Kyntra Bio, Inc. (KYNB) Q3 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to FibroGen's Third Quarter 2022 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to today's speaker, Michael Tung, Vice President of Corporate Strategy and Investor Relations. The floor is yours.

Thank you, Gerald, and good afternoon, everyone. I'm Michael Tung, Vice President of Corporate Strategy and Investor Relations at FibroGen. Joining me on today's call are Enrique Conterno, our Chief Executive Officer; Dr. Mark Eisner, our Chief Medical Officer; Juan Graham, our Chief Financial Officer; Dr. John Hunter, our Chief Scientific Officer; Thane Wettig, our Chief Commercial Officer; and Chris Chung, our Senior Vice President of China Operations. The format for today's call includes prepared remarks from Enrique and Juan, after which we will open the call for Q&A. I would like to remind you that remarks made on today's call include forward-looking statements about FibroGen. Such statements may include, but are not limited to, our collaborations with AstraZeneca and Astellas, financial guidance, the initiation, enrollment, design, conduct and results of clinical trials, our regulatory strategies and potential regulatory results, our research and development activities, commercial results and results of operations, risks related to our business and certain other business matters. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in FibroGen's filings with the SEC, including our most recent Form 10-K and Form 10-Q. FibroGen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The press release reporting our financial results and business update and a webcast of today's conference call can be found on the Investors section of FibroGen's website at www.fibrogen.com. And with that, I would like to turn the call over to Enrique Conterno, our CEO. Enrique?

Thank you, Mike, and good afternoon, everyone, and welcome to our third quarter 2022 earnings call. On today's call, I will provide a high-level summary of the most important accomplishments and developments in the third quarter of 2022. Juan Graham, our CFO, will then review the financials. After which, we will open the call for your questions. Starting with Slide 3. Today, we announced a royalty monetization transaction with NovaQuest Capital Management, securing $50 million of additional non-dilutive capital, strengthening our balance sheet. We will use additional proceeds to continue to support our strategic priorities, advancing our late-stage development programs, where we anticipate top line data from 7 pivotal Phase III studies beginning in the first half of 2023 through mid-2024, 5 from pamrevlumab and 2 from roxadustat, as well as progressing our early-stage pipeline. You can read more about the transaction in our press release published earlier today. Moving to Slide 4. FibroGen is positioned to create significant value for patients and shareholders by executing on our 3 areas of focus. Number one, delivering pivotal Phase III pamrevlumab data in 3 indications with significant unmet medical need, idiopathic pulmonary fibrosis or IPF, Duchenne muscular dystrophy or DMD, and locally advanced unresectable pancreatic cancer or LAPC. Number two, ensuring the commercial success of roxadustat in patients with chronic kidney disease outside the U.S., as well as delivering Phase III data in myelodysplastic syndromes, MDS and chemotherapy-induced anemia or CIA. Number three, increasing our research productivity to advance novel programs that leverage internal expertise and access external innovation for additional pipeline opportunities. Let's move to our clinical trials on Slide 5. Throughout 2022, we have made significant progress in enrolling our Phase III studies. It's very exciting to be anticipating data readouts from 7 pivotal Phase III trials starting in the first half of 2023 through mid-2024. Let's begin with pamrevlumab. Data from LELANTOS-1, our Phase III trial of pamrevlumab in non-ambulatory patients with DMD is expected in the first half of 2023. The ZEPHYRUS-1 Phase III trial of pamrevlumab in patients with IPF is expected to read out in mid-2023. Data from our LELANTOS-2 trial of pamrevlumab in ambulatory patients is expected in the second half of 2023. Our LAPIS Phase III study of pamrevlumab in locally advanced pancreatic cancer patients is expected to read out in the first half of 2024. And finally, we are pleased to announce today that our ZEPHYRUS-2 Phase III trial of pamrevlumab in patients with IPF is expected to report out mid-2024. Moving to the roxadustat program. We anticipate readouts from the MATTERHORN Phase III trial of roxadustat in patients with anemia of myelodysplastic syndromes in the first half of 2023. And data from our China Phase III study of roxadustat in patients with chemotherapy-induced anemia are expected in mid-2023. 2023 will be a transformational year for FibroGen, and look -- we look forward to sharing the results of these studies. I would like to extend my gratitude to the patients, caregivers and investigators, as well as my FibroGen colleagues for their commitment to these studies. I'd now like to spend a few minutes highlighting our perspective on the significant potential commercial opportunity we see with pamrevlumab, our wholly-owned monoclonal antibody program in each of the 3 disease areas on Slide 6, beginning with IPF. With a diagnosed prevalence of approximately 330,000 patients across the U.S., EU, China and Japan, IPF represents a significant opportunity with the 2 approved IPF therapies generating almost $4 billion in net revenue in 2021. Important to note, there remains significant unmet need with these 2 approved therapies as characterized by continued disease progression and challenging tolerability. There is a sentiment in the IPF community of limitations with the current therapies and a desire for additional therapeutic options. We believe pamrevlumab has the potential to help a sizable number of patients with IPF and be a very relevant medicine for patients. In the middle column, you can see the DMD opportunity. Given the devastating nature of DMD and the relentless progression of the disease, we're hopeful that LELANTOS Phase III program can lead to an approved therapy that is desperately needed by the DMD community. While the current approved exon-skipping therapies produced an increase in the dystrophin levels, they're targeted at a small proportion of DMD patients and have yet to demonstrate a meaningful clinical improvements in symptoms or disease progression. There is a clear need for therapies that can automate disease progression by targeting the downstream pathological changes to improve muscle function and prolonged ambulation. We believe the antifibrotic mechanism of pamrevlumab may be a solution that can help these patients. And finally, in the third column, we wrap up with a snapshot of the locally advanced pancreatic cancer opportunity. Pancreatic cancer represents one of the largest unmet needs in oncology. Given the diagnosed prevalence of over 90,000 patients across the major regions, combined with a -- with a low 5-year disease-free survival rate of around 10%. There have been limited treatment advances in the non-metastatic setting over the last 2 decades, with immuno-oncology therapies failing to demonstrate survival benefits over the current standard of care. There's also a limited late-stage development activity in non-metastatic pancreatic cancer, which creates a meaningful commercial opportunity for pamrevlumab in LAPC if we can demonstrate a significant improvement in overall survival. In addition, the Pancreatic Cancer Action Network's Precision Promise adaptive trial platform, evaluating pamrevlumab in combination with standard of care for patients with metastatic pancreatic cancer continues to progress. Now let's move to roxadustat on Slide 7. We continue the ongoing roxadustat clinical trials for the treatment of anemia in myelodysplastic syndromes or MDS in the U.S. and Europe, and for the treatment of patients with chemotherapy-induced anemia or CIA, in China. Roxadustat is approved in China, Europe, Japan and numerous other countries for the treatment of anemia in chronic kidney disease patients. The European commercial activity with roxadustat is accelerating as it was recently launched in the United Kingdom, Germany, the Netherlands and the Nordic countries with further launches expected in the major EU markets over the coming months. We believe the anemia of CKD opportunity in Europe is significant. Our initial uptake has been slower than expected, where EVRENZO has launched, the early feedback from health care providers prescribing EVRENZO has been quite positive. And moving to China, roxadustat continues its strong performance and you -- as you can see on Slide 8. We are reporting third quarter total roxadustat net sales in China of $59 million by FibroGen and the joint distribution entity compared to $57.8 million in the third quarter of 2021. This represents an increase of 2% in U.S. dollars despite the price reduction to the NRDL renegotiation and the impact of currency. This growth was driven by an increase in volume of over 80%. We continue to expect roxadustat net sales growth for the full year 2022 in China driven by significant growth in volume. FibroGen's portion of roxadustat net product revenue in China was $17.4 million for the third quarter on a U.S. GAAP basis. Juan will elaborate further in the finance update. Turning now to the updated external market data on Slide 9. Roxadustat continues to be the #1 branded treatment for anemia CKD as measured by value share in the category, which includes all ESA products and roxadustat. We expect this category leadership to continue as roxadustat volume continues to grow at a fast pace. Next, Slide 10 provides a snapshot of roxadustat unit growth as indexed to December 2020 on the chart on the left, as well as year-over-year growth in the table on the right. Of note, this is a significant unit growth of roxadustat, where the leading ESA brand is slightly up, reflecting the anemia CKD market expansion that has been driven by roxadustat since its original NRDL listing in 2020. I will now turn the call over to our CFO, Juan Graham, for the financial update. Juan?

Thank you, Enrique. Before jumping into the financial remarks, I would like to begin by thanking our colleagues in the United States and China for their leadership focus in executing on our strategic priorities. As we have communicated, we're fully enrolled in 5 of our 7 Phase III pamrevlumab and roxadustat trials with pivotal readouts starting in the first half of 2023. Today, we have also announced a royalty monetization transaction with NovaQuest Capital Management, which will further strengthen our balance sheet to continue supporting our strategic priorities. Now getting into our financial results. Total revenue for the quarter was $15.7 million compared to $156 million for the same period in 2021. It is important to note the main drivers of change versus the third quarter of 2021, which are: one, a $120 million milestone payment in the last year period from our partner, Astellas, related to the European Commission approval of EVRENZO for the treatment of adult patients with symptomatic anemia associated with CKD, and two, a decrease of $24.1 million in co-development revenue from our partners due to substantial completion of the roxadustat development. Breakdown of revenue sources is as follows. We recorded $17.4 million net product revenue for roxadustat sales in China compared to $13.4 million in the third quarter of 2021, which represents a 29% increase quarter-over-quarter. During the quarter, we also recorded development revenue of $2 million associated with co-development efforts for roxadustat with our partners as compared to $26.1 million during the third quarter of 2021. Given the stage of roxadustat development and as anticipated and previously communicated, going forward, we expect co-development revenue to remain in range to this quarter's results. Finally, we recorded a reduction of $4.1 million in drug product revenue for roxadustat bulk drug or active pharmaceutical ingredients sold to Astellas. This reduction was due to the change in our estimates related to the shipments as per U.S. GAAP, primarily driven by the Japanese yen currency depreciation versus the U.S. dollar. Now shifting our focus into the operating results for our roxadustat business in China. Total roxadustat net sales from the joint distribution entity jointly owned by AstraZeneca and FibroGen or JDE was $59 million this quarter compared to $57.8 million in the third quarter of 2021. This represents an increase of 2% despite the impact of the NRDL price reduction and currency headwinds. This sales performance is the result of a significant volume increase of over 80% versus third quarter of 2021. As we have previously communicated, the growth experienced by our China operations continues to be strong and in line with our expectations of year-over-year growth in sales. Moving from roxadustat net sales in China, FibroGen's net transfer price from sales to the JDE was $19.5 million for the third quarter, consistent with the 30% to 45% range of the JDE's roxadustat net sales which we have continuously guided. During this quarter, we deferred $4.6 million in revenue due to the change in our future estimates as per U.S. GAAP, primarily driven by unfavorable renminbi currency impact amongst other estimates. As we have communicated in the past, the deferred revenue balance in FibroGen China fluctuates based on management estimates of future revenue. As a result, FibroGen recorded $14.9 million in net revenue for the quarter from roxadustat sales to the JDE and $2.4 million of direct to distributor sales from FibroGen China. Now making our way down the P&L. Operating costs and expenses were $109.4 million compared to $105 million for the third quarter in 2021. This increase in operating costs is driven by higher drug supply costs associated with our pamrevlumab programs offset by lower clinical trial expenses and overall cost management efforts in our infrastructure despite inflationary pressures. Diving in deeper into our expenses, R&D continues to be our focus to support future growth with roughly $75.2 million or 69% of our operating expense capital dedicated to research and development. Of the $75.2 million, $53.6 million was dedicated to pamrevlumab development and CMC activities, $12.5 million funneled to support our early-stage pipeline and the remaining $9.1 million directed towards roxadustat development. During the third quarter of 2022, net loss was $91.7 million or $0.98 net loss per basic and diluted share as compared to our -- to net income of $49.8 million or $0.54 per basic and diluted share for the third quarter last year. On Slide 11 of our presentation, we make reference that at September 30, we reported $441.6 million in cash, cash equivalents, investments and accounts receivable. Considering today's announcement on the royalty monetization transaction with NovaQuest Capital Management, we estimate our 2022 ending cash balance of cash, cash equivalents, investments and accounts receivable to be in the range of $380 million to $410 million. The royalty monetization transaction, along with our focused financial discipline, will provide additional strength to our balance sheet, further enhancing our cash position to support our organization. Finally, as we have previously stated, we're privileged to be able to consider a variety of options to continue to strengthen our balance sheet. Thank you. And now I would like to turn the call back over to Enrique.

Very good. Thank you, Juan. And in closing, I would like to reiterate our third quarter developments. Our financing transaction, our royalty monetization transaction, which gives us $50 million of non-dilutive capital, further strengthening our balance sheet. Our commitment to advancing pamrevlumab as a potential first-in-class medicine in Phase III developing in 3 indications with significant unmet medical needs. We expect top line data in 2023 from 3 pamrevlumab pivotal Phase III studies, LELANTOS-1 in non-ambulatory patients with DMD, ZEPHYRUS-1 in IPF and LELANTOS-2 in ambulatory DMD. Roxadustat continues to perform very well in China. Our partner, Astellas, is moving forward with the commercialization of roxadustat in Europe with further launches and reversal decisions expected in the major EU market -- EU markets over the coming months. We anticipate top line data in 2023 from 2 roxadustat pivotal Phase III studies, 1 global MDS trial and 1 China trial in CIA, which are expected to read out in the first half of 2023 and mid-2023, respectively. We continue to have a strong financial position with $441.6 million in cash as of December 30, 2022, and expect to end the year with $380 million to $410 million in cash. We continue to have multiple options to consider to further strengthen our balance sheet to ensure our long-term success. And now I would like to turn the call back to the operator for questions.

[Operator Instructions]. Our first question comes from Jason Gerberry of Bank of America.

A couple for me just on the IPF opportunity. Can you speak to what underpins your confidence that you can enroll subjects of similar severity to the Phase IIb PRAISE trial? Just specifically when PRAISE was conducted, I think patients were -- or I'm sorry, the market which is kind of seeing the rollout of new standard of care IPF medicines. So just wanted to get your thoughts on that? And then secondarily, if successful in the ZEPHYRUS programs, wanted to get your thoughts on running an adjunct trial, given that BI is the market leader and they are running an adjunctive trial. And so how important do you think that is to do or do you think the pamrev as a monotherapy can be highly competitive with the program that you're running?

Thank you, Jason, for your question. I'm going to pass your questions here to Dr. Eisner.

Yes. Thanks. So your first question about our confidence that we can enroll a patient population of IPF patients in the ZEPHYRUS program of a sort of range of severity similar to PRAISE, yes, we're highly confident. I mean, we are enrolling a broad range of patients, including more severe, and we expect to have a very generalizable population of patients in the ZEPHYRUS program. And then your second question around the adjunct or combination trial, I'm going to start, and then I'll turn to my colleague, Thane Wettig for any commercial kind of perspective that he might have. But we are certainly looking at life cycle options, assuming our ZEPHYRUS trials are positive. We will be looking at several options that could be one of them. I think we believe our data will be very informative because the -- actually the monotherapy design of the ZEPHYRUS program will give us a very clean efficacy and safety signal compared to placebo that will really be very highly informative to clinicians. So let me see what Thane thinks about some of the more market-facing potential of your question.

Thanks, Mark. Hi, Jason. As we continue to speak with pulmonologists about pamrevlumab and we highlight the PRAISE data to get the reaction and then speak about our Phase III program with potential label scenarios, one of the key questions we ask them is how they perceive pamrevlumab either as monotherapy or in combination, even if we don't have combination data to be able to share with them. And what we consistently hear back is that when they see the pamrevlumab profile, they consider the options that they have right now in terms of standard of care. They -- and if they have somebody who is on Ofev or Esbriet, they believe needs additional efficacy without then the trade-off of further issues from a tolerability perspective, they replay back to us just a natural inclination to add pamrevlumab on top of current standard of care. And then when we further press them to say, we don't have any data, what they then play back for us is hey, as long as I know that you have a strong efficacy profile and that I'm confident about the tolerability of your product, as I understand the mechanism of an anti-CTGF, they then understand how that product can go along well with either Ofev or Esbriet, and they just have a natural inclination to want to use them together. And so unless we have payer restrictions that say you cannot use pamrevlumab with Ofev or Esbriet, then we're pretty confident that physicians will go there. And it's not unlike other disease areas where if you think about hypertension or Type 2 diabetes or many -- or many other disease areas, these add-on therapies, it's a very common thing for physicians to do. It's just it's a natural next step for them. And we've heard that same thing over and over again as we research this with pulmonologists in the U.S.

Yes. Jason, just let me add one more key point. Clearly, with positive ZEPHYRUS-1 data, I think there will be a number of opportunities that will be in front of us. We have outlined some of those opportunities here internally. What you described is one of them, quite frankly, of course, we have to look at the data, but I would not consider that to be the top opportunity for us. So a number of additional opportunities, including some what I'm going to call adjacent indications to IPF, where we believe the product would work. So now we have to just wait for the data. We are, of course, highly enthusiastic given the conviction that we have based on our press results, and we look forward to having an incredible 2023.

Our next question comes from the line of Annabel Samimy from Stifel.

This is Jack calling in for Annabel. So think about PAM and IPF, right now, my understanding is that the trial is enrolling patients who haven't been eligible or who have not tolerated current treatments. If you're successful in IPF and there is some indication of fibrosis reduction, how do you expect the treatment paradigm to shift? Is the study designed to potentially offer a first-line position before Ofev or Esbriet or after? And also do you have a sense of the percentage of the population enrolled who are naive to current therapies versus ineligible?

Very good. I'm going to have once again Dr. Mark Eisner respond to your question, Jack.

Yes, no, thanks for your question. So just to clarify in the ZEPHYRUS program, we are enrolling both naive patients and patients who have previously been on standard of care and have discontinued standard of care prior to entry into the trial. So the good thing about that is we're going to have a very broad patient population that includes both naive and experienced patients. And we would expect a very broad label for the treatment of IPF reflecting the patient population that we enrolled. So we expect also from a clinician point of view that they will have all the information they need to make good decisions for their patients based on the benefit risk profile of pamrevlumab for IPF.

I think he also asked about the percentage.

Yes. We haven't really reported those percentages publicly. I mean, they're ongoing trials. So we don't have that data for you right at the moment.

Our next question comes from Michael Yee of Jefferies.

We had two questions. One, following up on a lot of the IPF questions, we wanted to understand or remind us what you designed the Phase III powering for in terms of assumptions on drug versus placebo and how that related to what we're seeing in Phase II? And the reason I ask that is in part because of the idea that you have patients that have either previously failed or intolerable to the orals, whereas in the Phase II, they had never seen it at all. And so the idea here is that there are sicker patients as you referred to. So just wanted to triangulate the different population sort of seen here and what you powered it for based on Phase II?

Yes. Great question. So in terms of power, I mean, we have powered the studies very robustly to be able to detect a treatment effect of pamrevlumab versus placebo. So we think statistical power should be more than adequate for each trial individually, ZEPHYRUS-1, ZEPHYRUS-2. And then the other part of your question that's pretty interesting too is around how would you expect naive versus an experienced patient to perform in a clinical trial. And it's pretty interesting because I think what we're learning from other studies in the placebo group, in particular, is that patients who are treatment experienced to go into trials continue to progress over the next year, much more than you would anticipate based on the labels for Esbriet or Ofev. So they do progress, and they actually are good patients to enroll in the trial just as naive patients are. And the best theory about why that would be is that if you're a patient on Esbriet or Ofev and you're doing well, even if you discontinue it -- discontinue the therapy and you're doing well, you're not really going to enroll in the trial. Patients who enroll in trials are patients who are continuing to progress typically are symptomatic from the disease. So they actually perform -- they actually progress on trial despite the fact they've been on standard of care in the past. So I think that whether they're naive or experienced, we expect those patients to progress on the trial in the placebo group, thereby providing us the opportunity with pamrevlumab to show a treatment benefit.

Thank you for that. Yes, it could be interpreted in both the faster placebo, which could be a good thing or also just a more difficult population in general. But the other second question, a follow-up has to relate to combination. So you made some nice comments about combination therapy, which I think, of course, is attractive, particularly if it works. And I do recall that previously, there was a combination study, fairly good sized. I think the safety was positive, but there never was any information never was presented. Can you just sort of remind us your takeaways from the combination study and what you learned from that?

Yes, I think you actually summarized it quite well. I mean it was a very, very small number of patients really not able to draw any efficacy conclusions, but there's certainly the safety of combining pamrevlumab and the tolerability with Esbriet or Ofev was more than acceptable.

Our next question comes from Danielle Brill from Raymond James.

This is Alex on for Danielle. Just another one on IPF considering the same. Just kind of curious to hear your thoughts on changing the Phase III enrollment criteria to include forced vital capacity down to 45%. Were you seeing screening failures and needed to expand? I'm just kind of curious if there was any post-hoc data cuts at the Phase II of the efficacy as a function of forced vital capacity? Just kind of curious that evident, the pamrevlumab was still working in these low baseline forced vital capacity that makes you confident that lowering it is not going to harm the trial?

Yes. Good question. So second question first. No, there really wasn't -- there was no post-hoc analysis looking at FVC as a predictor of efficacy in PRAISE. What I can tell you is that question has been thoroughly looked at in both Esbriet and Ofev pivotal trials. And interestingly, a lower or higher FVC, greater or less severity, does not predict Ofev or Esbriet efficacy in the pivotal trials of those agents. So we would expect similar in our trial. Yes, you're correct. We did lower the FVC from 55% in PRAISE to 45% in the ZEPHYRUS program. That's for a couple of reasons. One key one you mentioned, it's really important to reducing screen failures and enrolling the trial. Second point is that, that really harmonizes it with virtually all the pivotal Phase III programs in IPF that have been conducted in the past and are being conducted now. And based on my other comments, we don't expect that to have any adverse effect on the trial. If anything, we think there's some advantages including the patients on the slightly more severe end of the spectrum.

Our next question comes from the line of Andy Hsieh from William Blair.

Congratulations on getting that deal done. So regarding the deal, just a quick question on its . So first is, do we know roughly estimate how much are you getting from Astellas royalty wise per quarter? And also related to that, will future milestones count within the framework of this deal? Also we also have a question on IPF. So obviously, there is kind of the timing difference between the readout of the 2 Phase trials are about a year apart [Technical Difficulty] company, whether you guys have strategies in terms of either probably shrinking the timing is not possible, but maybe engaging in dialogue earlier just to kind of mitigate the difference in time? Third one is kind of a quick one. I noticed that in the 10-Q, you mentioned about this IP in China about the crystalline of roxadustat. I'm just curious if you can comment a little bit further on that in the context of market exclusivity?

Sure. I'm going to have Juan comment on and respond to your questions on the deal, Mark, on IPF and the timing between the trials and strategies that we could do or actions. And then Chris, I'm going to give it to Chris to discuss our exclusivity position and in particular, the IP question and the crystalline forms.

Andy, this is Juan. With regards to your question, I think with regards to the royalty, I think the way to think about it more generally would be that we are under the context of the Astellas deal, we're basically entitled to a 20% royalty. Clearly, as you have probably been following, we're in launch mode in Europe. So it's difficult to talk about numbers at this point in time. But clearly, we expect Europe to be fully reimbursed in the next couple of months or in the next few months in the key territories there, which will enable, obviously, growth in revenue and therefore, growth in our royalty. So that's I think the way to think about that piece. And I think I don't know if I mentioned, but we're entitled to around 20% royalty from that transaction. In terms of future milestones, I think there are just sales-based milestones out in the future. And yes, there would be a portion that would be attributable here as well in this transaction. So I think those are the 2 components.

Yes. So your question about IPF and the difference between the readouts of ZEPHYRUS-1 and ZEPHYRUS-2, yes. So we've previously communicated and continue to assert that we -- the base case is we'll need both ZEPHYRUS-1 and ZEPHYRUS-2 for filing in the U.S. That said, with the positive ZEPHYRUS-1 trial, we would go to FDA if the data are strong and compelling and discuss that with them the potential for filing one pivotal trial. I think there's precedence for that in a rare severe disease like IPF. So base case, 2 trials, but we do everything possible to discuss with FDA whether one pivotal trial could suffice for approval.

And with respect to market to exclusivity, we have multiple avenues to protect our exclusivity. In China, patents are, of course, one form of exclusivity, where we have a robust portfolio, including composition matter and yes, crystalline patents and other method patents. So this is just one form of exclusivity. We also have regulatory and administrative exclusivity by virtue of being a domestic Class 1 innovative drug. With respect to the specific question about the crystal form patents, yes, this is the first round of invalidation hearings. We had 3 crystalline patents that publicly available information were invalidated, which is consistent with the expectations as context in [Technical Difficulty] China, during the first round, the invalidation rate is 90%. So we now go on to appeal. There are 2 rounds of appeals through the courts. We expect that to take 2 years to 3 years to get resolved. So we're still very early on in that process.

Thank you, Andy.

Chris, just a follow-up. During the process of appeal, are all the patents still enforceable just like in the U.S.?

They are. They are -- they remain in effect until the appeal process is included.

Got it. Got it. Great.

One moment for our next question. Our next question comes from Paul Choi from Goldman Sachs.

I want to switch gears maybe for a moment to DMD. And I know you've historically been somewhat cautious on with regard to the prospects for the non-ambulatory trial. But in the case that it hits on the upper limb assessment, can you maybe just remind us what the regulatory feedback here has been on the approvability of that particular endpoint? I think it's a little less well understood relative to the ambulatory population and other drugs that have filed for instance on endpoints?

Go ahead, Mark.

Good question, Paul, it's Mark. We believe that positive clinical data for either LELANTOS-1, the non-ambulatory population or LELANTOS-2, the ambulatory population could support a regulatory filing. And this is a disease with a very high unmet medical need. There are really no therapies approved based on clinical endpoints. The currently available therapies are approved on dystrophin biomarker. So we believe that either trial could support filing by itself. So that, of course, would be a discussion we would have to have with the FDA based on the data, but that's our current assessment.

Okay.

Any questions on the -- I think he was asking also about regulatory interactions related to the endpoints?

Yes. So -- right. So FDA has supported both the performance of the upper limb for the non-ambulatory population and the North Star for the ambulatory population. And you're probably aware there's a draft guidance or actually guidance on DMD endpoints, where they're pretty nonspecific, but these are both endpoints that have -- that are supported in the guidance that have been used in other trials. So we're very confident about the endpoints.

Okay. I did also have a financial question for Juan here. Appreciate the cash burn guidance for the remainder of the year. But as you look to next year, you'll obviously have several late-stage trials rolling off. And I just wanted to maybe ask what's the maybe initial thinking on the rate of burn or just how you think about paring down OpEx as some of these trials come to end stage or completion?

Thanks, Paul. I think as you called out probably a little bit as we're going through, clearly, all of our financial processes, planning and so on, we're looking at 2023, and we will come back in our subsequent earnings call to provide more visibility. But clearly, there's a lot of activity happening in 2023 with clinical trials as you pointed out rolling off. But potentially as well, we would potentially start ramping up for launch depending on the readouts. So I think all of those components is what we're currently discussing, and we will provide further perspective over the coming months to what 2023 looks like.

Yes. It's -- as you can expect, Paul, there are important dynamics here. On one side, you correctly state, we will have lower trial expenses as those -- some of those trials conclude. But in some assuming positive trial, we will also have additional expenses related to bringing those products to market. So we need to think about how to -- as we prepare for next year, we need to be thinking about how we're going to provide that type of cash guidance given some of those dynamics. But it's an exciting time, it's an exciting time for FibroGen, an exciting time for patients to have so many readouts of pivotal data coming in 2023.

One moment for our next question. Our next question comes from Yaron Werber from Cowen.

First, can you just remind us what kind of efficacy you saw in the Phase II WHITNEY study in CIA? And if we might see some more of that data when you report the China study next year? And then just quickly on the European launch of roxadustat. When you say it's been a little bit slower than expected, is that mostly a reflection of just kind of negotiations with individual country reimbursement processes or is there really something about the actual clinical or commercial opportunity in Europe that's also contributing to some of these launch dynamics?

Yes. Thank you for the question. I'll have Mark answer the chemotherapy-induced anemia questions and Thane answer the European performance questions.

Sure. So the Phase II WHITNEY study was a open-label study that looked at 2 doses of roxadustat. And what we showed there is we can, in fact, increase the hemoglobin and improve the anemia, and we selected the 2.5 mg per kg dose to take forward into the China Phase III study, which is a head-to-head study versus ESA, excuse me, versus ESA, it's a non-inferiority design and that will read out mid next year. And that China is exclusive -- that study is exclusively aimed at China and the China population and the China market.

And then regarding the EU performance to date, it is still early in the game, reimbursement in Germany and through NICE in the U.K. and then awaiting reimbursement decision in France, Italy and Spain, as Juan said in his previous remarks, and as Astellas has guided, they expect reimbursement decisions in those other 3 markets by the end of their fiscal year, which would be between now and the end of March. The -- as we have stated in terms of the performance being slower than expected, that's primarily related to Germany because it's still early in the U.K., NICE approval was granted in July. Hospitals have 90 days to then adopt that NICE guidance. And so it's still really early in the U.K. And I think what we're looking at and what we're experiencing is the reality of a standard of care that's been in place for 30 years, and the fact that physicians are so used to using ESAs that it's just been a bit more difficult than anticipated breaking into that standard of care habit. That -- as Enrique said in his remarks, when physicians have replayed back to Astellas, their experience in using roxadustat, it's been very favorable. And so just as we've seen in China, where the drug has performed phenomenally well, there's no doubt about the clinical relevance and the benefits of roxadustat relative to an ESA. I think it's just going to take a little bit longer to penetrate into that standard of care habit than perhaps we anticipated.

Yes, we -- maybe just to add, we recently conducted some market research in a number of European countries looking at intent to prescribe. Clearly, reimbursement is a huge catalyst, but the intent of prescribers tends to be really, really high. So we need to get the reimbursement, that's a critical catalyst. And -- but as we look at the future, we remain -- we continue to remain very excited about the overall opportunity for roxadustat in Europe, we think is very significant.

Thank you. I would now like to turn it back to Enrique Conterno, Chief Executive Officer.

Well, thank you. I want to thank everyone for your participation in today's investor call and your interest in FibroGen. And I hope you very much enjoy the rest of your day. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.