Earnings Call Transcript - KYNB Q3 2025

Gaia Vasiliver-Shamis, LifeSci Advisors

Thank you, Twanda. Good afternoon, everyone, and thank you for joining us today to discuss FibroGen's First Quarter 2025 Financial and Business Results. I'm Gaia Shamis from LifeSci Advisors. Joining me on today's call are Thane Wettig, Chief Executive Officer; and David DeLucia, Chief Financial Officer. Following the prepared remarks, we will open the call to your questions. 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, collaborations with AstraZeneca and Astellas, financial guidance, the initiation, enrollment, design, conduct and results of clinical trials, regulatory strategies and potential regulatory results, 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 the company's 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. With that, I would like to turn the call over to CEO, Thane Wettig.

Thane Wettig, CEO

Thank you, Gaia. Good afternoon, everyone, and welcome to our third quarter 2025 earnings call. Today, I will provide an update on our efforts focusing on our three main priorities: completing the sale of FibroGen China, progressing with our lead asset, FG-3246, a potential first-in-class antibody drug conjugate targeting CD46 for metastatic castration-resistant prostate cancer, and the path forward for roxadustat as a potential treatment for anemia due to lower-risk myelodysplastic syndromes. Then David DeLucia, our CFO, will review the financials, and we will open the call for questions. I would like to start with the sale of FibroGen China to AstraZeneca that we recently completed for approximately $220 million. This was a transformative transaction that provided us with an efficient means to access the company's cash held in China, extending our cash runway into 2028. Following the transaction, we successfully paid off the term loan facility with Morgan Stanley Tactical Value. We are also making progress with FG-3246 and FG-3180 in metastatic castration-resistant prostate cancer and initiated the Phase II monotherapy trial of FG-3246 and FG-3180 earlier this quarter. We expect top line results from the investigator-sponsored trial of FG-3246 in combination with enzalutamide in mCRPC to be presented at a medical conference in the first quarter of 2026. As previously stated, we had a successful Type C meeting with the FDA in July, providing us with a clear regulatory path forward for roxadustat. We remain on track to submit the Phase III trial protocol for roxadustat for treating lower-risk myelodysplastic syndromes in patients with high transfusion burden later this quarter. We are confident that with our mid- and late-stage assets, simplified capital structure, and upcoming catalysts, we are well-positioned to advance therapeutic options for patients and create significant value for shareholders. Now, I will give a brief overview of our FG-3246 and FG-3180 programs in mCRPC. The high unmet need in late-stage prostate cancer is highlighted by approximately 290,000 annual diagnoses in the U.S., with around 65,000 being drug-treatable patients with metastasized castration-resistant cancer. This patient group has a grim five-year survival rate of about 30%, indicating a significant opportunity for new life-extending treatments. We believe FG-3246 could be this new treatment option, estimating the total addressable market to be well over $5 billion annually. We will now highlight the distinct features of CD46 as a tumor-selective target. CD46 is upregulated during tumor genesis and helps tumors evade complement-dependent cytotoxicity. Its expression increases during the progression from localized castration-sensitive prostate cancer to metastatic castration-resistant prostate cancer and is further overexpressed after treatment with androgen signaling inhibitors. Importantly, CD46 is highly expressed in mCRPC tissues, making it an attractive therapeutic target. FG-3246 is our potential first-in-class ADC in development for mCRPC, combining the YS5 antibody with an MMAE payload specifically targeting the tumor-selective epitope of CD46. FG-3246 offers an androgen receptor agnostic approach, differentiating it from other developing prostate cancer treatments that mostly target PSMA. The companion PET imaging agent, FG-3180, uses the same YS5 targeting antibody and is also in clinical development. We believe having a patient selection biomarker will enhance patient enrichment in future trials and differentiate FG-3246 in the prostate cancer treatment paradigm. Additionally, FG-3180 could be a valuable commercial companion diagnostic to FG-3246. The top line results from our FG-3246 clinical trials to date are promising. In the Phase I monotherapy study, patients with mCRPC who were heavily pretreated showed a median radiographic progression-free survival of 8.7 months. Notably, over 50% PSA reductions were observed in 36% of these patients. In the Phase Ib portion of the investigator-sponsored combination study with enzalutamide, the preliminary efficacy data indicated a 10.2-month radiographic progression-free survival, with PSA declines seen in 71% of evaluable patients. These results highlight compelling clinical activity with FG-3246 compared to other approved and investigational treatments. Following the Phase I monotherapy results, we initiated the FG-3246 Phase II monotherapy dose optimization trial in September, planning to enroll 75 patients across three dose levels to determine the optimal dose based on efficacy, safety, and other parameters. FG-3180 will be integrated into this study to demonstrate the correlation between CD46 expression and response to the ADC. The design also includes using G-CSF as primary prophylaxis to manage potential neutropenia observed with MMAE payloads. An interim analysis of the trial is expected in the second half of 2026. Our long-term development strategy for FG-3246 and FG-3180 aims to explore multiple registrational pathways, evaluating FG-3246 in various lines of therapy in both monotherapy and combination settings. Upcoming catalysts for these programs include the expected top line results from the investigator-sponsored trial of FG-3246 and the interim results from the Phase II monotherapy trial. FG-3246 targets a novel epitope on prostate cancer cells, representing first-in-class potential with no other CD46-targeted projects in clinical development. We are enthusiastic about our upcoming milestones and will continue to update you as the program progresses. Turning to roxadustat, there is a significant unmet need and potential for this treatment in roughly 49,000 patients in the U.S. with anemia associated with lower-risk MDS, where current treatments are effective for less than 50% of patients. There are no oral options available in late-stage development, presenting an opportunity to offer a convenient oral treatment for patients in the second line and beyond. In a post-hoc analysis of patients with high transfusion burden in the Phase III MATTERHORN study, roxadustat showed a meaningful treatment effect, with 36% of patients achieving transfusion independence for at least eight weeks compared to 7% in the placebo group. This data aligns closely with pivotal trial results for two recently approved therapies for anemia in lower-risk MDS. Our target indication for roxadustat is patients with lower-risk MDS and high transfusion burden who are refractory to or ineligible for previous ESA treatment. We had a positive Type C meeting with the FDA in July, agreeing on essential design elements for the pivotal Phase III trial, which will include patients requiring multiple RBC units before randomization. We are finalizing the Phase III protocol and aim for submission in the fourth quarter of this year. There is considerable opportunity for roxadustat in anemia associated with lower-risk MDS, especially given the absence of other oral treatments in development. A target indication supportive of orphan drug designation could provide seven years of data exclusivity in the U.S. This exclusivity, combined with an attractive market opportunity, represents a substantial economic opportunity for roxadustat. I will now turn the call over to Dave to discuss the company's financials.

David DeLucia, CFO

Thank you, Thane. I will first review the updated FibroGen China transaction details and then provide the company's financial performance for the third quarter of 2025. As a reminder, our China operations are reflected as discontinued operations throughout our financials. On Slide 21, we highlight the summary of the key financial terms of the transaction. Upon the close of the transaction in August 2025, FibroGen received an enterprise value of $85 million plus FibroGen net cash held in China at closing of approximately $135 million, with a total consideration of approximately $220 million. This is a $60 million increase from our initial net cash guidance in February. Upon close of the China transaction, we paid off our senior secured term loan with Morgan Stanley Tactical Value, resulting in a cash outflow of approximately $80.9 million. This includes the $75 million principal balance, accrued and unpaid interest, and an applicable prepayment penalty. The net cash payable at closing is subject to holdbacks of $10 million, which is comprised of a $6 million holdback to offset final net cash adjustments and a $4 million holdback to satisfy any indemnity claims. I am happy to announce that we have received $6.4 million associated with the first holdback last week. We expect to receive the second holdback of $4 million in the second quarter of 2026. This truly transformative transaction allowed us to pay down our senior term loan facility with MSTV, provided full access to our cash in China, and extended the company's runway into 2028 to support U.S. development initiatives. Given the company's current market capitalization of approximately $45 million, we believe these increases in expected net cash received upon the close of the transaction represent a meaningful outcome for shareholders. Now on to the company's financials for the third quarter. For the third quarter of 2025, total revenue was $1.1 million compared to $0.1 million for the same period in 2024. For full-year 2025, we reiterate total revenues to be between $6 million and $8 million. Now moving down the income statement. Total operating costs and expenses for the third quarter of 2025 were $6.5 million compared to $47.8 million for the third quarter of 2024, a decrease of $41.3 million or 86% year-over-year. R&D expenses for the third quarter of 2025 were $1.2 million compared to $20 million in the third quarter of 2024, a decrease of $18.8 million or 94% year-over-year. SG&A expenses for the third quarter of 2025 were $5.3 million compared to $9.4 million in the third quarter of 2024, a decrease of $4.1 million or 43% year-over-year. During the third quarter of 2025, we recorded a net loss from continuing operations of $13.1 million or $3.25 net loss per basic and diluted share as compared to a net loss of $48.3 million or $12.01 per basic and diluted share for the third quarter of 2024. For full-year 2025, we are updating our guidance for our total operating costs and expenses, including stock-based compensation, to be between $50 million and $60 million. At the midpoint, this represents a 70% reduction from full-year 2024. Now shifting towards cash. As of September 30, we reported $121.1 million in cash, cash equivalents, accounts receivable, and investments in the U.S. We expect the company to now have cash runway into 2028. In summary, we believe we have taken important steps to reduce our fixed cost infrastructure across both project and FTE spend to maximize our cash runway and enable investment in our U.S. pipeline opportunities.

Thane Wettig, CEO

Thank you, Dave. To conclude today's remarks, with a substantially strengthened financial position and an extended cash runway through multiple clinical milestones into 2028, we are well positioned to advance our mid- and late-stage clinical development programs for FG-3246 and roxadustat, respectively. We look forward to reporting the top line results from the investigator-sponsored study of FG-3246 in combination with enzalutamide at a medical conference in the first quarter of 2026. The recently initiated Phase II monotherapy trial of FG-3246 is progressing as planned, and we expect to report the interim results in the second half of 2026. Finally, with the positive feedback received from the FDA, we now have a regulatory path forward to advance roxadustat for the treatment of anemia associated with lower-risk MDS, and we'll submit the pivotal Phase III protocol before the end of this year. We have made substantial progress this year, transforming FibroGen into a lean and laser-focused organization, firmly positioning us to finish this year on a high note with an exciting future ahead. We look forward to providing further updates to our stakeholders over the coming months. I would now like to turn the call over to the operator for Q&A.

Operator, Operator

Our first question comes from Andy Hsieh with William Blair.

Andy Hsieh, Analyst

Congratulations on closing that $220 million deal with AstraZeneca, just really transformative for the company. We have three questions across the pipeline program. So one is on the roxadustat MDS pivotal trial. You mentioned about the potential thrombotic risk. They're a very prudent thing to incorporate into the trial. But I'm just curious maybe from an epidemiology perspective in that second line or later setting, refractory intolerable to ESAs, what proportion of patients do you think might be screened out because of the thrombotic risk? And maybe related to that, basically, I'm just curious about the cost of running that Phase III trial and whether or how would that impact the 2028 cash guidance that you provided? And I have a quick follow-up.

Thane Wettig, CEO

Yes. Thanks, Andy. Nice to hear from you, and I appreciate the questions. As it relates to the thrombotic risk and what that can potentially do to the size of the patient population, I think it will be dependent really upon two things. One is what is the ultimate kind of exclusion criteria that we align on with the FDA? And then second, ultimately, what does the data report from the Phase III trial? I think it's too early for us to even kind of estimate, is it a really small proportion of the total population of Phase II and beyond patients in lower-risk MDS or is it more of a moderate portion of the population. Our hypothesis is it's a pretty small amount of the patient potential, but we won't know that until we really align on the inclusion and exclusion criteria with the agency, ultimately run the trial, see the data and then figure out exactly what the label says should we have a positive trial and a positive registration. In terms of the cost of the trial, we're estimating it will cost in the neighborhood of $50 million to $60 million. And that's assuming about 200 patients, an enrollment period of 18 to 24 months. But I'll let Dave comment on how we're thinking about that in terms of our cash runway and our guidance. Dave?

David DeLucia, CFO

Yes, sure. Thank you, Thane. So right now, our current guidance reflects a cash runway into 2028, and that does not contemplate taking on the Phase III study on our own. So to your point, Andy, obviously, it would impact our cash guidance. We think that it could push the cash guidance into the second half of 2027, give or take. But we do expect that we'll be looking to bring on incremental capital to help support the cost of running the Phase III study if we were to take it on our own.

Thane Wettig, CEO

And Andy, maybe, yes. So one final comment on that, Andy. As we said in our prepared remarks, as we are evaluating the potential to run the trial on our own versus the partnering process, which we have commenced, ultimately, it's going to come down to a combination of what we would call strategic and economic considerations. On the economic front, we would have to bring in additional capital per Dave's point. We've started to have those conversations just to see what the potential or the likelihood for us to be able to do that. And then we'll compare that as we advance the partnering process. We'll be able to compare that kind of side by side and ultimately do what we think is in the best interest of shareholders.

Andy Hsieh, Analyst

I see. Okay. Great. And then maybe kind of a big picture question on the prostate cancer landscape. There's a lot of targets out there, PSMA, C1, DLL3, CD46, obviously, and then I guess, most interestingly, CD47, which has a negative expression correlation profile versus PSMA. So I guess, do we have additional maybe academic work that looks at some of the overlapping expression profiles that could actually be advanced stages for CD47 to kind of position based on the expression levels? Just kind of curious about your thinking on that front.

Thane Wettig, CEO

Thanks, Andy. That's a really good question and one that we discuss quite regularly. We have a strong group of key opinion leaders who are starting to help us explore this. When it comes to the expression levels of CD46, we can best relate it to the expression levels of PSMA. We know there is a high degree of concordance between patients expressing the CD46 epitope and those expressing PSMA. As patients undergo treatment with androgen receptor inhibitors or taxanes, or potentially Pluvicto, we observe some resistance to PSMA development, with PSMA expression levels actually decreasing. We expect to gain more insights from our Phase II monotherapy trial, where we will treat all patients with the CD46 PET imaging agent to better characterize the expression levels. We anticipate having data on many of these patients regarding their prior PSMA expression levels. This will allow us to conduct a correlation assessment based on those expression levels in response to the antibody-drug conjugate. We will also examine how our ADC performs in patients who previously received Pluvicto compared to those who did not, considering the signals we've seen indicating that PSMA levels change as patients progress through treatment with taxanes and potentially Pluvicto. However, we likely won't have much data from our Phase II trial concerning other targets. As you mentioned, some academic work has been done looking at the expression levels of STIP1, TROP2, CD46, PSMA, and others. Therefore, it may be too early for us to comment on how CD46 could overlap with the expression of these other targets at this time.

Andy Hsieh, Analyst

Look forward to the second half.

Matthew Keller, Analyst

So just one from us. On FG-3246, I was wondering if you could provide a little bit more color on what your thoughts are and what we can expect specifically from the top line data out of the IST study. And really what I'm trying to get at is more specifically, what are you considering a success from this data readout?

Thane Wettig, CEO

Yes. Thanks, Matt. I’ll begin, and Dave can add comments afterwards. In the preliminary efficacy data from the Ib portion of the combination trial, we observed a preliminary efficacy estimate of 10.2 months. If we see consistent results, that would be quite encouraging for us. It will be crucial to analyze the data from around 44 patients, particularly how it varies based on the number of prior ARPIs each patient has received. We believe this will be included in the disclosure due to the IST nature of the trial. We won’t have control over how this information is disclosed, but it will be a significant aspect of our understanding. We know that with an increased number of ARPIs that patients have undergone, there tends to be a decrease in rPFS, which is also an important point for the disclosure. Dave, do you have anything to add?

David DeLucia, CFO

No, I think you hit the nail on the head, saying. Thank you.

Chen Lin, Analyst

Many of my questions have been answered. Just curious, there's a line of liability of $63 million on your report. Is that related to the milestone payment for the ADC asset?

David DeLucia, CFO

I'll take that. So no, that liability is actually related to the royalties associated with our royalty financing with NovaQuest Capital Management, and that is associated with our royalty stream from roxadustat sales in CKD in the European and Japanese territories where we are partnered with Astellas.

Chen Lin, Analyst

Okay, great. So that's a royalty stream, and you own the royalty, right? You sold some royalty, so is there a minimum payment for that royalty? What does the liability look like, or will your future revenue just be covered?

David DeLucia, CFO

Yes. Currently, the way the deal is structured is that we own NovaQuest 22.5% of any of the royalties received in those territories. So FibroGen Inc. owns 77.5%, and then the 22.5% are paid out to NovaQuest Capital Management on an annual basis.

Chen Lin, Analyst

Okay. Okay. Great. So it's a line item and not actual the royalty that you own going forward. Great. Thank you. So do you have any other line item for the potential future milestone you need to pay for the ADC going forward in the financial report?

Thane Wettig, CEO

Yes, Dave, I'll take that one. So China, the only future milestone that we would have in the relatively near term related to the agreement that we struck with Fortis in May of 2023 would be if we decide based upon the Phase II data, if we decide to move the program into Phase III, we would then exercise the option to acquire Fortis Therapeutics for $80 million. We would then run the Phase III trial. And if the data supports then a filing and the product were ultimately to get approved in either the U.S. or Europe, we would then owe them an additional milestone based on approval of $75 million. And then there will be no royalty obligation on net sales to Fortis after that. There would be a very small single-digit royalty obligation to UCSF, but not to Fortis.

David DeLucia, CFO

And just to add to that, the reason why we don't carry the liability on the balance sheet is that it is fully at our discretion. So as Thane pointed out, if the Phase II trial is successful and we like what we see, we can exercise that option. If we do not like what we see, then we can return the asset back to Fortis Therapeutics. So it is fully in FibroGen's discretion based upon the outcome of the Phase II study of FG-3246.

Chen Lin, Analyst

Okay. Great. That's clarifying a lot. When do you expect to decide which path to take with LRMDS, this new Phase III trial? Do you want to wait for the Phase II interim results, or do you plan to move forward before that?

Thane Wettig, CEO

Yes. Thanks, Chen. Now these are completely independent of one another. And so we're looking at the low-risk MDS opportunity for roxadustat by itself as a stand-alone. I would think that we'd be able to have some clarity on the path forward, whether we do it on our own versus whether we partner it probably in the second quarter of next year. We'll have better clarity on that.

Operator, Operator

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Thane for closing remarks.

Thane Wettig, CEO

Yes. Thank you, and thanks, everybody, for joining us for today's third-quarter earnings call, and we appreciate your continued interest in FibroGen. Have a great rest of your day. Thank you.

Operator, Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.