Good day, and thank you for standing by. Welcome to the Akebia's First Quarter 2023 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 be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms. Mercedes Carrasco, Senior Director of Investor and Corporate Communications. Ms. Carrasco, please go ahead.

Thank you, and welcome to Akebia's first quarter 2023 financial results and business updates conference call. Please note that a press release was issued earlier today, Monday, May 8, detailing our first quarter financial results, and that release is available in the Investors section of our website. For your convenience, a replay of today's call will be available on our website after we conclude. Joining me for today's call, we have John Butler, Chief Executive Officer; and Dave Spellman, Chief Financial Officer. I'd like to remind everyone that the 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 May 8, 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 as of 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. I want to begin today by recognizing an exciting milestone that's been years in the making. Last month, the European Commission granted marketing authorization for Vafseo, vadadustat, approving the product as a treatment for symptomatic anemia associated with chronic kidney disease in adult patients on dialysis. The headline here is that vadadustat is now approved in 32 countries. We're extremely proud of this accomplishment and are eager to bring Vafseo to market in Europe and beyond, delivering an additional oral therapeutic option to patients on dialysis with anemia. To that end, I'll note that our priority in Europe is to quickly complete a partnership with a company that truly understands the complexity of the dialysis market across Europe and who will make Vafseo a priority for the more than 325,000 dialysis patients across Europe who are currently treated for anemia due to CKD. We're running a very active process and we look forward to announcing our partner and then collaborating with them to support a launch of Vafseo in Europe late this year. Again, the approval was an important catalyst for Akebia, and it would not have been possible without our dedicated team. If you recall, we assumed responsibility for the marketing authorization application last summer and we worked to remain on track for approval. I'm proud of the team's demonstrated commitment to patients and to Akebia. I'm also grateful for the patients, physicians, investigators and support coordinators who participated in our clinical trials that led to the approval. In the U.S., our work towards a potential approval for vadadustat continues, as we remain engaged with the Office of New Drugs, or OND, on our appeal to the vadadustat complete response letter, or CRL. Last quarter, we met with Dr. Peter Stein, Director of the Office of New Drugs and the deciding authority on our appeal. Since that time, Dr. Stein indicated he has completed his internal discussions with experts within the OND, and we anticipate a response within the next 30 days. We continue to believe in the potential benefit vadadustat can deliver as a treatment for anemia due to chronic kidney disease and we believe in the overall market opportunity for that indication. In fact, last month, we announced positive top-line results from FOCUS, an alternate dosing study evaluating the efficacy and safety of vadadustat in hemodialysis patients who were converted from a long-acting erythropoiesis-stimulating agent, or ESA, to three times weekly oral vadadustat dosing for the maintenance treatment of anemia. The data demonstrated that vadadustat met the primary and secondary efficacy endpoints and was non-inferior to an ESA in the treatment of anemia due to chronic kidney disease in patients on hemodialysis when used three times a week at the time of dialysis and with a comparable safety profile to the current standard of care. We believe the positive top-line results are important, because if vadadustat is approved for this dosing schedule, a three times weekly dosing schedule aligns with in-center hemodialysis visits, ensuring patient compliance. Again, I want to extend our sincere appreciation to everyone involved in this study, as it was a significant undertaking and we are very pleased with the results. You'll recall we're also working with UTHealth, evaluating vadadustat as a treatment for acute respiratory distress syndrome, or ARDS. Since our last update, I'll confirm that we continue to work with UTHealth to design and initiate a well-controlled study in a broad ARDS patient population and we expect to enroll patients this year. Our strategic business decisions and our team's adherence to our strategic focus have enabled us to live up to our purpose to better the lives of people impacted by kidney disease. We know there are many potential catalysts ahead in the near term, and we look forward to reporting on them as we continue to execute against our strategic plan. And with that, I'll ask Dave to talk more about our quarterly financials.

Thank you, John, and good morning, everyone. I'd like to begin by addressing Auryxia revenue. It's important to note that we are affirming our annual net product revenue guidance of $175 million to $180 million. While last quarter we noted a significant increase in channel inventory, this quarter, there was a significant move against us with a large reduction in Auryxia inventory at our selling partners to the tune of approximately $5 million. Auryxia net product revenue in the first quarter of 2023 was $34.8 million compared to $41.4 million in the first quarter of 2022, a 15.9% decrease. We anticipate that with current contracting dynamics, quarterly performance will be a little bit bumpy. We are realizing a higher net price per tablet approximately 80% higher than three years ago. As a result, changes in inventories in the channel are now much more apparent. Cost of goods sold decreased versus the same period in 2022. We are now, what I would call, at a normal cost of goods for Auryxia, which will include the $9 million quarterly non-cash Auryxia intangible asset amortization cost through Q4 of 2024. Next, I'll review operating expenses, an area I believe that our team has performed extremely well. In the first quarter of 2023, we realized a nearly 50% reduction in operating expense versus the first quarter of 2022 and a nearly 30% reduction from the fourth quarter of 2022. Our team has been diligent in its efforts to manage spend and sustain a reduction in operating costs. Rather than diving into the comparisons, I believe it will be valuable to remind folks of the actions we have taken over the last 12 months, while working diligently to further reduce our overhead. Some of those actions and accomplishments include: reducing our headcount by more than 55% from Q1 of 2022; reducing external spend on several support functions; occupying less office space; winding down of historical clinical programs; reduction of contractors and consultants; and a reduction of our supply chain commitments to better reflect our current needs; as well as other important activities, while still having several value creation activities ongoing supporting our third strategic pillar. As for cash, with our continued execution of our plan, our cash and Auryxia revenues will allow us to fund our business for at least the next 12 months. We ended the quarter with approximately $57 million in cash on hand. Our debt position has been reduced to $51 million, a 24% reduction from the end of the year. We have significantly reduced our current liabilities. I also want to address our stock price and NASDAQ listing. As many know, we have been out of compliance with NASDAQ's minimum bid price rule for over a year. In an effort to regain compliance, earlier this year, we filed proxy materials proposing amendments to our charter, including a proposal to effect a reverse stock split of our outstanding common stock. The primary purpose for effecting the reverse stock split was to increase the per-share trading price of our common stock, so as to regain compliance with the minimum bid price rule and maintain the listing of our common stock on NASDAQ. Unfortunately, the proposal did not pass and we anticipate that we will receive a delisting notice imminently. While we plan to appeal the delisting, NASDAQ is under no obligation to accept the appeal and there is no assurance that the appeal will be successful. Per NASDAQ rules, the only way to maintain a listing upon completion of the appeal process is to trade over $1.00 either organically or through a reverse split for no less than 10 consecutive business days. As such, if our stock does not organically regain compliance during the appeal process, we currently plan to file a new proxy statement seeking approval of a reverse stock split. We appreciate that the majority of our voting shareholders supported the reverse stock split proposals at the special meeting and find value in maintaining the NASDAQ listing. In the meantime, we continue to operate our business as usual and recognize the value that could come from potential near-term catalysts. We are extremely proud of our business progress over the last year since we established our new strategic pillars. I'd like to close with a recognition of all the Akebians who have got us here. With that, we'll open the line for questions.

Thank you. Our first question will come from Allison Bratzel of Piper Sandler. Your line is open.

Hi, thanks. Good morning, and thanks for taking my questions. So first, just on the vadadustat FDRR process. Could you just help us understand the communication you've had with FDA on that process, at least to the extent that you can? And just clarify, when did the 30-day clock start, or just what gives you confidence you'll get an answer from Dr. Stein within 30 days? And I have a couple of follow ups.

Thanks, Ali. So, we've been in regular contact. We mentioned that we had a formal type A meeting with Dr. Stein last quarter. And there's been regular communication with the project manager as there normally is during an FDA review. And so, we expect to have an answer from Dr. Stein within 30 days, but recall that it's also possible that he'll ask more questions and extend it another 30 days. We don't think that's where it's going to go. But we don't really have insight into what that next communication will say. So, while we believe that he has the information he needs to make a decision and, of course, we feel strongly about where that decision should go, we don't really have any insight into what that communication is going to be. So, we're looking forward to seeing that and, of course, I'm sure there'll be ongoing communication over the next 30 days as well. Just that regular course of business.

Got it. And then just on the EU partnership, can you just help us understand what kind of partnerships could be on the table there? And just how those discussions have progressed now that you have the approval in hand in Europe? And any kind of clarity or visibility on timing there for a partnership? That would be helpful. Thanks.

Sure, Ali. It is a very active process. Now obviously, we've been saying all along having the CHMP vote was important, but having the approval in hand and knowing exactly what's in the label, etc., really has accelerated that. At the end of the day, you can expect a pretty typical type of transaction would be my guess at this point. I think the important thing is the indication is in dialysis and dialysis is a complicated market. And so, finding a partner who really understands that market opportunity is crucial, considering every one of those European markets is different and dialysis is different within each one. So that expertise is something we're weighing heavily as we consider the options that we think we have for partnership. We want to move quickly because we want to launch the product as soon as possible, and we're anticipating that before the end of the year. But we want to be very deliberate and pick the right partner who will maximize long-term value.

Got it. That's helpful. And then just last one for me. Just on the FOCUS trial data, can you kind of walk us through the importance of that, the three times weekly vadadustat dosing and maybe what venue we could expect to see full data presented or published at? This seems you'd want to get that data out to docs pretty quickly. Thanks.

Yes, that's correct. As you're aware, dialysis is typically performed three times a week with in-center hemodialysis. We recognize that home dialysis will play a significant role for vadadustat, and we've emphasized the importance of its once-a-day oral dosing. However, hemodialysis remains the predominant method for delivering dialysis both in the U.S. and Europe. Allowing dialysis providers to dispense the medication to patients during their dialysis sessions helps streamline the process for both parties and ensures patient adherence. In the U.S., considering TDAPA, dialysis providers will be purchasing vadadustat if approved, so they need to make sure patients are taking it. Therefore, we believe that a three times weekly dosing regimen is crucial. Additionally, we aim to make that data available as soon as possible. I understand there is a manuscript under development, and we typically present data at the ASN meeting. While we aren't certain if the data will be ready for that meeting, it is my expectation.

Okay. Got it. Thank you.

Thanks, Ali.

Thank you. One moment please for our next question. Next question will come from Ed Arce of H.C. Wainwright. Your line is open.

Hi, good morning, everyone. This is Thomas Yip asking a couple of questions for Ed. Just perhaps the first question regarding the FDRR process as you alluded to and the response expected within 30 days, just internally wondering what would you consider to be the best and worst case scenarios? And would you be open to file another round of FDRR if needed?

Thank you for the question, Thomas. We've previously outlined the possible outcomes of the process, and those still stand. The worst-case scenario is that our appeal is denied and we're sent back to the division, which would likely eliminate any path forward for vadadustat in the U.S. Naturally, that's not the outcome we are aiming for. The most straightforward positive result would be if the appeal is granted. It's important to note that this is not an approval, but rather part of the appeal process. If the appeal is accepted, we will refile the NDA, and the division has a timeframe of either two or six months to review the product again, based on whether it's a Type 1 or Type 2 submission, leading to potential approval. With an approved appeal, the chances of success are very high. The third possibility would be a denied appeal but with a defined path forward. From our viewpoint, this scenario is almost as favorable as having the appeal granted. The FDA, through Dr. Stein, would be providing a clear direction for approval. We've discussed before that this might involve holding an AdCom, although we believe that is unlikely. It could also entail other options he suggests that could facilitate approval, potentially without the need for more clinical data, such as some analysis or a REMS program, which could establish a path to approval. This is a common outcome based on our experience with these FDR processes.

Got it. Thank you so much for running all the scenarios. Really appreciate it. Perhaps one question from us. Switching gears to Auryxia, you mentioned in the press release beyond the loss of exclusivity that's anticipated for March 2025, what are some possibilities to keep that on the market? Can you discuss? Thank you.

Yeah. No, it's a great question. Thank you. So right now, the expectation in dialysis, remember where Auryxia is used is to treat hyperphosphatemia in dialysis patients. Right now, CMS is expecting to add phosphate binders, all oral products that aren't part of the bundle already to the bundle as of January 1, 2025. And they've said in their last rule that they're going to have a TDAPA period for these oral products, because right now they don't have the data to know what to add to the bundled payment. So if you use the calcimimetic as an example, the Amgen product, they went through their TDAPA period a few years ago, and you go from being a Part D drug to a Part B drug, CMS collects all of the data on utilization of the product, and then at the end of the TDAPA period, they make a determination for the dollars per dialysis session that they'll be adding to that bundled payment. And so that's what we expect them to do, looking at the different binders, the utilization of each. When you think about this from a dialysis provider's perspective, there's great incentive to treat patients effectively. So really focus on treating hyperphosphatemia, and frankly, focus on the use of branded products within that in order to maximize the value of that payment that's added. Because once that's added, it doesn't change. CMS doesn't feel they have the ability to go back and look at that payment again. So, for those two years during the TDAPA period that's been defined by CMS at this point in time, so 2025 and 2026, there's a real motivation for them to utilize products like Auryxia and utilize the branded products. So, we'll have to contract directly with the dialysis providers and work with them on their protocols, so that they're utilizing the product. Unlike a situation where you simply lose exclusivity and generics come in to dominate the market, we think there's more opportunity there. Even if we get to a situation where we didn't have TDAPA, given the nature of these phosphate binders, if you look at sevelamer, Renagel/Renvela as an example, even though they lost their patents, the dynamics of the amount of product that has to be delivered to a patient is such that there wasn't really significant interest from generic manufacturers to bring the product to market. So, they had a very long tail on sevelamer. If we see something like that, either through TDAPA or the normal course, there is very significant revenue still. It will be a declining revenue stream to be clear, but one that will need very little sales and marketing investments, so significant opportunity for positive cash flow for the company.

Understood. That makes sense. Thank you again for taking our questions and really looking forward to the FDRR response.

As are we. Thanks, Thomas.

Thank you. This will end the Q&A portion of the conference. I would now like to turn the conference back to John Butler for closing remarks.

Thanks, Chris, and thank you all again for joining us this morning. It's hard not to reflect on the progress we've made over the past year since receiving the CRL. We've negotiated an exit with Otsuka that brought $55 million in cash and secured significant global rights. We've continued to drive Auryxia, allowing us to run the company on Auryxia revenue plus our cash on hand. We've completely changed the cost structure of the company. We've worked through the FDRR process with the FDA. Most importantly, to date, we've taken over the European filing and led vadadustat to be approved in Europe. We have what may be even more important milestones ahead in the next months, and I really look forward to discussing those with you in the near future. Thanks, everyone. Have a great week.

This concludes today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.