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Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX)

Top-Line Results from Zerenex™ Phase 3 Long-Term Study Conference Call

January 28, 2013 8:00 am ET

Executives

James F. Oliviero – Chief Financial Officer

Ron Bentsur – Chief Executive Officer

Julia Lewis – Professor of Medicine-Department of Nephrology-Vanderbilt University School of Medicine

Analysts

Jonathan M. Aschoff – Brean Capital LLC

Matthew L. Kaplan – Ladenburg Thalmann Securities

Joe Pantginis – ROTH Capital Partners LLC

Boris Peaker – Oppenheimer Securities

Reni J. Benjamin – Burrill & Co. LLC

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Operator

Greetings, and welcome to the Keryx Biopharmaceuticals’ Investor Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, James Oliviero, Chief Financial Officer for Keryx Biopharmaceuticals. Thank you, Mr. Oliviero, you may now begin.

James F. Oliviero

Thank you. Good morning everyone, and welcome to our conference call regarding the top-line results from the long-term phase 3 study of Zerenex, the Company’s ferric iron-based phosphate binder drug candidate, for the treatment of elevated serum phosphorus levels or hyperphosphatemia, in patients with end-stage renal disease on dialysis.

My name is James Oliviero, Chief Financial Officer of Keryx and I welcome you to our conference call today. After our Safe Harbor statement, I’ll turn the call over to Ron Bentsur, our Chief Executive Officer who will discuss the results of the Phase 3 long-term study earlier this morning. Also joining us on today’s call is, Dr. Julia Lewis, the Study Chair for our Phase 3 registration program.

Before we begin, I’d like to remind everyone that various remarks that we make about our future expectations, plans and prospects constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Keryx cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated.

Among the factors that could cause our actual results to differ materially include risks related to the timing for submission of the NDA and MAA and whether the FDA and EMA, respectively will accept such submissions for review following submission and ultimately approve them; whether the FDA and EMA will concur with our interpretation of our Phase 3 study results or the conduct of the study; our ability to successfully and cost-effectively complete clinical trials, submit new drug applications and obtain marketing approvals for Zerenex; top-line results are based on a preliminary analysis of then available data both safety and efficacy and there is the risk that such findings and conclusions could change following a more comprehensive review of the data; the risk that the data, both safety and efficacy from the ongoing Phase 2 study in non-dialysis dependent chronic kidney disease will be negative or inconclusive; our ability to meet anticipated development timelines for Zerenex due to clinical trial results, manufacturing capabilities or other factors; our Japanese partner's ability to successfully obtain marketing approval for ferric citrate in Japan; uncertainties related to the regulatory process and other risk factors identified from time to time in our reports filed with the Securities and Exchange Commission.

Any forward-looking statements made on this conference call speak only as of today’s date and we do not intend to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof.

Keryx would also like to remind everyone that the results that will be discussed on this call are top-line results and as that the full safety and efficacy data set will be presented at a future medical conference.

This conference call is being recorded for audio rebroadcast on Keryx’s website www.keryx.com, where it will be available for the next 15 days. All participants on this call will be listen-only mode. The call will be followed by a brief Q&A session.

I’ll now turn the call to Ron.

Ron Bentsur

Thank you, James. Good morning everybody. This is obviously a very exciting day for the company, our employees, our investors as well as the physicians that have worked tirelessly to advance Zerenex to this point. By now, many of you have seen our press release regarding our Phase 3 long-term study of Zerenex for the treatment of hyperphosphatemia in patients with end-stage renal disease on dialysis.

And on this call, we will discuss the highly positive top-line results focusing on the primary and secondary end points, including the eagerly awaited results surrounding the impact of Zerenex on iron storage parameters, in IV-iron and ESA sparing. There is no question that Zerenex delivered strong data today, and we believe that the data presented today clearly suggests that Zerenex has the potential to become the market leader in the phosphate binder space.

Joining me on today’s call to discuss the significance of the Phase 3 data and the potential impact of Zerenex if approved by the FDA could have on patients suffering from hyperphosphatemia is Dr. Julia Lewis, a key opinion leader in the field of Nephrology and Study Chair for our Phase 3 registration program. Dr. Lewis is Professor of Medicine, Department of Nephrology at Vanderbilt University and a member of the Executive Committee of the Collaborative Study Group.

With that, I will begin with a quick background of the Phase 3 program, reminding those listening that this program was conducted pursuing to a special protocol assessment or an SPA with the FDA.

In accordance with the Company’s SPA agreement, the Phase 3 clinical program for Zerenex consisted of two clinical trails, a short-term study which was successfully completed approximately two years ago in the long-term safety and efficacy study that we announced today.

This long-term Phase 3 is therefore the second and final obligation under our Phase 3 clinical program part of the SPA. We will now start shifting our resources towards the NDA and European MAA filings, both expected in the second quarter of this year. As a reminder, this long-term Phase 3 study was a multicenter, randomized, open-label, safety and efficacy clinical trial in 441 End-Stage Renal Disease Patients on Dialysis patients on hemo or peritoneal dialysis.

Patients entered a two week wash out period followed by a 52 week safety assessment period in which they were randomized 2-1 to receive either Zerenex or an active control. The 52 weeks safety assessment period was followed by a four week efficacy assessment. During this Efficacy assessment period, only those patients who were randomized to receive Zerenex during the safety assessment period were randomized in a 1-1 ratio to either continue treatment with Zerenex or to be switched to placebo for a 4-week period.

I’ll note that the active control patients were allowed to receive Renvela and/or Phoslo. So this was a really standard of care active control group.

Regarding the primary end-point, the primary end-point of the study was to demonstrate the statistically significant difference in serum phosphorus between Zerenex and placebo during the efficacy assessment period of the study or the last four weeks of the study. As you can see from the press release, we met the primary endpoint with a highly statistically significant result.

On another note, you may recall that last year we received formal scientific advice from the EMA, which is the equivalent of the FDA in Europe regarding our Phase 3 program. In their formal advice, the EMA indicated that as a primary endpoint, they would want to see serum phosphorus non-inferiority at Week 12 versus the Renvela subjects in the active control. I’m very happy to report that we met this primary endpoint as well and we’re now also gearing towards the European MAA filing for Zerenex as expeditiously is possible.

Now let me discuss the much anticipated key secondary endpoints that we are hoping to achieve in order to really set Zerenex apart from the rest of the path. We said all along that Zerenex is the only phosphate binder that has the potential to transcend into another dialysis category, in this case, anemia management and generate a benefit. The objective of these secondary endpoints was to corroborate prior data, which suggested that Zerenex has the ability to increase iron storage parameters, as well as reduce the need for IV-iron and ESAs in this patient population.

The key secondary endpoints were predefined as part of the statistical analysis plan per the SPA and included ferritin, TSAT, cumulative IV-iron and ESA use. All these parameters were measured during the 52-week Safety Assessment Period where we had the head-to-head comparison versus the active control group.

We felt that if Zerenex could pave even some of these secondary endpoints, it would have the potential if approved by the FDA to become highly differentiated in the phosphate binder market. We’re absolutely thrilled that Zerenex met all the key secondary endpoints in dramatic fashion.

Starting with iron storage parameters, Zerenex clearly demonstrated very robust increases in ferritin and TSAT scores to the extent of 51% for ferritin and 26% for TSAT, whereas the active control group remained flat. The changes in ferritin and TSAT occurred fairly quickly and peaked after only about four to five months, what is also very compelling is that the ferritin and TSAT levels then plateaued at these higher levels. We believe that this maybe the body’s natural iron absorption mechanisms being utilized. And of course is the striking reductions in IV-iron and ESA use observed in the study that are truly a potential game changer.

As a reminder, Zerenex generated a 52% drop in average cumulative IVR use and a 27% drop in average cumulative ESA use versus the active control group in the study. These reductions are clearly impressive and I would also add are very significant from a pharmacoeconomic perspective. The ESA and IV-iron USA dialysis markets are approximately $2 billion and $400 million respectively.

A quick back at the envelope calculation of the potential savings to the health care systems, that the observed 52% and 27% reductions in IVR and ESAs respectively can potentially generate, put this potential cost savings at approximately $750 million annually and that’s in the U.S. alone.

Also keep in mind that with the IV drugs, which include IV-iron and ESAs being in the bundle, the pricing pressure placed on dialysis providers regarding the use of IV drugs will not led up, in fact, it may even intensify further. One doesn’t have to be an expert on dialysis to understand the tremendous value that Zerenex can potentially offer in this setting.

It was also encouraging to see that even with these dramatic drops in IV-iron and EPO use in the Zerenex arm, Zerenex actually achieved a statistically significant treatment difference in hemoglobin versus the active control. This is indeed a very impressive result. At this juncture, I think it is also very important to make an inference about CKD or pre-dialysis.

Clearly, today’s data validates and increases our confidence regarding our approach for Zerenex and CKD. We believe that with today’s data, the probability that Zerenex could become the first phosphate binder/oral iron supplement to obtain an FDA approval in CKD has been enhanced.

Now to shed some color on safety and tolerability of Zerenex in the study. Consistent with previous studies, Zerenex appeared safe and well tolerated in the study and the safety findings were generally unremarkable. The dropout rate in the study was 34% for Zerenex and 25% for the active control. As a reminder, the dropout rate in the Renagel, long-term study for Renagel was 39%, so ours was significantly lower than that.

For reference, subjects who were previously intolerant to Renvela and/or Phoslo were ineligible to participate in our long-term Phase 3 study. Therefore, subjects generally came into the study, already seasoned on Renvela and Phoslo. So this was clearly a built-in bias against Zerenex in the study. We knew that going in and still wanted to have the head-to-head comparisons versus the active control group for the iron parameters.

That said, based on an analysis of the safety data, the side effect profile of Zerenex and the active control group appears similar, with the most common adverse events being gastrointestinal related. The overall rates of subjects who had at least on gastrointestinal related adverse event, excluding feces discoloration, which is an asymptomatic Zerenex side effect was 39% for Zerenex versus 44% for the active control.

The overall serious adverse event rates in the study were 34% for Zerenex and 43% for the active control. Importantly, there were no clinically meaningful or statistically significant differences between Zerenex, and the active control group in serum calcium levels and liver enzymes, as measured by ALTs and ASTs.

With that, I will now turn the call over to Dr. Julia Lewis to provide her impressions of the study results. Thank you.

Julia Lewis

Good morning everybody. First, I want to just expand a little bit on what my roles are in my workplace. In addition to being Professor of Medicine at Vanderbilt, I also have a large clinical practice at Vanderbilt on any given date for years now; I’ve had 75 to 85 dialysis patients right here for myself, that is more than most nephrologist in private practice. I’ve also been the Director of Dialysis units and my husband and I guess I’m a small part owner of a dialysis unit in Chicago as well.

So there are, in addition to my academic roles in the designing conduct in clinical trials, I have a very practical experience in the cure of dialysis patients, and in fact the first time, I was asked what I thought about the concept of using ferric citrate as the phosphate binder, I was in my dialysis unit and I here have been both rounding, and I guess a little close to 300 patients in our two units here, and I said first off, I was absolutely confident that my patients would enthusiastically welcome another alternative in the phosphate binder market, just to have another choice, because of either side-effects or country indications for or expense of other phosphate binders, and I actually think I turn to a few of my patients, and asked then they kind of whooped.

In addition, I said hey, this is fantastic, I mean this citrate is great because our patients in bicarb, and if they absorb some of the iron, even better because currently between 70% and 80% of dialysis patients are receiving IV-iron. I have to say that I would not have unless they predicted how robust our results are going to be, and how exciting they were going to be for our patients. And I think, while it’s given you the pharmacoeconomic prospect of the advantages of ferric citrate, but I’d like to comment more on the clinical advantages, and how, I as a nephrologist would look at this, or as a director of a dialysis unit caring for patients.

And I think you have to realize, it’s not just that the IV-iron will save the cost of it or the cost of the EPO, but that cost can then get shifted to nursing care for the patients to provide other services. It takes a tremendous amount of not just the raw cost of the iron ESA, but it’s cost of the time of the nurse to manage the time of the nurse to draw it out and then from the patient’s perspective, each time something is injected into their dialysis line, such as IV-iron or EPO. There is an infection. There is a real infection risk, because you’re invading on this sterile technique is now perfect or if any of those, so many things can happen. Also unlike oral iron, IV-iron does have high allergenicity. So there are patients who get asymptomatic allergic reactions.

So from a clinical perspective and from how the dialysis unit, it is going to function, there are going to be huge benefits to choosing ferric citrate beyond the one that will also be very important to people, and to patients and hopefully, some of the funds will get diverted to other services for them, which are pharmacoeconomic. I think these results are consistent, robust, pretty exciting. We’ve just ourselves gotten this weekend and I’ve been pretty happy, and I’ve troubled sleeping last night.

I think we’re very, very excited and optimistic that going forward, ferric citrate is going to be approvable with these results, and is going to be a very major player in the phosphate binder market, not only here in the United States, but worldwide.

And I’ll pause there Ron for questions or comments.

Ron Bentsur

And so, thank you, Julia, and this is truly a great day for Keryx and everyone involved with the program. Well, this mean the second and final part of our SPA governed registration program, the Company is now focused on the assembly and submission of the NDA and MAA filings with the FDA and the EMA respectively. Also as a reminder, that our partner in Japan having filed our NDA in Japan earlier this month, and with the bundle for the orals being delayed by two more years.

We feel that we’re in a really in a great position to continue to drive the Zerenex program forward. And I also want to particularly be thankful and grateful to Dr. Julia Lewis and the Collaborative Study Group, for the all work, their guidance, and their dedication to this clinical program, and of course to our core shareholders for their support. This is a major milestone for the company, and we truly appreciate your support, and we hope to continue to leverage this positive momentum, as we believe embark on really a new right era for Keryx.

With that let’s open it up for Q&A. Thank you.

Question-and-Answer Session

Operator

Thank you. we will now be conducting a question-and-answer session (Operator Instructions). Our first question comes from the line of Jonathan Aschoff of Brean Capital. Please proceed with your question.

Jonathan M. Aschoff – Brean Capital LLC

Thanks a lot. Good morning guys and…

Ron Bentsur

Good morning and thank you.

Jonathan M. Aschoff – Brean Capital LLC

Positive data, I was wondering, do you said $750 million, as an overall savings and Julia may have touched upon this, I may have been distracted a second or two, but could you outline first, a little more specifically how much less in ESRD patient may cause to treat with Zerenex and its benefits, versus both the non-generic as well as the generic phosphate binder.

Ron Bentsur

So, in quantifying these numbers when you think about, how much ESAs are sold into the dialysis market. That’s EPO darbepoetin et cetera that’s approximately $2 billion a year. U.S only the dialysis only, so just quantifying that a 27% drop in that is about certainly over $500 million close to $550 million alone.

Then when you look at the IV-iron market, again U.S. only, dialysis only, is about $400 million to maybe $425 million annually, a 52% drop or 51% drop there is over $200 million in potential savings. Adding the two of them together, you get to $0.75 billion in potential savings in the U.S. alone on an annual basis that is the value that these results basically indicate that this compound can deliver to the dialysis providers.

Julia Lewis

If medicine underestimate to the dialysis providers because it’s not as too many per cost, per personnel to hang the IV-iron, observe the patient, et cetera, et cetera so there is whole another layer of cost. You’re just talking about just the very basic raw number of the cost of the drug, not the administration cost, which are considerable. People’s time, personnel that you hire, it’s more in the more expensive parts of the dialysis unit.

Ron Bentsur

Thank you Julia, so Jonathan regarding a generic Renagel, I honestly don’t think a generic Renagel has the capacity to compete with this magnitude of potential cost savings, so I am even more confident today that if we move forward in the right fashion, it has no chance of really putting a dent into what we’re trying to do with Zerenex.

Jonathan M. Aschoff – Brean Capital LLC

Okay, and could you guys outline what lies ahead in terms of educating a CKD market place to accept a meaningful amount of our phosphate binder used in that healthier population, and also to what extent is off-label phosphate binder used?

Ron Bentsur

Well, we’d have to get the label first before we can go and educate people, you certainly don’t want to do that before you have the label. First we…

Julia Lewis

I can comment to that. As you know right now, I think nephrologists who do see patient prior to ESRD, monitor their parathyroid hormone levels as well as their phosphorus’s and new paradigm for many or if not most of them is to begin a phosphate binder when the PTH rises which usually occurs somewhere around an EGFR of 50 or less.

It is now widespread used off-label Phoslo and Renvela, but remember in the CKD population we’re also facing some of the same issues of anemia EPO, IV-iron, et cetera. So and in fact the insurers require us to give the IV-iron and bring this iron storage level quite higher before they all pay for the EPO in the CKD population.

So, I think that we’re very interested and the CSG and the whole ferric citrate team are anxious to establish efficacy in CKD population, but in the interim I can’t imagine that this will get the same embraced use and you know directors, what they are using in their dialysis unit, that’s going to be the one they are easily going to grab to use in their outpatient clinic as well as pre-ESRD.

Jonathan M. Aschoff – Brean Capital LLC

Thank you and with the stage in hand, would the bundling help you guys?

Ron Bentsur

We’ve said all along that the bundle is a very big ally of ours, simply because of the pricing pressure that it applies to the IV drugs. So nothing really has changed on that front. I think we’ve just made it that much pronounced with the data that we have in hand right now.

Jonathan M. Aschoff – Brean Capital LLC

Definitely. Thank you and congrats again.

Ron Bentsur

Thank you.

Operator

Thank you our next question comes from the line of Matt Kaplan of Ladenburg Thalmann. Please proceed with your question.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Hi, good morning guys. Can you hear me?

Ron Bentsur

Good morning.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Congratulations on a very impressive data.

Ron Bentsur

Thank you.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Just staying on the CKD name for a minute, I guess Dr. Lewis in terms of – can you describe a little bit how you treat the patients especially in the light of the anemia issue that they run into and specifically how you think potentially Zerenex could play a role in terms of treatment of their iron deficiency versus use of IV-iron per se?

Julia Lewis

So, as I said before, I think first off, once the EGFR is less than 50, they begin to see that PTH rising irrespective of whether they’re anemic yet or iron deficient. I think a phosphate binder will be started and I think positions will tend to use the phosphate binder that they’re using in their dialysis unit and comfortable with and one they prescribe in a regular basis. And I think that they will also look forward even early on to the fact that the patient over time is likely to become both iron deficient as defined by the amount of iron you need for EPO on work as well as require EPO.

So I think it will be a likely first choice for most of them, and then once the patients – so if a patient starts with them, has been with them a long time, it’s possible from our results, I mean we don’t know, I’m speculating, we haven’t done the CKD study yet, but it is possible that they’ll never become iron deficient, they will build up sufficient iron storage over time from receiving ferrate citrates or phosphate binder.

Let’s say, a patient comes to you for the first time at a point where they have relative iron deficiency and then are anemic, I think again, ferric citrate is going to be a very attractive choice, because it’s going to accomplish both the goal of treating every last or just repairing their iron deficit.

Organizing, getting a pre-ESRD patient to go get an IV-iron infusion is really challenging. And many nephrologists just like, wait, they just like kind of leave them anemic sometimes because it’s really challenging. The insurance companies are confused by it, if this is an infusion center. It’s not like in the dialysis unit at all.

So I think that they’ll be very attracted to attempting to repair the iron deficit in these patients. And it’s a relative deficit because you’re going to need extra iron storage to respond properly to EPO. And so, I think they’ll be very attracted to doing that with an oral agent. They could just write the patient a script for in their office and walk away.

So I think – again we haven’t done this study, but I’m optimistic that if the study reveals what we’ve found in this study in terms of the bodies regulated iron absorption from this medication in a way that would lead to an increase in iron storage, even come close to that or remotely close to that in the CKD population, it will be very popular choice.

Matthew L. Kaplan – Ladenburg Thalmann Securities

All right, thank you. And then another question in terms of just, help us interpret the data that, it was just announced from point of view of it’s impact on iron storage and what your impression is of the ferritin and (TSAT) twice that were reserved and how would you use that into the process?

Julia Lewis

Yeah. I think it’s incredibly cool. So I always say that the body is smarter than we are and we have to realize that what we’re seeing here and I don’t know that you guys are getting top line data. It certainly looks like the (inaudible). When you give IV-iron, it just goes in the patient, right. I mean it’s in their intravascular space. You can just pour it into them. You can give any amount. You could massively overload them or whatever, but when you give oral iron, the body is smart. The body has a very complex system to regulate iron absorption. So that the body takes what it needs from the gastrointestinal tract and to some extent, no more. And that’s what I think our data shows. And so aside from the allergenicity of the IV-iron, which is an issue and the potential absorption risk et cetera, et cetera. I think the fast that it will be a more natural, logically regulated way to deliver iron as opposed to IV-iron, will again be very important and a huge advantage for the product over IV-iron.

Matthew L. Kaplan – Ladenburg Thalmann Securities

All right. Thank you.

Ron Bentsur

Matt. Okay, sorry go ahead.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Yeah. I have a couple of questions, but you want to…

Ron Bentsur

No, no. Go ahead, I’m sorry.

Matthew L. Kaplan – Ladenburg Thalmann Securities

And then just in terms of, talk about – little bit about the analysis, I guess one question for you, Ron, analysis of the primary endpoint which was the efficacy, the four-week efficacy at the end of the study. And how you ended up with the number of patients you ended up with and the jobs that you did, what’s your opinion?

Ron Bentsur

Keep in mind that the primary endpoint was at the very end of the study. So it was basically from Week 52 to Week 56. Okay?

Matthew L. Kaplan – Ladenburg Thalmann Securities

Right.

Ron Bentsur

So the ends that you see there are reflective of that. So basically the patients who dropped out during the one-year period are not in this analysis.

Matthew L. Kaplan – Ladenburg Thalmann Securities

And these are only the patients that were on Zerenex to begin with?

Ron Bentsur

Right. So it’s only, per the protocol, only those patients who were on Zerenex during a one-year Safety Assessment Period who completed the study, okay, went into the efficacy assessment period. So essentially it’s two-thirds of the patient pool, less the drop out rate. Those are the patients that ended up into the efficacy assessment period.

Matthew L. Kaplan – Ladenburg Thalmann Securities

And remind us what your dropout rate was versus Renagel/Renvela in terms of their studies?

Ron Bentsur

Right, so it’s about 34% for Zerenex. Keep in mind that the Renagel dropout rate was 39% in their one year study. Fosrenol incidentally was 63%. So ours is actually the best, the best dropout rate of all of them. So we’re actually very happy with the dropout rate that we have.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Great, great. And then just one final question, I’ll just back into queue. Talk to us little bit about timelines now in terms of what you need to complete before you can follow your NDA?

Ron Bentsur

So as you know, an NDA is not a simple process. There are several modules that have to be completed. But I think we made significant headway on several of them. And our goal is to file the NDA and the European MAA in the second quarter of this year. That is the goal.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Great. Congratulations again on the terrific results.

Ron Bentsur

Thank you.

Julia Lewis

And can I just comment quickly a little bit of a side bar about your question. We specifically design the protocol. And I believe that in general the FDA really likes this design concept which is doing the efficacy at the end of the safety assessment period. So you’re really testing the drug and the people who have had it for long-term use as opposed to the reverse where you may be seeing efficacy in people that are never going to be able to tolerate the drug beyond the first load.

So, it’s a very nice way to answer the question that sometimes they ask. Well, it’s great that it works. But can – are people really going to take it? Are they going to continue to take it? So that was an intended design element.

Matthew L. Kaplan – Ladenburg Thalmann Securities

Thanks for the added color, thank you.

Ron Bentsur

Thank you, Matt.

Operator

Thank you. Our next question comes from the line of Joe Pantginis of ROTH Capital Partners. Please proceed with your question.

Joe Pantginis – ROTH Capital Partners LLC

Hey guys good morning and congratulations as well.

Ron Bentsur

Good morning, and thank you.

Joe Pantginis – ROTH Capital Partners LLC

That I wanted to jump the gun a little bit, what would you view as your preliminary path on commercialization of the drug, obviously we’re going to make the assumption based on the FDA that the drug has the chance for approval, that’s actually Dr. Lewis mentioned that, so bringing the drug forward now from a communization standpoint, can you review some of your earlier DB goals or how you are looking to potentially do that? Thanks.

Ron Bentsur

Thanks Joe, so obviously this dataset opens up, we believe a fair amount of functionality in fact a tremendous amount of functionality. I think companies that for example, may not have been that interested in the past, maybe because they didn’t have a foothold in dialysis, I think looking at the dataset such a ours, I think it’s going to make them think twice about not considering it seriously, and obviously you always have the folks to our kind of embedded in the dialysis space, whether directly or indirectly in the renal space that I think would certainly have an interest. Our folks remain opportunistic and really to evaluate these types of opportunities as those present themselves, and really take it from there, but we’re very obviously happy with this dataset it’s just something that cannot be ignored in the renal space.

Joe Pantginis – ROTH Capital Partners LLC

Okay, and maybe just one quick follow up on that, obviously JT and Torii just filed recently so in Japan the drug has the potential to be on the market approximately one year ahead of U.S. and Europe, so with that said you have potential for some revenues coming, assuming you guys were going to be part of the commercialization process in the U.S. and Europe. Can you just remind us about the terms regarding JT/Torii?

Ron Bentsur

Yes. So just one correction, they filed their NDA a few weeks ago, and they expect to review process of about 12 months. So we should make it on to the market, just a few months after them, not a year after them, that’s the goal anyway, but in terms of the economic terms of that deal. So we still have $65 million in milestone payments that are due to us, and those are upon approval, and there are sales milestones as well, and we’re also entitled to a low double-digit royalty that escalates to the midteens depending on sales volumes. And given the data that they generated, I truly believe that they will become the market leader in Japan.

Joe Pantginis – ROTH Capital Partners LLC

Thanks very much, fair enough.

Ron Bentsur

Again, we look forward to obviously reaping the fruits of that transaction of that partnership.

Joe Pantginis – ROTH Capital Partners LLC

Great. Thanks so much and congrats again.

Ron Bentsur

Thank you.

Operator

Thank you. Our next question comes from the line Boris Peaker of Oppenheimer. Please proceed with your question.

Boris Peaker – Oppenheimer Securities

Good morning.

Ron Bentsur

Good morning.

Boris Peaker – Oppenheimer Securities

And I’d like to add my congratulations on the excellent data.

Ron Bentsur

Thank you.

Boris Peaker – Oppenheimer Securities

For Ron and the team and certainly, Dr. Lewis as well. So my first question is for Dr. Lewis, I just want to understand, if there perhaps a kind of a reasonable segmentations of dialysis patients, where we can identify perhaps a low-hanging fruit or kind of group of patients for Zerenex, do you think would be initial adopters versus maybe some other group that would come in later as more real market data for the drug developers?

Julia Lewis

Well, about the 70% to 80% of dialysis patients currently are receiving IV-iron. So that’s I don’t know, if that’s low hanging fruit, that’s the majority. So I think those patients are receiving IV-iron will certainly be immediate candidates for that. The 10%, 20% who for whatever, and those are people like, in any given month. So there are a lot of patients that are on iron and off iron and et cetera. So I think that those 70% to 80% would be the ones, I would imagine would be targeted first.

Another target will be patients, who are intolerant of the existing phosphate binders that are efficacious. And there’s probably 5% to 10% of dialysis patients, who don’t tolerate any of the three major phosphate binders, Fosrenol, Renvela or Phoslo. So they’re like taking tones or some weird medicine or maybe nothing. Those would be another group having an alternative would be great.

I think that it will go from there.

Boris Peaker – Oppenheimer Securities

And also – thank you for that answer, it’s very helpful. And also my other question for you is, what were the top reasons for stopping Zerenex treatment, and how does that compared to your normal targets and expectations? Since we know dialysis patients will often stop treatment for various reasons, so just wanted to get a sense of, is this kind of what’s expected and reasonable or is there something unexpected there?

Julia Lewis

I don’t want to comment on any kind of specifics. We are drilling down on all those results. I will just say in a very general way at the very beginning of the study when we were introducing people to ferric citrate for the first time, a lower than expected number of them had some sort of GI intolerance compared to say, Renvela or Phoslo or Fosrenol.

Following the initial, sort of first exposure kind of effect, it was overall, as you can see from our SAEs and our AEs which are reported, very well tolerated. We just like them.

Boris Peaker – Oppenheimer Securities

Thank you for answering those questions. Now I have another question for Ron.

Ron Bentsur

Yeah.

Boris Peaker – Oppenheimer Securities

Ron, could you comment, if you look at all the Zerenex studies to date, my understanding that some of the patients were treated at DaVita and maybe Fresenius centers. Could you comment approximately what fraction of the patients were in the clinical studies of DaVita and Fresenius, and have you discussed Zerenex with any of them or any kind of feedback you may have received from those clinics?

Ron Bentsur

So I don’t recall specifically what the previous studies were, but in this study, I would say that probably, close to half came from the DaVita and Fresenius; half of the patients came from the DaVita and Fresenius, it may even be slightly over 50%, but I just don’t remember exactly. Both organizations I think are fully aware of what we’re doing. So obviously, they’ve been essentially waiting to see what the outcome of the data would be also. So we intend to obviously commence dialog with both organizations now that we have the data on hand to see what can be done on those fronts.

Boris Peaker – Oppenheimer Securities

Great. And my last question is, anything you’re running a study right now of higher dose of Zerenex to potentially reduce full burden. Could you just update us on that program?

Ron Bentsur

So there is a compassionate safety extension program that we announced several months ago, basically patients who completed this long-term Phase 3 study are eligible to go into a one-year compassionate safety extension program, and that is where we want to introduce the 1.3 gram caplet formulation up until now including in this long-term Phase 3, we’ve been using a 1 gram caplet formulation and the idea of introducing the 1.3 gram caplet formulation is obviously to enhance the pill burn advantage.

Boris Peaker – Oppenheimer Securities

In terms of any kind of timeline when or any specific data points do you plan to report from this trial?

Ron Bentsur

No. I mean this is just a safety type of an observation study, obviously we think that the more safety information we have that the FDA, the better this would not a regulatory requirement, we just felt that ethically, it was the right thing to do to provide these patients with the opportunity to stay on the drug longer if they want it to, but it’s not a regulatory obligation, but again more safety information never hurts so…

Boris Peaker – Oppenheimer Securities

Great. Well thanks very much for taking my question and congratulations on the excellent data.

Ron Bentsur

Thank you.

Operator

Thank you. Our next question comes from the line of Reni Benjamin of Burrill & Company. Please proceed with your question.

Reni J. Benjamin – Burrill & Co. LLC

Hi, good morning Ron and congratulations as well.

Ron Bentsur

How are you?

Reni Benjamin – Burrill & Co.

Great. Great and, just a couple of questions regarding the drop out rate, I think Dr. Lewis had mentioned that it seems like, a majority of the times, it was happening earlier on in the trail than later, and that it was primarily GI, related. I just wanted to confirm that, that majority of this, these drop outs will impact earlier in the form not late, if I heard that correct.

Ron Bentsur

Yeah. I believe most of the drop outs occurred early, and that’s very typical phosphate binders so when, typically when patients go on the phosphate binder for the first time they encounter some GI adverse events, and that typically when you see a higher drop out rate, so I think that is consistent with what we saw in our study.

Julia Lewis

We will caution you that we are giving you our impressions, I follow throughout the study every single SAE that’s occurred, and so I have a decent impression, but we don’t have the drill down, science fields, statistics and all that yet, but that is definitely our strong impression and of course there are continued things like you know, if dialysis patient has a stroke and goes into a nursing home, there say, events like that happen later on that are unrelated to our drug.

Reni Benjamin – Burrill & Co.

Got it and just regarding pill burden, in this study you were able to titrate the dose, could you give us a sense as to roughly what the pill burden was on Zerenex versus the Renvela?

Ron Bentsur

Yes, so we did not actually receive the pill burden for this top line analysis, but we believe that we’re probably tracking at about a 15% pill burden reduction, 15% but again that’s basically “unaudited” number at the moment, but there is definitely a pill burden advantage and obviously with a 1.3 gram caplet formulation, if it’s 15% with a 1 gram of caplet formulation, the 1.3 gram should make it 35% to 40%. So…

Reni Benjamin – Burrill & Co.

Excellent.

Ron Bentsur

…we certainly have the wherewithal to deliver a very robust pill burden advantage, but honestly with the data that we have here, I am not sure it’s all that important.

Reni Benjamin – Burrill & Co.

Okay

Julia Lewis

It would be important to the patients and the providers. If it does bear out and again something we haven’t drilled on from the top line, even small difference in hearty eaters make a big difference in compliance and if at some point we’re being held to goals, you know like, you get paid more of your patients, phosphorus are better, it’s going to be very important practically for the providers to be able to achieve that.

Reni Benjamin – Burrill & Co.

Okay, okay. And just regarding the criteria for IV-iron usage or ESA usage, was it a very strict criteria whereby the physicians have to follow a very specified protocols to…

Julia Lewis

No, not at all. Let me tell you how we did it. There was no restriction on the use of EPO. Each center it was blocked. So each center had both active control and ferric citrate patients. And they applied whatever EPO protocol and in most cases, I will say, I would adventure, actually 100% of the dialysis units have a protocol of some sort, even either Fresenius or DaVita or [home grown wardens]. So they apply that to both groups equally, the same. And they didn’t care who was in the study and who wasn’t. So we didn’t in any way guide the EPO use.

In terms of iron, we never told them to give iron ever. However, we did say, they could not give iron if the ferritin and TSAT hit certain parameters. So our only involvement in the EPO IV-iron arena was to say, if they hit a certain level of ferritin and TSAT, we don’t permit IV-iron.

Reni J. Benjamin – Burrill & Co. LLC

Okay. From a compliance perspective, I want to get a sense, maybe from your experience in the clinic, how was patient compliance measured? And can you talk about any patient feedback that you saw or running those that were on Zerenex versus Renagel and Renvela?

Julia Lewis

I’m sorry, what kind of feedback?

Reni J. Benjamin – Burrill & Co. LLC

Just patient – either compliance feedback or just their general percent?

Julia Lewis,

Yeah, we don’t have the compliance data which of course would be co-counts et cetera drill down. Yeah, so I can’t comment on it from any kind sophisticated or data pointing view. But this is a very, we were very involved as a central coordinating center with all the sights on a frequent basis for a variety of reasons. And we certainly didn’t hear any feedback that I can recall ever, any differentiation our people not wanting to take care it’s trade and wanting to take their in dollar or something or even people requesting to go back to their old drugs. So I don’t foresee there being any issues.

Reni J. Benjamin – Burrill & Co. LLC

Excellent and I guess…

Julia Lewis

We want to get something down there throughout, pricing them to take an early thing.

Reni J. Benjamin – Burrill & Co. LLC

Right.

Julia Lewis

They’d like to do, they’d like to.

Reni J. Benjamin – Burrill & Co. LLC

And I just do one last question Ron, maybe for you in this whole thinking of combating generics, and the fact that generics are coming on the market next year, clearly with the sales force that’s out actively marketing these advantages of Zerenex over generics, where there is no sales force as well as the potential cost, how much it might be to make these generics. Can you talk a little bit about the other advantages, let’s say over generics, you may have and then related to that, what’s the patent protection for Zerenex?

Ron Bentsur

So, I’ll address the last part first, the patent protection that we think we have is actually pretty strong, there are several families of patents, some issued, some pending, both compensation claims, both method of use claims, the core patent with patent term extension should get us out to 20, 23, and obviously other patents can get us out to 20, 28; 20, 29 days like that. So we feel pretty good about the patent protection that we have. Back to your question regarding generics, again, there is a misconception out there of that once a generic is out, the price of Renagel will drop precipitously we don’t believe that to be the case for several reasons, one is you need to make Renagel, Renvela doesn’t matter which one in very significant scale to get to a economies to cost of goods that will allow you to drop a price significantly.

So if it happens at all, it will take a while for it to happen, again, if you’re the third or fourth generic file and you decide to come on, and you think that you’re going to get there by making, let’s say 30 macro tons, I think you’re in for a root of wakening. You need to make a lot of Renagel/Renvela to get to the economies of scale, where you can be competitive just because of the complications that are involved in manufacturing it, the cost of the raw materials et cetera. And I think that’s where we have a very big advantage over them, just in terms of the inherent cost of goods of making iron based phosphate binder versus the polymer.

The second thing is again, I think to some extent, this whole discussion becomes move with the data that we have here. If our benefits, the benefits that we see here in this clinical trial translate into the real world, they can’t possibly compete with that kind of a pharmacoeconomic impact that Zerenex can make. So again, the generics are going to come out in March of 2014. We’re fully aware of that the first 5 hours impacts, but I think with the data that we have today, there is a significant disadvantage.

Reni J. Benjamin – Burrill & Co. LLC

Terrific, guys. Well, thank you very much. Congratulations again.

Ron Bentsur

Thank you.

Operator

Thank you. We have time for one more final question, which comes from the line of Amol Pawar of Stifel Nicolaus. Please proceed with your question.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Yeah. Hi, guys, this is Steve.

Ron Bentsur

Hey. How are you?

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Thanks for taking the questions, and congratulations on the data this morning.

Ron Bentsur

Thank you.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Just quickly on the IP situation, I was just mentioned, and that you talked about the composition of matter of patent going off in 2023. But do you think that this data set actually provides you with some opportunity here to maybe file some additional claims around this compound?

Ron Bentsur

We actually believe that it does, yes.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Okay. And then I just have some statistical question, which I know that I’m sure that you’re preserving. But just wondering, if you could give me any kind of additional color on, I guess one would be the mean changes and ESA and IV-iron dose reductions, did those look like the medians?

Ron Bentsur

Yeah, so again, this is our understanding from what we heard from the CRO. These were not normal distributions.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Okay.

Ron Bentsur

So you have to correct for that using the Wilcox rankings or whatever the method that it’s called. So they did all that. But in terms of the means, yes, the means closely resembled the median, yes. But again, it wasn’t the normal distributions. So they had to correct for that.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

And then, in terms of imputing missing data and it was kind of – this seems to always be a bit of foreign regulatory issue, when you’re dealing with studies with somewhat high dropout rates. Do you know if your statisticians have looked at additional methods besides LOCF and whether or not the data looks to be plus or minus fairly similar?

Ron Bentsur

Yes. So as part of our SPA, LOCF was obviously the main method and that needs to be backed up by an MMRM method for sensitivity. And we look pretty good on that, yes.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Okay. And then with respect to a conference date Ron, I know ASN is kind of the renal conference, but that’s obviously a bit away. I’m just wondering if you guys have pegged anything internally that might be a presentable date for the data?

Ron Bentsur

We’re looking at several conferences right now. There’s the MKF, there’s the WCN. There are a couple of more specific type conferences that occur basically around maybe year or so. We’re looking it all those very carefully and we’re going to pick the right one where we think we’re going to have the most impact.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Okay, and then maybe just one last question with respect to I guess, seemingly kind of maxing out the TSAT benefit at week 12 and then taking I guess another 12 maybe you could argue 24 weeks to kind of top half on ferritin benefit. I’m just wondering if maybe you or Julia could provide any kind of color on that.

Ron Bentsur

Julia that’s probable. . .

Julia Lewis

Yeah, I think – great I think that actually the data that looks like they reach a – it’s a very robust ferritin and a robust TSAT and then the plateau again speaks to this, I think very powerful argument potentially that it is being regulated at the level of the GI track by the regulatory system that is designed to deliver iron to the body for utilization. And this is quite in contrasts IV-iron which can just be given endlessly and you can give some toxic quantities of it if you wanted to because there is no regulation when you give IV-iron. So I think it’s actually – certainly robust levels of iron storage, it certainly suggest if you look what happened to our EPO use in our hemoglobin that this was a level of iron storage that resulted in efficacy in terms of efficiency of making blood which is the point of the whole thing. And I think to beyond this from an academic point of view, this study has more information to inform doctors about appropriate ferritin and TSAT levels and how the body is getting utilized the things out there, just kind of coincidentally, because of – we’re a phosphate binder, let’s remember that. That’s really, really important. But we got this amazing iron data and hemoglobin data and EPO data.

So in a world where people are starting to use more IV-iron because they’re trying to use less EPO and broadening in everything, there isn’t really – I mean I think, we’re going to be the data set that people are going to look at, write about and learn from. So I think it looks fantastic.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Great, I appreciate the color. Thank you very much.

Ron Bentsur

Thanks, Steve.

Operator

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to Ron Bentsur for any closing comments.

Ron Bentsur

Thank you. And I want to thank everyone on the call today needless to say this is a very exciting moment for all of us here at the company and all the investigators that are involved in the study. Please call us with any follow-up questions. We are here available to answer any of those questions. And again, thank you very much. This is a very, very exciting day for the company and we look forward to many more great things with this drug. Thank you very much. Bye.

Operator

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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