Good day, ladies and gentlemen. Thank you for standing by and welcome to Akebia's Fourth Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Mercedes Carrasco, Senior Director of Corporate Communications. Please go ahead.

Thank you, and welcome to Akebia's fourth quarter and full year 2022 financial results and business updates conference call. Today we also celebrate World Kidney Day, an opportunity to raise awareness for kidney health and recognize all those in the kidney community who share in our purpose to better the lives of people impacted by kidney disease. Joining me for today's call, we have John Butler, Chief Executive Officer; and Dave Spellman, Chief Financial Officer. Our press release was issued earlier today, Thursday, March 9th, detailing our fourth quarter and full year 2022 financial results, and that release is available on the investor section of our website. For your convenience, a replay of today's call will also be available on our website after we conclude. Before we begin, I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information describing these risks is included in the financial results press release that we issued on March 9, as well as in the Risk Factors and Management Discussion and Analysis section of our most recent annual and quarterly reports filed with the SEC. The forward-looking statements on this call speak only to the original date of this call, and except as required by law, we do not undertake any obligation to update or revise any of these statements. With that, I'd like to introduce our CEO, John Butler.

Thanks, Mercedes, and thank you all for joining us. Everyone at Akebia has entered 2023 with renewed optimism. Through the past year, our team's work and the strategic decisions we've made have put us in a position to thrive as a company. We continue to engage with the kidney community and support our patients on Auryxia. We've advanced the regulatory process for vadadustat in Europe to a point where we're now approaching a potential marketing authorization, and we're excited to look ahead as we evaluate and drive potential pipeline expansion opportunities, including developing hypoxia-inducible factor prolyl hydroxylase inhibitor compounds for potential indications of serious unmet need. We have a team that works with purpose and I'm proud of their accomplishments as they've delivered a company today with a strong revenue base, multiple near-term catalysts, and mid and long-term product development opportunities. Now let's begin with Auryxia. In 2022, we reported net product revenue growth of nearly 25% over 2021, exceeding the revenue target guidance we established mid-year. Achieving net product revenue growth while the phosphate binder market continues to decline is a credit to our dedicated commercial team that works hard to ensure thousands of patients have access to Auryxia. Last year, we launched a new commercial model that aligns with customer objectives. We believe the model will enable our team to continue high-touch engagement with high-value individual prescribers and entities that are focused on delivering coordinated, cost-effective care for advanced CKD patients, including those receiving dialysis. Auryxia net product revenue is integral to our operating plan as we continue to support the regulatory processes for vadadustat globally and invest in our other drug research and development activities. Regarding vadadustat, we're quickly approaching a potential milestone. In late February, the Committee for Medicinal Products for Human Use, or CHMP, of the EMA adopted a positive opinion recommending that the European Commission approve Vafseo, vadadustat for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis. We anticipate potential marketing authorization for Vafseo to be granted by the EC in May of this year, which would be applicable to all 30 European Union member states and affiliated countries. Beyond the EU, we also anticipate a regulatory decision for vadadustat for ACCESS Consortium countries, the UK, Switzerland, and Australia later this year. We are dedicated to delivering an oral treatment option to patients with anemia due to chronic kidney disease and continue our efforts to select a potential partner in Europe to commercialize Vafseo if approved. We don't expect to formalize a partner engagement until sometime after Vafseo receives marketing authorization, but we're deeply engaged in the process to select a partner that can maximize the potential value of Vafseo while quickly reaching appropriate patients. Vafseo marketing authorization in Europe would mean vadadustat would be approved in 31 countries as it's currently approved and marketed in Japan by MTPC for dialysis-dependent and non-dialysis-dependent adult patients. We believe in the favorable benefit-risk profile of vadadustat. To that end, we continue to pursue a potential path for approval in the U.S. for patients on dialysis. Last year, we submitted a formal dispute resolution request with the FDA regarding the complete response letter for vadadustat, specifically related to adult patients on dialysis. In February of 2023, we received a second interim response from the FDA indicating that due to agency resource constraints and staffing needs, Dr. Peter Stein, the Director of the Office of New Drugs, will serve as the deciding authority for the appeal. Dr. Stein has indicated he will seek internal consultation with nephrology, cardiology, and liver safety experts to complete the review, and we expect to receive a response 30 days after Dr. Stein completes his discussions. We continue to engage with Dr. Stein and the Office of New Drugs and will update investors on this process as appropriate.

Thank you, John, and good morning, everyone. 2022 was an important year for Akebia and we have developed an operating plan that will enable us to further build value as we capitalize on potential upcoming catalysts in 2023. Most immediately, assuming vadadustat gets approved by the EMA in May, we will have developed a second drug that will be approved in over 30 countries and has the potential to benefit thousands of patients. Beyond a European approval for vadadustat, we could initiate our next ARDS study with UTHealth in a non-COVID ARDS population, generate preclinical data for indications for vadadustat in acute settings; secure potential approval for vadadustat in other countries, including the UK, Switzerland, and Australia; secure an ex-U.S. licensing deal; resolve our FDA dispute resolution process which would provide clarity to our expense profile and the potential revenue related to vadadustat in the U.S. Beyond vadadustat, broader portfolio opportunities that may be added within our operating plan include the potential to leverage our infrastructure to build out our development and commercial portfolio with new external assets and maturation of our preclinical programs with the potential for multiple INDs over the coming years. Auryxia continues to perform well, which based on our guidance for 2023, will deliver net revenues in excess of $350 million over the 2022, 2023 time period. Our Auryxia guidance of $175 million to $180 million assumes inventories return to normal levels, and that we realize an increase in net price per pill, partially offset by a reduction in total units sold. We also assume that the binder market continues to have challenges. Our cost management exercise has yielded important financial strength and stability for us. We expect to have cleared the going concern analysis upon filing our 10-K, meaning that we have cash that will provide us the resources to fund our operating plan for at least 12 months. This is the result of two main focuses of the company, which we have previously discussed in great detail, but given the significance of the event, it is worth reviewing again. First and most obviously is the commercial success that led to a nearly 25% increase in year-over-year net product revenue for Auryxia. Our commercial leadership team undertook a laborious process to look at each and every commercial contract and position the brand to deliver more revenue on fewer net tabs sold. Few products achieve this type of growth, let alone those that are in their first few years on the market. Many congrats are owed to our commercial team, including our key account managers. Second, and just as important, has been the narrowing of our strategic focus, which has enabled concentrated spending on items that will support our future growth. We've exited several contracts that were not yielding the return we needed and have asked our people to do more with less and have stopped certain activities in order to push more money into our R&D pipeline. In addition, we reduced our debt balance and are paying less interest expense than otherwise would have. Overall, we are managing our working capital tightly. We are not offering operating expense guidance at this time, but we'll continue to focus on extending our cash runway. Our focus on maximizing Auryxia revenue remains both pre and post launch, and we will only look to reinvest in high-value areas we can afford to pursue. We'll also look for areas to potentially grow our revenues with Auryxia, for example, by ensuring that we have a TDAPA strategy in place to maximize revenue during this period, as well as potentially having revenue from vadadustat first with a European partnership. On that note, as you are all aware, we recently obtained a positive opinion for vadadustat from the CHMP and now anticipate a potential approval in May. As John mentioned, we have been actively pursuing our partnership to ensure a successful launch in a timely manner. We cannot, at this time, provide guidance on deal economics, but can say we are looking for a partner who will team with us to maximize the value of the asset and shares our goal of benefiting as many patients as possible within the approved indication. Finally, pivoting to NASDAQ compliance, we have filed our definitive proxy and are on track to take the appropriate steps to regain compliance with the price criteria for continued listing on NASDAQ. On today's call, we will not be going through year-over-year fluxes of the financials beyond those provided in the press release, but are happy to dive into questions.

Hey, good morning, guys. Thank you for taking my questions. So first, just one on the vadadustat appeal process. Could you just help us understand if you've had any additional communications with the FDA since the interim response in late February? And just hoping you could walk us through the possible outcomes and expected cadence of events there. Do you plan to communicate when the 30-day clock starts for Dr. Stein's review? And then I have a couple of follow-up questions after that.

Well, thanks, Allie. And so, we are in regular conversation with the agency, usually administrative more than anything else. And again, just to stress, we can't say what exactly the timing of this is going to be. It will be 30 days after he's finished his internal review. He has clearly communicated that he's looking to do that in an efficient manner and exactly what that means we can't say. So I can't guide you towards when that might be. But it seemed clear in the letter that there's not an expectation of dragging that review out. But I don't want to set an expectation that we can't meet because it takes them a while longer to complete those conversations. There is regular administrative communication throughout the process. There isn't a commitment that we'll know exactly when that 30-day clock will start, so it's hard to say we will definitively tell you when it does. But as I said, we will clearly update as appropriate as we understand the process going forward without getting into that kind of day-to-day communication.

Got it. Yes, no, and thanks, that was helpful. Another question I wanted to ask about the vadadustat approval; just hoping you could share your thoughts on how that approval and also now that the FDA review documents have been published, just how does that impact your thinking about the chances for a successful appeal outcome for vadadustat? And also just for a potential vadadustat label, just noticing that the TDAPA label is specifically indicated for patients on dialysis for at least four months; does that reflect class labeling or is that more something specific to vadadustat? Understanding this might be a cart-before-the-horse question, but just interested in your thoughts there.

Every product is an individual product, though, right? And so how our label might look vis-à-vis there is impossible to predict. Now, like I said, I can't wait to be in those labeling discussions with the FDA. We just do not know what will come from the appeal process, but we continue to have a lot of confidence in the data. A European CHMP positive opinion, I think, similarly is nothing but positive for the FDA as Dr. Stein looks at the label. Thirty-one countries have now decided that the product is safe and effective. And we will do everything we can on our end to move the process effectively and, again, we'll communicate it as quickly as we can.

Okay. Yes, I understood. And then maybe just a last question from me just on the expense trajectory. I guess this came up a bit in the prepared remarks, but just wondering if there is any color you can provide to help us understand that expense trajectory for both R&D and SG&A? And just expectations for cash burn over the course of 2023 or is that something you'll be able to describe more once you do get that answer from the FDA? Thanks.

Yes, so, Allie, thanks for the question. Like I said in the prepared remarks, we're not going to provide specific guidance, but we have done a lot of work to continue to bring down R&D and SG&A and we'll continue to do so, even this quarter. A lot of that focus is to bring it down so that we can balance the Auryxia revenue and revenue growth with reinvesting in these pipeline opportunities. I think the big thing that I mentioned is the expectation to clear the going concern analysis. That is the strongest guidance that we can give, that we plan to be able to manage our expenses within the cash that we have and the Auryxia revenue. So we're very excited about that. And I think long-term, the two things that would just factor into the burn would be success in the pipeline, and to your point, vadadustat, investment in a commercial launch is not something that we've gotten our plan right now. So if we are fortunate enough to have those conversations, we would definitely be reassessing the investment plan. But again, this is where going back to something we haven't talked about for a long time, our leverage and our commercial expertise, the model that we have right now, the focus on the dialysis center is — so the relationship in the dialysis center is strong, and the relationship with Vifor to be able to partner with them on that potential launch — we don't expect that this is a major new investment. Leverage is going to be the name of the game there.

Yes, it's such an important point. And I mean, when we made the change to the commercial structure, it was with the thought of how to do that launch in mind as well, with the Vifor partnership. I mean, that would be incredible leverage we could get out of that organization. So yes, there is investment to be made in a launch, but in this case, it's a very small investment in people, maybe a couple of marketing people. We dust off a launch plan that we had a year ago and I think it would be a phenomenal outcome for us. But again, as Dave said, we've built our budget without right? We want the company to have the discipline of driving to positive cash with Auryxia alone and a disciplined approach to spending. The team has done a phenomenal job of delivering on that, and we expect to continue to deliver towards that in 2023.

Got it. Thanks so much.

Thanks, Allie.

Thank you.

Great. Thanks for taking my questions and congrats on all the operational progress in 2022 including the strong growth of Auryxia. First question from me, I noticed you mentioned you have signed a European license agreement with Averoa for Auryxia in Europe. I'm wondering if you could just discuss what you expect there. What kind of communications can we expect going forward with that? And what's your expectations for the end of exclusivity in those markets?

Ed, thanks for the question. So Averoa is a small European company. And again, with Auryxia, we've only had the product available in the U.S. and the idea of bringing this to European patients where we think there can be a benefit has always been attractive for us. We knew this is something we weren't going to execute on our own. So bringing in a partner who looks at this a little bit differently is essential. They're working on that now, and they're consulting with regulatory authorities, and we tried to put a contract in place here that created upside for us if they're successful with very little, I wouldn't say downside risk, but distraction for the organization. And that was quite important. So again, we're living our purpose of bringing products to patients where there's a need, but doing it in a way that really just creates potential upside for us. Remember, in Europe, you have data exclusivity timeframes, but that's what they'll be relying on rather than patent protection per stage in the market. So there's an opportunity there. This is a deal that — obviously, it’s a royalty-based deal for us. They are taking some risk, and we're taking very little, but the upside is if they're successful in the way they approach the EMA with this. We will see where we go from here. I wouldn't say this is something that we put significant focus on as we think about building the company, but we're happy with Averoa as a partner and look forward to supporting them as necessary.

Okay. And then you also mentioned in the release that you're working on certain initiatives to extend the revenues of Auryxia beyond March 2025. I wondered if you would care to expand upon that in any way? And perhaps related, I think I heard brief mention of TDAPA. I'm wondering if there is any opportunity for you to leverage that come 2025?

But what's unique to the situation we're in today is, as you said, the TDAPA process that CMS has said that the phosphate binders will go into the bundle as of January 2025, which has been the expectation. But in the last final rule, they made that clear, and they made it clear that they were going to have a two-year TDAPA process and then a three-year TDAPA process, which they did for another drug, would be more appropriate and we'll talk with them about that. But with a two-year TDAPA process, it means they're collecting data for those two years to see how the dialysis providers utilize phosphate binders so they can make a decision about what to add to the bundled payment come January 2027. So if you think about this from a dialysis provider standpoint, there's a lot of motivation to use, obviously, they treat patients appropriately, but to use products like branded products so that they're not going to end up with a bundled payment that doesn't cover their costs ultimately. So there are clearly opportunities for us with Auryxia over the course of 2025 and 2026 to work with them on utilizing the drug appropriately for patients, of course, but increasing, continuing to increase the utilization and then helping with that switch over to generics beyond 2026. So there are some meaningful revenue opportunities there, and we're just now working with dialysis providers to see how that will be rolled out.

Okay, great. And then one last question; I joined a bit late, so maybe you discussed this already, but I just wanted to clarify for vadadustat in the U.S. If that process were to ultimately result in an approval, commercially, what is your plan right now?

So the focus of the FDA dispute resolution request now is for patients on dialysis only. So that would be the expectation of what an approval would yield. The commercial organization that we've put in place now, the reorganization we did late last year, we think from a field perspective, we probably have to add a couple of marketing people, but from a field perspective, we have what we need for that launch because of the Vifor relationship. We have the Vifor relationship that we have. They will sell directly to Fresenius and the other small and medium providers who have contracts, they have contracts with; this really allows us to have a much more efficient commercial focus and delivers a tremendous amount of leverage for us on our P&L if we're successful with that.

Great, thanks so much.

Thanks, Ed.

Thanks, Ed.

Yes, thank you for taking the questions and congrats on the progress. Looking forward to more. Just a quick question on margins for this quarter. I think you mentioned it in the call, excuse me, in the release. But COGS had a benefit this quarter; I think there was some mention about contract termination fees. Could you go into a bit more detail about how we should be thinking about the cost of goods and gross margin? Again, I know you're not commenting on the expense guidance, but just in general, thinking about the operations of Auryxia and costs and gross margins and things in general?

Yes. Thanks for the question, Bert. So as folks are aware, back in December, we released information about the termination of a supply contract that we had, a multiyear supply contract among the different supply agreements that we had back then. We had then each quarter been providing updates on something that we call an excess purchase commitment with the restructuring of the supply chain. We expect that those charges are going away, and we have reversed those charges in the fourth quarter. So what you'll see going forward within that cost of goods line, you'll still see the amortization of intangible that is clearly in there and called out as a noncash expense. But what you'll see now is a much more normal cost of goods line, which would be just our cost to produce and sell Auryxia. That will be — again, we're not providing specific numbers, but you can go back historically and look at what we've disclosed; whether it's excess purchase or inventory write-offs, take those to the side, and it will be a much more normal rate. We're really, really happy about those contract terminations and reworks because it does save us a significant amount on the cash flow. Again, this has been a big contributor to us having this cash runway that we're talking about now due to changing those contracts. This reversal was in excess of $70 million.

Terrific. I'm looking forward to clearer numbers in the future. That's great. I have a couple of questions regarding vadadustat. In the U.S., is Dr. Stein looking for additional data from Akebia? Are you communicating with him in any way?

So the focus of the letter is the internal discussions that he is having. If he requests anything from us, then obviously we'll be responsive to that. Part of the FDRR is that you can't give new data into the review, so we couldn't proactively get him anything new to look at. It's got to be all things that are included in the NDA. That's part of the rules of the FDRR. I think his initial focus is certainly — I don't want to speak for him, but coming up to speed, he has come up to speed a long way. I mean, he really was quite versed in the issues at hand but wants to seek that internal guidance. So I think it's more about that. We will do everything we can to support him in that process and support a positive outcome. Having a direct communication with him on these issues is something we would welcome.

Okay, terrific. And then just thinking about — again, there's a little bit of additional data coming up from the Focus Study, the three times weekly data. What does this give you? What should we expect in terms of data release for that study?

Yes. We expect that we'll be presenting that data at a scientific session or in a publication to be determined. It's an important study. It is the study that we feel will be the basis for having a three times weekly dose for vadadustat in our label. And obviously, with the dialysis patients, even with a negative outcome in the U.S., we have a positive outcome in Europe. Having that ability for dialysis providers to deliver the drug when the patient is on dialysis is just another option for them that can be very helpful and ensure compliance for their patients. It's important, and I think it's important for patients, and it's also important commercially. It's giving physicians more options. So that study is completing, and we do expect that data will be presented this year.

Okay, terrific. And just one more; I think you talked about this to some degree, but I'm sorry to kind of come back to it. But I just, maybe a little bit more formally, what would a label look like in the EU for vadadustat as Vafseo as we're moving forward? Just any kind of broad characterization you can provide for the potential authorization would be helpful. Thanks.

So obviously, until we have that marketing authorization, we don't want to get ahead of that. But you are talking about a label as you go through the CHMP, and we're very pleased. From a commercial eye, I think it's a label that we absolutely can work with. There's nothing that's outside of what I would expect in there. Obviously, focused on dialysis patients alone. When I look at the concerns expressed by the FDA, those are handled in a very appropriate way in the anticipated summary of product characteristics. So we'll see the final when we have it, but I have no concerns from a commercial perspective based on what I've seen so far.

Terrific. And just one more along those lines; how would you characterize the status of interactions for folks with additional commercial parties in the EU? You said clearly that nothing is going to happen until formal authorization, but I'd just love to get a sense of the temperament out there. Thanks.

Yes. It's a very active process. Getting clarity that it's dialysis versus dialysis and non-dialysis, obviously, was important to the process. Having the CHMP positive opinion is very valuable for us and having authorization creates more value for us ultimately. We have an active process with multiple parties who are interested in the asset. We have clarity that creates room for further dealings. Seeing this process through and maintaining multiple parties usually yields the best outcome for us and for the product. If that takes a little time, that's usually time very well spent. So we're very pleased with how this process is moving forward.

Thanks for all that. Congrats on the progress. Looking forward to more. Thank you.

Thanks, Bert.

Thanks, Bert.

Thanks, operator, and thank you all for your attendance this morning. While we celebrate World Kidney Day today, our commitment to patients drives us forward every day and I hope you got a sense of our excitement from this call. I just want to summarize very quickly a few of the exciting developments we're expecting in 2023. We're going to continue to drive revenue growth for Auryxia and expect to deliver net product revenue of $175 million to $180 million. We received a positive opinion from the CHMP for vadadustat and anticipate marketing authorization in a couple of months. We expect a regulatory decision for the ACCESS Consortium countries. We anticipate engaging a partner to commercialize vadadustat in Europe. We expect a decision on the FDA dispute resolution process. We anticipate that UTHealth will initiate an ARDS study with vadadustat in a broader patient population. We look forward to talking much more about our pipeline development for vadadustat and other novel HIF-PHI compounds as the year progresses. This will be a very busy year for us, I think, an exciting year for Akebia, and we look forward to updating you further on it. Thanks again for joining us. Have a great day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.