Hello, and welcome to the FibroGen Q2 2015 Conference Call. My name is Miesha, I will be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the meeting over to Mr. Greg Mann, Mr. Mann, you may begin.

Thank you all for joining on the call. With [indiscernible] Executive Officer of FibroGen, Dr. Peony Yu, Vice President of Clinical Development; Dr. Frank Valone, Chief Medical Officer; Pat Cotroneo, Chief Financial Officer; and Dr. Lynda Szczech, Executive Director, Clinical Development. On this call, we expect to make forward-looking statements regarding our business, including our collaboration with AstraZeneca and Astellas, financial guidance, the initiation enrollment, design conduct and results of clinical trials, research and development activities and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes that are difficult to predict, many of which are outside of our control. We refer you to the Risk Factors section of our annual report on Form 10-K, for the year ended December 31, 2014, our quarterly report on Form 10-Q for the quarter ended March 31, 2015, and our quarterly report on Form 10-Q for the quarter ended June 30, 2015, each of which has been filed with the SEC. For risks and uncertainties regarding our business as well as the statements made on the call today. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise. A webcast of this conference call will be available for replay on the Investor Relations page at FibroGen's website, www.fibrogen.com. I'll now hand the call over to Tom Neff.

Thank you, Greg. Good afternoon. On today's call, we will review key updates, discuss accomplishments and results during Q2, and highlight our most important near-term and long-term goals. Many of these on the call today may be new to FibroGen, so I'd like to begin with a brief introduction. The company is advancing 4 distinct clinical stage programs in anemia, fibrosis, cancer and corneal implants. In anemia, we have our lead compound, roxadustat, a small molecule investigational therapy based on hypoxia inducible factor system, which has been shown to trigger the natural responses to anemia. Roxadustat is currently in Phase III trials in the U.S. and in Europe, and is now expected to interface 3 in China Q4 this year. Roxadustat was discovered and developed by FibroGen and is partnered with AstraZeneca and Astellas under multiple exclusive territory-based agreements. Our roxadustat patent portfolio includes multiple issued and pending U.S. patents, offering protection for roxadustat through 2033 and potentially beyond. As noted in today's press release, we remain on track to achieve our goal of submitting regulatory applications in China in 2016 and in the U.S. in 2018. Working closely with AstraZeneca and Astellas, we have launched all 7 studies required for the roxadustat regulatory submissions in the U.S. and EU. 4 of these studies are in hemodialysis patients where total enrollment is planned for just over 3,500 patients, 3 of these studies are in non-dialysis with target enrollment of approximately 3,800 patients. Of these 7 studies, 3 are being run by FibroGen, 2 by Astellas and 2 by AstraZeneca. The 3 FibroGen studies are focused in the U.S. and account for 25% of patient enrollment. The 2 Astellas studies are focused in Europe, the 2 AstraZeneca studies are global in character and much larger than the others, accounting for more…

Thank you, Tom. I'd like to comment briefly on the profile of roxadustat, and its potential for treating patients with anemia, and then describe our Phase III program. Roxadustat is our first-in-class hypoxia-inducible factor prolyl-hydroxylase inhibitor in development for the treatment of anemia in patients with chronic kidney disease. In response to hypoxic conditions, such as high altitude of blood loss, our body naturally makes more red blood cells to carry oxygen. Roxadustat pharmacologically turns on that response system to make red blood cells. Tom already mentioned how roxadustat's mechanism of action includes mobilizing iron availability, reducing hepcidin and stimulating only a modest amount of the body's own erythropoietin. We believe a novel approach with roxadustat leads to a differentiated therapeutic profile and potential advantages over the class of injectable erythropoietin-stimulating agents or, commonly known as ESAs, that are currently used in anemia of CKD. This includes the potential to overcome the safety issues with ESA, treat anemia effectively in the presence of inflammation, where ESAs don't work so well and potentially eliminating the need for IV iron supplementation. We have study roxadustat in more than 1,100 subjects in our Phase I and II studies. In addition to the potentially differentiated clinical profile versus ESA, roxadustat as an oral agent, has the potential to expand treatment except to CKD patients not on dialysis and who are not under the care of nephrologist. We and our corporate partners believe that most CKD patients are under the care of non-nephrologist physicians, such as endocrinologist, cardiologist and internist, until late stages of CKD develops. It's estimated that 36% of diabetic and 20% of hypertensive CKD patients suffer from anemia. Yet, the anemia goes untreated by their physicians because of the financial and logic -- than logistical barriers to prescribing ESA. If roxadustat enters…

Thank you, Peony, for your comments. I'll now ask Dr. Frank Valone to make a few comments. Frank, please go ahead.

Thank you, Tom. Now, I'd like to return briefly to FG-3019 and our programs for treatment of fibrotic diseases and fibrotic cancers. FG-3019 is a fully human monoclonal antibody that blocks connected tissue growth factor, or CTGF. A large body of scientific literature demonstrates that CTGF, central mediator of fibrosis. We believe that FG-3019, by blocking the biologic activities of CTGF, may be a treatment for an array of fibrotic diseases and fibrotic cancers. As Tom noted, we have seen profound evidence in animal models and clinical studies that FG-3019 has potential to inhibit and even reverse the progression of fibrosis. We completed an open-label dose finding study of FG-3019 in patients with idiopathic pulmonary fibrosis, or IPF. That study showed that 35% of patients had improved or stable lung fibrosis after 48 weeks of treatment with FG-3019. To our knowledge, no IPF clinical trial have shown improved lung fibrosis. This includes trials of the recently approved drugs pirfenidone and nintedanib. Based on the encouraging data from our open label trial, we began Study 067, which is a randomized double-blind, placebo-controlled trial of FG-3019, that was originally designed to enroll 90 subjects with IPF. The study endpoints at week 48 includes change from baseline enforced vital capacity percent predicted, change from baseline and hold-on fibrosis measured by high resolution CT scans. The goal has been to enroll the study by the end of 2015 and to have data approximately 1 year later. [indiscernible] has slowed in the U.S. due to the approval and launch of pirfenidone and nintedanib for treatment of IPF. In order to complete enrollment of the original study, we have opened up the trial in a number or countries where pirfenidone and nintedanib have not fully penetrated the markets. Countries we are now launching include Canada, Australia,…

Thank you, Frank. Pat Cotroneo will now review the financial results from Q2 as well as some of the end of the year projections.

Thank you, Tom. As we announced in our press release today, total revenue for the quarter ended June 30 of 2015 was $120.6 million. For the same period, operating expenses were $61.2 million and net income was 51. -- $57.1 million or $0.95 per basic share and $0.83 per diluted share. Included in operating expenses for the quarter ended June 30, 2015 was an aggregate noncash portion totaling $9.4 million, of which $6.9 million was a result of stock-based compensation expense. In terms of our cash balances, we had $408 million in cash, cash equivalents, investments and receivables, compared to $346.8 million at the end of 2014. Our investments consists primarily of 2- to 3-year investment grade corporate debt. As Tom has mentioned, our cash balances at June 30, 2015, include 121 -- $120 million non-contingent license fee payment and the $15 million milestone payment received from AstraZeneca during the second quarter 2015. In connection with the cost-sharing arrangement with AstraZeneca, FibroGen's total funding obligations for roxadustat outside of China are limited to $116.5 million, of which $83.4 million had been incurred and $33.1 million remained as of June 30, 2015. Based on the current year budgets and enrollment forecast, FibroGen expects to reach this $116.5 million cap in Q4 2015, at which time Astellas and AstraZeneca will be responsible for funding roxadustat development in CKD through a launch for all territories outside of China. Specifically, once the cap is reached, FibroGen will no longer be billed by AstraZeneca for 50% of AstraZeneca's development cost, resulting in lower expenses in our statement of operations. In addition, once the cap is reached, roxadustat development expenses incurred by FibroGen will be fully offset by reimbursement. Looking to year end 2015, we continue to anticipate that our cash, cash equivalents, investments and receivables will be in excess of $325 million. I'll now turn it back to Tom.

Thank you, Pat. Operator, we're now ready to start taking the question-and-answer session, if you can set that up, please.

[Operator Instructions] Our first question is from Michael Yee with RBC Capital Markets.

Two questions, 1 on roxadustat. I know there's a particular focus on safety and of course, the DSMB analysis, can you just comment on to what degree or what additional information you could provide regarding risk of tumors, whereby you feel very confident other than just the carcinogenicity studies? What kind of things were looked at with diligence? And in the DSMB analysis, are they specifically looking at that type of imbalance? And the second question is just on pancreatic cancer, since there could be some data not too far away, just be a little more specific in terms of, I guess, where you are in that enrollment? How many patients do you think could be reported on at ASCO GI, things of that nature? What would you be defining as good data to keep going?

Okay. So Michael, thank you for the comments and questions. Let me do it this way, I will ask Frank to address the pancreatic question first, and then I'll come back and ask Peony to address the questions you asked about DSMB and tumors and so. So Frank, please go ahead.

Sure, Michael. Couple of things, we don't comment about patient enrollment, it's a lovely detail you might like, you find that might be misleading over time. Enrollment is moving along smoothly. We have 3 centers now screening patients. We will have a fair amount of data on patients who completed the study. As I indicate in my presentation, the primary endpoint is tumor resection. But along the way, we can learn a lot about tumor responses by CAT scans, PET scans and tumor markers. So you have to go and pull the totality of data together. We should expect to do it at the end of the year. As then as I said present in January, whether that's going to be enough data to make a decision to expand the trial or simply continue to just going, I won't know until December when I open up all those envelopes and see what we have. But we feel quite confident we should continue the trial, we just don't know whether it will be expanded based on data we'll have in December.

Yes, so I might add 1 thing there, Michael, and that is these are patients that fail resection scoring before we start the study. And they go on a standard of care, gemcitabine and ABRAXANE and then 3019 in the randomized arm. This means that if there's any patients that are resection eligible after 6 months, we've done something positive, and we've already seen that. And so, now it's just a question of how many patients do we need to see a difference, really taking on the question of standard of care, gemcitabine and ABRAXANE versus gem plus ABRAXANE plus 3019. And so it's interesting times, I wish it would go faster, but methodologies are complex and getting people like Mayo and Georgetown on board has taken a lot of work just because they are learning a paradigm they haven't really been involved in before. So step-by-step, I think it's a good investment so far though. So I'll stop there. Peony, do you want to address DSMB, I think Michael is asking about tumors, surveillance of tumors and so on?

Yes. So Michael, thank you for the question. First of all, roxadustat corrects hemoglobin via a mechanism that is very different than ESA. And we understand the sensitivity about tumor risk in anemia therapy in patients who receive high doses of ESA as in the case of chemo-induced anemia historically. And what we like to make it very clear is that our drug mechanism does not involve that excessive level of erythropoietin exposure. Furthermore, in the HIF biology, there is extensive work investigating the use of HIF-PHI for potential targeting treatment of cancers. With that said, turning to your question regarding DSMB, our program has been under review by the DSMB since Phase II. During Phase II, we have not find any safety signal related to tumors. During Phase III, our DSMB continue to review all SAE and tumors are part of the SAE reporting. And so we have not found any signals in the Phase III review as well. One thing that we are very careful to avoid confounding by baseline factor is that we screened out patients with pre-existing renal cell carcinoma by ultrasound prior to entry in the study. So late stage patients who already have renal cell carcinoma, which is at higher prevalence in patients with end-stage kidney disease, would have been screened out of the studies. Does that address your question?

It does. So there is a specific surveillance for it is, I think, what you're trying to...

So Michael, yes, the point here is that by doing the prescreen in ultrasound, we will be able to detect any incipient renal cell carcinoma during the study. We have not seen anything yet. This is stuff that's surveilled pretty aggressively. But, at the same time, we've got a ways to go, but we have a way to have very clear readouts on that point.

Our next question is Kennen MacKay with Citi.

So I was wondering if you could just comment on the regulatory timeline in China and sort of how long that submission process would take? And given the submission in 2016, when you'd get the approval there?

Okay, Kennen. I'm -- thank you for the question. Let me confirm what you've asked about. You're saying, what are the regulatory timelines as we presently conceive China?

Yes, exactly. And just sort of timelines from submission to potential approval there.

Yes, so let me walk you through what we currently think. The study looks like it will start enrolling this fall. We have been advised that about 4 weeks from now, we'll get to the point of having the -- what's called the chopped orders. So we have the authority to negotiate with IRBs [ph] and sites and contract for it and then start enrolling patients. We have had, in preparation for this, several preceptor meetings, where we fly the clinical teams over to the U.S. and go through the data in great detail. So we're pretty enthusiastic about moving ahead with the enrollments. And point of fact, we're doing 26-week study across the board, and then for safety cohort, we do 52 weeks. At the point that we have 26 weeks fully enrolled, we are able under the green pathway rules to initiate a dialogue with the Beijing CFDA, which is our regulator at the level of CM&C activities. So the local regulator to CM&C in China and then national central regulator does drug evaluation. Under the terms of the agreement it's a rolling review, we expect that the CM&C review will take somewhere between 9 and 12 months based on history and analogous situations. At the point we have the 52-week data, we're allowed to submit the drug review for CDE, the Center for Drug Evaluation, and make a formal assessment on the drug. We believe this is somewhere between 5 and 7 months of time. So the way that AstraZeneca and we thought about this is that we're trying to make these 2 timelines meet up at the end of 2017, roughly December 2017, at the point that we would be authorized to make and ship drug. Under the agreement with AstraZeneca, we are sending bulk drug…

Yes, that definitely spells it out. And then maybe just one more question on 3019. I think the sort of potential for a combination trial there is really a terrific one. And I was hoping maybe you could speak a little bit about the potential synergies that might arise in IPF? And if there's one sort of mechanism of the approved products out there that potentially jumps out as being essentially more synergistic with the IPF patient?

So let me start by saying that we have been watching this year with the main strip submission on our exploratory study and looking at the peer review and the editorial comments and so on. And we are struck by the idea that the data seems pretty important to a lot of people. And so in our hands, many years ago, 1997, we had an option to look at pirfenidone. And we declined it, as a matter of record, because we didn't feel that it could do what we wanted in fibrosis. So we have a general view that the mechanism of pirfenidone is somewhat different than the one that arises from blockading 3019. And so we expect that it would be additive. And so I would simply say that if we show that the HRCT methodology, which is really a time series of HRCT scoring, they take 1 millimeter thick cuts vertically and then horizontally in the patient, so they get incredibly accurate data for lung volume and for matrix and matrix deposition. If it turns out the data we saw in the exploratory study is replicated in this study, I think that there's a pretty compelling case for a combination therapy. Recently, I think in part because of the review of the manuscript, just thinking about what's being said, we have taken on the idea of testing patients that have taken, for example, pirfenidone, in the U.S., because it's now been approved. So it'd be concomitant therapy kind of idea. Let me stop here and have Frank explain what our thinking is on this, because we've spent a lot of time. Team -- Frank's team has really spent a lot of time on this past 45 days.

Tom has covered most of it I would say. We're actually looking at the question whether the combination of 3019 and pirfenidone or nintedanib would be synergistic. There are -- they have different mechanism of action. So assuming they're additive rather than synergistic, we will look in preclinical models to see if we see signs of synergy, but it won't plan on that in our trial design as that might lead to trial failure. I think we're pretty comfortable that additive makes sense and that we'd be looking at that type of trial design. At this point, I can't choose easily between pirfenidone and nintedanib. They both operate pretty similarly, different toxicity but similar efficacy and they may just be additive at most. And part of our discussion internally is how we want to go so that we need to really do further modeling. And as I said, we'll offer more comments once we got a chance to look at this further.

Yes, I mean, to-date, we've been thinking about, given the 90s studies -- this is end of the 90s range, that the total patients in the study would be something on the order of 250. We may go back and rethink that a little bit, but I think that's sort of a scale that we think we can handle and execute efficiently. If we did that kind of number, we'd have to do 1 of the 2, pirfenidone instead of nintedanib or vice versa. And we just haven't quite got to the point yet of deciding about that.

Got it. And just to sort of follow-up on that, following the trial read-out done in IPF for next year, you'll have data from treatment-naive previously treated failures with pirfenidone and nintedanib and then also potentially the combination product. So based on combination with 3019, so would the decision then be sort of how to design a registrational trial, and could you potentially go for head-to-head against approved products in treatment-naïve patients there?

So I think the answer here is that we clearly are trying to leverage our ability to develop a registrational strategy. And there is an option here depending on data to go head-to-head, but it depends a lot on data, and we don't yet know what to expect. Frank, you want to add anything there?

We're setting up a program to have all possible options available to us in the end. What we do will be data-driven.

Our next question is from Terence Flynn with Goldman Sachs.

Maybe just one more on 3019. Just wondering if you can help maybe frame for us what type of FVC [ph] change you're looking for in non-ambulatory Phase II DMD trial?

Thank you, Terence. This is a topic that's been front and center here this year, and I think Frank knows a lot about it. So I'm going to let him walk through.

Since we're still digging deep into that, I'm not sure I want to give you a number, because I'm looking at several models. The thing we're struck by is that in our trials, we see stable or better. And so we have to decide -- still whether we look at FVC [ph] change or look at some other marker that may provide further differentiation from the currently approved drugs. So I don't have a firm answer to this question.

I think the one thing we can say, though, is that the KOL meetings we had, there's been an assertion that we should expect 5% decline in FVC percent predicted in these patients irrespective of ambulatory status. And that kind of number is sort of staggering when you try to get your arms wrapped around it, given what we've seen with IPF patients. So I think that it's a target-rich environment here in terms of what may happen for us. I think Frank is getting at the question of what the measurement endpoint we're going to ultimately choose. And that's -- but the concept here is that there's a really significant loss of lung function as the disease proceeds and...

What time course is that 5% over, Tom?

A year. It's actually more than 5% on average, but 5% to 8% per year.

What I saw was over a multiyear time period, this rate -- this slope continues. This was presented by the guy in Paris, the German guy. I forgot his name, but...

Voigt [ph] .

Voigt [ph] , Thomas Voigt [ph] . And so -- and the other people there were concurring with this, I mean, that nobody disagreeing. So you see really significant fibrotic impact on these patients. The concept here that is we originally noticed that there was a huge amount of fibronectin being made in DMD patients. And as we dug into this, we realized that the dystrophin genetic defects were causing myofibroblast to exponentiating activity, so there is a massive amount of CTGF around, a lot of collagen around. And we just started digging away year-after-year working on this from 2006 until now. 22 papers that our collaborators have done. And it's very clearly the case that CTGF-mediated disease progression is certainly part of the picture here. One of the factors we'll be paying a lot of attention to is there's some data that suggests CTGF dedifferentiates muscle in here, or in other words, they're turning muscle into fat. And if that's really true, then we might be in a situation where we're directly modifying the disease, which is sort of an ideal situation if it turns out that way for our purposes. But we don't have enough data yet to be sure about that or some of the other stuff like the effect of reducing fibrosis on muscular strength, on endurance is very clear and so still to be explored some. But that's sort of the feel for it. Does that help at all?

Our next question is Seamus Fernandez with Leerink.

Just a few questions. Maybe first off, Tom, can you just help us better understand the -- your comment on the bundle and the determination there just in terms of its relative impacts? I know this is potentially important from a commercial perspective. The second question -- yes, go ahead.

No, no, please go ahead and finish so I can figure out how to allocate.

And then maybe the second question, if you could comment on just sort of the next potential anemia indications, I know you mentioned a few in the prepared remarks, just in terms of the indications and then also timing initiation. I have 2 more questions, if you don't mind. But just the frequency of DSMB evaluations in the global roxadustat studies and how many more could occur from here? And then the last question is, you mentioned other fibrotic cancers, fibrosis compounds. What other cancers should we be thinking about beyond pancreatic cancer potential?

Okay. Let me do it this way, I'll start with the DSMB part and the bundle, and then we'll -- Peony can take anemia indications and Frank can do the fibrosis question. With regard to the DSMB charter, we adhere to the charter so it's all prospective. And basically, there is preset prescribed activities each quarter. This goes on for quite a while, in the future so much so that I don't know off the top of my head what is the point where it ends. It's been going on since 2009. Several of the members have been on this committee since that time. So we just view this as part of the work environment. And when I was talking to the Chair recently, at this point, in the study size, there is a lot of focus on whether there is any small imbalances and things that are completely unexpected, because this is a time period where if there's anything really off-the-wall happening, they try to cease on it. So it's -- I mean, pretty rigorous. And I think people, while they believe that roxadustat is well tolerated, they also take this entire exercise very, very seriously. And so that's sort of the flavor of it. With regard to the bundle, I know you weren't involved with us at the time, but from the FDA actions in 2011 that resulted in major changes in the use of EPO, until about 2014, I think the entire investment community was pretty bearish on anything involving anemia, in part because of the [indiscernible] failure, in part because the market seemed to be getting smaller and so on. And so it was a -- as a matter of course, it was assumed by everybody we'll be in the bundle. And I think that you'll…

Yes. We always recognize that chronic kidney disease is a subset of many different conditions, which leads to anemia. And given the mechanism of action of our drug as well as some of the preclinical work done in various other anemia, we do believe that our drug can be and -- have the potential to be of value in treating other anemia. And these -- this -- such work has been carried out over many years within FibroGen. And you heard earlier from Tom about the potential to treat inflammatory anemia in patients with rheumatoid arthritis, lupus or inflammatory bowel disease. And we know that ESA becomes less effective when there's inflammation. And we know that these are -- inflammatory anemias are not on ESA label. At the same time, as I mentioned, this is a subset of 7 or 8 different types of anemias, which we continues to -- we continue to evaluate and discuss with our partners. At this time, we will -- we are not -- we will defer the answer about timing until further conversation.

Okay. So the last element of Seamus' question is for Frank, as you look at the various fibrotic cancers, what are you excited about beyond pancreatic?

Interesting. Seamus, I'll clarify our term fibrotic cancers, because it extends rather widely to leukemias, for instance, that require fibrotic stromal for the cell proliferation. And 3019 in actually active in models of acute lymphoblastic leukemia, for instance. So there's actually a pretty wide range of catch that we could go after. Ones that are particularly interesting at this point are glioblastomas, we have some pretty nice preclinical data, as well as squamous cell lung carcinomas. There's been internal discussion about some of the more difficult, orphan GI malignancy, such as cholangiocarcinomas at this point. So I think we're really just working through this now. I have a new oncologist on the team who's really digging deep into our data, so he can really come up with a further development plan and hope to give you updates about this in the future.

Our next question is from Tom Shrader with Stifel.

First a quick question on 5200. Everything seems to be about China. Is there no market, or have you not -- do you not think there's a market in the U.S. and Europe? Is cadaveric enough there? Just talk a little bit about that.

So Tom, I think that's a very reasonable question. The way that this developed, I think that we, many years ago, started the pilot study. If it's in its seventh year now, I guess, we work backwards and probably started preparing this study around 2006. So we didn't know for a while what we would be getting. The occasion that caused the decisions around China was that in 2009 when we began to negotiate with the Beijing development authority, which is the entity that controls most of the property around Beijing, particularly in the science parts, we were informed that the -- there was a broad interest, most clearly personified by the Mayor of Beijing, who said that this is really important for China and we would like to see you bring this along with your anemia program as a second development platform. And given that China does not do cadaveric transplant to any degree of significance, I mean, there are some academic sites that do this, but it's not very much. And as we learned about this, there are actually professional arenas where the government only allows blind people to work such as, for instance, being a masseuse. So this is a feature of Chinese life where the prevalence is quite a bit higher than in the U.S, for instance, or in Western Europe. And so as we learned more about this and we learned about the reimbursement system for things made in China for China, we actually began to realize that the Chinese development opportunity was considerably more compelling than the alternatives in the U.S. and Europe and so on. And so the general notion of development has been, for the past few years, let's do the pilot really pivotal study that's required in China, which we have…

Thank you, ladies and gentlemen. This concludes the FibroGen Q2 2015 Conference Call. Thank you all for participating. You may now disconnect.