolerance would be accommodated? Thanks.

Eric, thanks for the question. We haven't updated on FORWARD enrollment. We said that we'll have data this year. We're still very much on track for that. This is a dialysis trial. If you look at the INNOVATE trial, for instance, you have captive patients, so enrollment there is certainly quicker than in the non-dialysis population, and I think that's what we're seeing in FORWARD, as well. We're very pleased and no update to timing. We'll have data this year. This is an open label study, so we'll be looking at the data as we go, and the design of FORWARD, it's a once-a-day design and then patients are switched to three-times-weekly, so you'll already have patients who are well-controlled on the drug. I can't recall the number of weeks before the switch, but you'll be moving patients who are well controlled on vadadustat to three-times-weekly dosing. Your design is constantly looking at the hemoglobin level, just like in Phase 3, to avoid having patients have excursions even above 11 where the current guidelines reside, and physicians really only worry when it's more above 13, but we're managing to the guidelines for the FDA. Again, we think that vadadustat has the ability, and it's shown that in Phase 2, to control hemoglobins well. We expect that we'll see that in FORWARD, but we'll all see the data at the end of the year, or sometime this year.

You're not looking at MACE in this study, but I'm just wondering if there are incremental safety considerations with a three-times-weekly dosing regimen that would need to be considered and looked at to have these data be eligible for an initial filing in tandem with the INNOVATE results.

Right, so we're not looking at MACE in FORWARD. Obviously, we'll have 3,900 patients in INNOVATE -- looking at MACE results from INNOVATE, so that database will be extremely strong. We'll look at general safety. These are dialysis patients so they're being seen three times a week, so they are watched over quite carefully just on a normal course of care. Now, this is a Phase 2 study, so we don't have an expectation that this will lead to an indication for three-times-dosing. We're planning the TRILOGY trial in order to be at a Phase 3 to lead to an indication, but we'll have this data and have it published, and obviously in the NDA and MAA, as well.

Thank you. Our next question comes from Chad Messer with Needham & Company.

John, I was wondering if you'd just comment a little more on the recent expansion of your agreement with Vifor. How significant is their third-party business?

Chad, thanks for asking the question. This is something we are extremely excited about and we really think it reflects on the way Vifor, and Fresenius for that matter, are looking at vadadustat and the opportunity for the product in the market. As you know, Fresenius represents about 40% of the dialysis market in the U.S. and the all other non-DaVita, if you will, midsize dialysis providers, smaller dialysis providers represent about 20%. Now, Vifor doesn't have access to all of them, but they are continuing to grow that business and will continue to do that over the next number of years in advance of the vadadustat launch with a large portfolio of products. So being a part of that will very quickly allow us to have the product introduced into more than just the Fresenius network, which, again, speed of launch is critical. And we really think this will have a significant impact on that speed. And the TDAPA ruling as well is an important step in the direction where INNOVATE really does encourage innovation for dialysis providers, and the Vifor along with the TDAPA ruling, we think will really accelerate the launch of vadadustat.

Thank you. Our next question comes from Ed Arce with H.C. Wainwright.

I think all of my questions have been answered, but thank you.

Thanks, Ed.

Thank you. Our next question comes from Robert Hazlett with BTIG.

John, you've been interacting with [Technical Difficulty] for a while now. Could you comment on any fine-tuning that you might be making with regard to messaging of the product in the marketplace for or subtle adjustments or levers you can pull to be able to affect demand? Thanks.

Thanks for the question. Yeah, I really have enjoyed getting to know the team, the traditional Keryx team, and the product, and have obviously been impressed with the way they've worked through this CMS issue. I have to say, a lot of the first quarter was focused on that and it was focusing on implementing tactical programs to help physicians work through and manage the CMS issue, which has led to a very clear growth curve moving forward. Now, just as of Monday, we have Dell Faulkingham onboard who is our new chief commercial officer, and we have certainly worked together with the team on moving messaging, moving tactical implementation forward. I'm really looking forward to allowing Dell to sink his teeth in here and drive the team forward, and see how steep we can drive that growth curve.

Just one other question about vadadustat. Do you know the total number of patients that have been exposed to drug? I know that's kind of an obscure question, but just as we're considering things like Hy's law, I just want to make sure we have that type of a number in the back of our minds.

That's not a number we've ever provided, but if you start thinking about the 3,900 patients we have in INNOVATE, many thousand patients in PROTECT, and then hundreds of patients in our Phase 1, Phase 2 program, it is many thousands of patients. Of course, those are all one-to-one randomizations, but it is many thousands of patients have been exposed to the drug at this point.

Thank you. Our next question comes from David Lebovitz with Morgan Stanley.

Hi, this is Ishmael on for David. Thank you for taking our question. Within the context of the strong growth you are observing in 2Q '19 so far, can you help us understand the ultimate impact you anticipate to Auryxia or ongoing quarters from the IDA ruling? Thank you.

Thanks for the question. As we've mentioned before, our expectation even before the CMS ruling was that hyperphosphatemia was going to be the key growth driver, certainly in 2019, and IDA was a very important longer-term growth driver. While disappointed by the CMS ruling and working hard to overcome it, we didn't think it was going to have a significant impact on physician adoption in 2019. Now, what was unprecedented was the way that this prior auth was implemented in that I've never seen this in my career where you had all of the patients on the drug who have to go through this prior auth process all as of January 1st, which was most of them, when the plans put the prior auth in place. We had to manage all of those patients through in Q1, focused on it, did it very successfully, and I think we see that success by the first four weeks of the second quarter being the highest we've ever seen since the drug launch. That's really being driven by the hyperphosphatemia indication. So the steepness of that growth curve, what that may turn out to be for the balance of the year and beyond. We just really don't understand what that will be yet, but it will be driven by hyperphosphatemia. The team will focus on those 45% of patients who have IDA and have commercial insurance, but it was always our expectation that hyperphosphatemia was the big driver.

Thank you. Our next question comes from Kennen MacKay with RBC Capital Markets.

John, could you maybe just remind us on the endpoints and the registration path forward for vadadustat as it relates to non-inferiority versus superiority on MACE? And going back to your prior comments on how we could think about a read-through to vadadustat from roxadustat MACE events. Can you maybe just help us contextualize this a little bit better given the difference in control arm? Should we think that maybe a placebo could have lower MACE events than an active control arm, or how should we be thinking about that? Then, I have one quick follow up question on Auryxia.

Thanks for the opportunity to really stress that the design of the Phase 3 program is a non-inferiority design. That is the threshold for regulatory approval. That's our expectation, is that we are targeting non-inferiority. To my knowledge, every single trial being done that is a MACE trial for all of the competitors are all non-inferiority design trials, so we're all targeting the same thing. From that perspective, I do think that there is the opportunity for a read-through here. I think you have to remember that in the dialysis market, which will be the first readout, we're incredibly excited that we're just a year away from a readout of our now fully enrolled INNOVATE trial, but that will be an active control trial, as is every other company who's developing drugs for dialysis patients. They're all active control, so that's very clear readout. Now, non-dialysis, as I mentioned before, when you have a placebo control, it is a difference. There was a difference in how you'll look at MACE. I think when you're looking at vadadustat versus an ESA, you've got a comparator product that has a history of elevated cardiovascular risk, and you have to show you're no worse. I think that's a bar we're really happy to have to cross for regulatory approval. And then I mentioned in my speech there that there are multiple secondary endpoints that allow for that commercial and clinical differentiation of the drug, that if you're comparing to a placebo, you don't have that opportunity.

I just had this one quick follow up on Auryxia. I guess when I had been tracking scrips, it had looked like demand was down about 14% quarter-over-quarter, obviously an impact of that CMS decision and working through those reauthorizations, but I was wondering if you could just elaborate on your commentary around demand being the highest ever for this drug. Then, separately, you mentioned some analogies for the Part D coverage of drugs in similar positions. I was wondering if you could just specify what those were so we can dig into this a little bit more closely and understand where the team is coming from. Thank you.

Sure. When you look at the quarter-on-quarter change, I think, Kennen, you might have been referencing Q4 to Q1 for the decrease in prescriptions. So that is where you saw weakness. What you don't see on a normal basis is the Fresenius scrip numbers, which are included in the 40,080 number that I gave you, and obviously, Fresenius is a very important direct customer for us, the Fresenius RX piece of business. That really is absolutely where you saw that decrease. When you incorporate Fresenius, the decrease is not quite the percentage you referenced. But it was -- the cadence of the quarter was you saw that drop in the early part of the quarter as all of those patients came through for the prior auth. We implemented these tools. For instance, you saw the utilization of samples double from what we expected in the first quarter under normal circumstances as physicians used samples to bridge patients through the prior auth. So obviously, those are not paying prescription, but that patient stays on Auryxia. And that's what's driving that increase we saw after those first few weeks, the scripts started to increase. I think on the March call, I even said we were seeing that growth. We're really seeing that robustly now in Q2, a very steep growth curve. And again, how steep that will remain we'll be monitoring, but I'm very encouraged by where that is today. We've come through that period where that bolus of patients have to move through. Once you get that prior auth, it's good for a year. And now even if we aren't successful in overturning CMS, we'll be prepared before they come through again so that you don't have that dip in prescriptions that you saw in the beginning of this year in Q1. So we'll be able to manage through that much more effectively.

The analogies for drugs in similar positions as it relates to Part D coverage.

The clearest one, the one I worked on myself, was vitamin D analogs. Really, the point that we believe that CMS is making here is that there's a statutory exclusion for vitamins and minerals, and they're saying that iron is a mineral. Of course, what we know about Auryxia is that it's not a naturally occurring iron. It is a chemically created ferric citrate coordination complex, and that's demonstrated most clearly by the fact that our Phase 3 trial in the iron deficiency anemia population was done only in patients who had failed oral iron already. That's a very compelling fact, but this is what we dealt with back when Part D was coming into place in 2006 where Part D wasn't going to cover vitamin D analogs because they were vitamins. Of course, what we had to explain to CMS and had folks on the hill help us explain this as well, is that this was an analog of vitamin D that dialysis or non-dialysis patients can't process natural vitamin D and manage secondary hyperparathyroidism. You're not using Auryxia as an iron supplement. You're treating a disease. That's the argumentation that we're using and we have used in the past. NIASPAN is another product that went through this, as well, and I didn't work on that one myself, but again, successfully made a very similar argument. I have a lot of confidence in our ability to get through this. Timing, of course, when you're dealing with the government, it's much harder to pin that down.

I just wanted to say our physician checks come back very much in line with your commentary on Auryxia being perceived as a differentiated product in helping patients, so thank you very much.

Kennen, thanks for adding that. That's what our research says, as well. Thank you.

Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to Mr. John Butler for any closing remarks.

Thanks, and thanks, everyone, for participating in the call. We look forward to continue updating you with our next quarterly call. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Have a wonderful day.