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Executives

Sylvia Wheeler - Vice President of Corporate Communications

John A. Orwin - Chief Executive Officer and Director

Anne-Marie Duliege - Chief Medical Officer

Herbert C. Cross - Chief Financial Officer

Analysts

Ed Arce - MLV & Co LLC, Research Division

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Robin Davidson

Affymax, Inc. (OTCQB:AFFY) Discussion of the Voluntary Recall of OMONTYS (peginesatide) Injection February 25, 2013 8:30 AM ET

Operator

Good morning, everyone, and welcome to the Affymax Conference Call. This call is being recorded. At this time, I would like to turn this call over to Sylvia Wheeler, Vice President of Corporate Communications for Affymax. Ms. Wheeler, please go ahead.

Sylvia Wheeler

Thank you, operator. Good morning, and thank you for joining our call. Leading the discussion today is John Orwin, Chief Executive Officer of Affymax. And joining us on the call are Anne-Marie Duliege, our Chief Medical Officer; Jeff Knapp, our Chief Commercial Officer; and Herb Cross, our Chief Financial Officer.

Before turning the call over to John, I'll remind you that we will be making forward-looking statements. Our actual results may differ materially from the results described, in particular, with respect to our regulatory, medical and commercial expectations for OMONTYS, our time line and collaboration with Takeda. We encourage you to review our press release and the risk factors in our most recent quarterly report on Form 10-Q. I will now turn the call over to John.

John A. Orwin

Thank you, Sylvia. Good morning, and thank you for joining us on this call today. As announced this weekend in our joint press release with Takeda, we voluntarily recalled all lots of OMONTYS as a result of recent post-marketing reports of serious hypersensitivity reactions. This is a surprising turn of events as given the collective positive feedback we had been receiving from customers using OMONTYS. Of course, patient safety is our #1 priority. And following recent serious safety reports that came to our attention after a large number of patients received their first dose of OMONTYS in mid-February, we began an immediate investigation and contacted FDA.

Ultimately in collaboration with the FDA and Takeda, we decided to recall the product nationwide. The issue that arose was regarding serious hypersensitivity reactions, including anaphylaxis, which have been reported to be life-threatening or fatal following the first dose of OMONTYS. Since the product was launched in 2012, over 25,000 patients have been treated with OMONTYS. The rate of overall hypersensitivity reactions reported is approximately 0.2%, with approximately 1/3 of these being serious in nature, including anaphylaxis, requiring prompt medical intervention and, in some cases, hospitalization.

To date, fatal reactions have been reported in approximately 0.02% of patients following the first dose of a intravenous administration. The reported serious hypersensitivity reactions have occurred within 30 minutes after such administration of OMONTYS.

Three cases of serious anaphylactic reactions associated with fatal outcomes were reported in February. Two deaths reported prior to February were deemed to be cardiovascular in nature. In these 2 cases, patients' symptoms were not consistent with hypersensitivity reactions, and in consultation with outside experts, these events at the time were not considered likely to be a result of drug-related hypersensitivity. These cases were reported to the Food and Drug Administration in accordance with regulations.

To date, and to be conservative, we are considering all of these cases in our evaluation and recall decision.

At this point, we are unable to prospectively identify which patients may be susceptible to hypersensitivity reactions. We are investigating potential ways to address this risk. It appears that in the rare cases that have been reported thus far, serious hypersensitivity is a first-dose phenomenon and has only been reported with intravenous administration of the drug. In the post-marketing setting, there have been no reports of such reactions following subsequent dosing in patients who have completed their dialysis session or in patients receiving the drug subcutaneously, although the subcutaneous patient numbers are limited.

The companies are actively investigating these cases to determine a root cause of these events. If we can identify and address the underlying cause, the FDA has said they would work with us on appropriate next steps for the product. In the meantime, we have suspended our promotional efforts and have instructed health care professionals that no new or existing patients should receive OMONTYS.

I am sure many of you have questions regarding this update. We continue to gather information related to the cases that have just recently come to our attention but are unable to provide guidance on the timing of resolution at this point.

In summary, we believe that although the majority of patients have tolerated OMONTYS well, suspension of promotional activities and a product recall is warranted at this time. Our priority is to attempt to determine and appropriately address the root cause of the hypersensitivity reactions and work with the FDA to reintroduce the product to the market. With that, I'll open the call to questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Ed Arce with MLV & Company.

Ed Arce - MLV & Co LLC, Research Division

I guess the first question is I realize this is very early still, but do you have a sense for how long this data analysis might take? And what is the -- what are the potential scenarios that you're looking at, at this point?

John A. Orwin

Right now, we're actively investigating these cases to determine the root cause. And until we proceed further with our investigation, it's really premature to speculate on the timing of the investigation or the next steps, unfortunately.

Operator

Our next question comes from the line of Ian Somaiya with Piper Jaffray.

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Wanted to get a sense of what the rate of hypersensitivity was on the -- in your Phase III trial, whether anything was observed in coming out of the Phase III? And has there been any changes to the product with [indiscernible]?

John A. Orwin

Ian, I'm sorry but you faded off. Would you mind repeating the question and maybe closer to the phone?

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Sure. Sorry about that. Hopefully this is better. Yes. So I just wanted to get a sense for the rate of hypersensitivity coming out of the Phase IIIs and whether there have been any changes on the manufacturing of the drug, which might potentially also explain what you're seeing in the post-marketing setting.

John A. Orwin

Yes. I'll ask Anne-Marie to comment on the rate of hypersensitivity reaction seen in the clinical trials versus the post-marketing experience.

Anne-Marie Duliege

Thank you, Ian. So our experience in the clinical trial was vastly different. The rate of hypersensitivity was about the same, but it was the seriousness that was very different. In the clinical trials with more than 4,000 subjects receiving peginesatide total, 5 subjects had no serious hypersensitivity reaction, and 1 subject had a serious hypersensitivity reaction but with no cardiovascular symptoms. Symptoms generally included hypertension, flushing, dyspnea and pruritus and the -- all occur after the first dose of OMONTYS, that you can see vastly different in terms of the seriousness of the reaction. By contrast, in the post-marketing reports, the severity of symptoms range from mild reactions to anaphylaxis, some of which, as we said, have been life-threatening and fatal. So while most of them were mild, there was this occurrence of serious reaction that we saw in the post-marketing setting.

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Anne-Marie, is it possible for you to go through the 3 cases that you've identified as being specifically related to hypersensitivity as opposed to CVD?

Anne-Marie Duliege

So, no, we're not going to detailed specific aspects. But these are -- in those 5 cases, there's occasions of patients who had this reaction shortly after the injection. The last 3 cases had specific symptoms of hypersensitivity reaction.

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Okay. And just on the manufacturing, have there been any changes?

Anne-Marie Duliege

So the clinical program was done with a single dose unit, and we have had -- the post-marketing program was done with a multi-dose vials.

John A. Orwin

Yes. I think, Ian, at this point, we really haven't identified the root cause of these reactions. And clearly, among all the things that we'll be investigating, we'll be looking very closely at drug products in all its forms and at all stages of manufacturing, distribution, supply chain, handling at the sites. I mean, it's -- we can't speculate. Obviously, it's too early in our investigation, but we will look at every aspect of the product and the way it's been given.

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Okay. But it wasn't specific to one lot or any given geography or site in terms of the occurrence of these side effects?

John A. Orwin

No. It was not -- they were not all from a single lot.

Operator

[Operator Instructions] Our next question comes from the line of Chris Raymond with Robert Baird.

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

Just kind of curious about the process here that you followed. Can you maybe give us some color on who initiated the recall? Was it you guys? Was it Takeda? And maybe can you give us a sense if you hadn't done this, would FDA have mandated one anyway?

John A. Orwin

Sure. As you would expect, patient safety is really our first priority. And clearly, these events were submitted to the FDA, and we worked very closely with Takeda on the decision, as well as the FDA. I wouldn't -- I don't want to speculate as to what -- under other circumstances would have recalled the product. We came to this determination really with the input from our partners at Takeda and the FDA. And in all cases, obviously, patient priority was -- patient safety was the first priority.

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

And can we -- should we assume that the hypersensitivity rate was distributed sort of equivalent to the usage between Fresenius and non-Fresenius sites?

John A. Orwin

I think that's probably a fair characterization, but at this point, we really can't comment on customer-specific experience.

Operator

Our next question comes from the line of Joel Sendek with Stifel, Nicolaus.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

So I have 3 questions. The first is, can you characterize your discussion -- the current state of your discussions with Fresenius right now, given the recall, what we should expect there? And the next question is, just wondering why you're recalling both subcu and IV? And then if you can comment on if you're taking any steps to address the -- your cash usage for the rest of the year.

John A. Orwin

Great. Okay. First, just to characterize the discussions with Fresenius, what I will say is that they have been excellent collaborators in this corporate initiative that they have taken. I wouldn't want to speak on their behalf. They issued an internal memo that we subsequently issued as an 8-K, and I would probably refer people to that, as well as any public comment that they make -- they may make going forward. On the subcutaneous versus IV route of administration, as we've noted, severe hypersensitivity reactions haven't been seen with the subcutaneous route of administration. But unfortunately, the experience to date is fairly limited. And so really, as an abundance of caution, the decision was to remove the product and with the promotion of -- for all routes of administration. And then on the last piece, I think it was to do with cash. I'll ask Herb Cross, our CFO, to comment.

Herbert C. Cross

Yes. I would say in light of kind of recent events, we're obviously very focused, as John mentioned, on the investigation right now. But clearly, we're going to have to go back and take a look at our expenses and be prudent in managing our cash, but it's a little early for me to, I think, comment on any specific plans at this point in time.

Operator

[Operator Instructions] Our next question comes from the line of Ed Arce with MLV & Company.

Ed Arce - MLV & Co LLC, Research Division

I realize that -- again, this is early and you're going to be looking at a series of different potential factors. I'm just curious if, among them, you would be looking at stratifying the patients and perhaps looking at a particular risk factor that may be common among those that had serious or fatal reactions?

John A. Orwin

Yes. That's a great question, Ed, and that is clearly a part of this investigation. At this point, there are no patient-specific characteristics that would make us comfortable that we know which patients are at highest risk, but that will clearly be an important part of our investigation going forward.

Operator

Our next question comes from the line of Robin Davidson with Edison Investment Research.

Robin Davidson

First of all, I just wondered whether these circumstances might be -- have been anticipated at all in the agreement you have with Takeda, specifically, perhaps the apportionment of costs that may accrue to -- from, obviously, recalling the product?

John A. Orwin

I'm not sure I understand your question. But if it is how the cost of the recall will be shared between the 2 companies, if I understand your question correctly.

Robin Davidson

Yes, yes. Exactly, yes.

John A. Orwin

Okay. So in the night United States, this is a collaboration between Affymax and Takeda that is a profit split. And all the costs associated with the marketing of the product, which would include, in this case, the recall would be shared between the 2 parties as part of the profit split.

Robin Davidson

Right. Is there any obligation for Affymax to repay any money that has been received from Takeda under these circumstances?

John A. Orwin

Not to my knowledge.

Robin Davidson

Right. Okay. And I just wondered -- I mean, is it possible that you can give some sort of guidance on the sort of current cash figure for the company or the sort of cash usage if you deferred any sort of ongoing or reduced your cash burn, let's say, by ongoing marketing costs and so forth, what the sort of cash run rate looks like?

John A. Orwin

Yes. I'll ask Herb Cross, the CFO, to comment.

Herbert C. Cross

Yes. I mean, as I kind of mentioned earlier, I think it's a little premature at this point for me to comment specifically. I would say I feel like, in the past, we've done a good job of being prudent in managing our capital, and we'll continue to do that. With regards to our cash balance, we finished the third quarter with about $100 million of cash on the books. And at some point in the coming weeks here, we'll be doing our year-end earnings release and 10-K and providing an update on our cash balance at that point.

John A. Orwin

Okay. Operator, if there aren't further questions, I'll close by saying this is a surprising and unfortunate turn of events. Thank you for joining us on the call and for your patience as we attempt to resolve the situation going forward.

Operator

Ladies and gentlemen, this does conclude your conference. You all may disconnect and have a good day.

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