Keryx Biopharmaceuticals' (KERX) CEO Greg Madison on Q1 2016 Results - Earnings Call Transcript

Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX)

Q1 2016 Earnings Conference Call

April 28, 2016 08:00 AM ET

Executives

Amy Sullivan - VP, Corporate Development

Greg Madison - CEO

Scott Holmes - CFO

John Neylan - CMO

Analysts

Reni Benjamin - Raymond James

Yigal Nochomovitz - Citigroup

Whitney Ijem - JP Morgan

Christopher James - FBR & Company

Mike King - JMP Securities

Boris Peaker - Cowen & Company

Stephen Willey - Stifel Nicolaus

Hartaj Singh - BTIG

Wangzhi Li - Ladenburg

Operator

Good morning. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to Keryx’s First Quarter 2016 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session [Operator Instructions]. Thank you.

Amy Sullivan you may begin your conference.

Amy Sullivan

Thank you, Rachel. This is Amy Sullivan, Vice President of Corporate Development at Keryx. Good morning and welcome to the Keryx Biopharmaceuticals conference call to discuss our first quarter 2016 financial results. We are using slides to support the call today and you can access those on the Investors section of our website at www.keryx.com.

Before beginning the call, please be advised that various remarks that we make about our future expectations, plans and prospects constitute forward-looking statements for purposes of the 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. We encourage you to review all of the risk factors associated with our business as filed in our 2015 10-K, 10-Qs and subsequent SEC filings.

Information regarding our use of non-GAAP financial measures is available in our first quarter 2016 financial results press release and slide 2 of this webcast. This conference call is being recorded for audio rebroadcast on Keryx’s website, where it will be available for the next 15 days. All participants on this call will be on listen-only mode.

The agenda for our call will be as follows. Greg Madison, our Chief Executive Officer will lead the call with a strategic overview of our business for 2016 and discuss Auryxia US product revenues in dialysis and progress on our growth. Scott Holmes, our Chief Financial Officer, will comment on Keryx’s first quarter 2016 financial results and financial guidance, and John Neylan, our Chief Medical Officer will highlight our recent phase 3 results for iron deficiency anemia in adults with non-dialysis dependent chronic kidney disease.

After the scripted part of the call, we’ll open the call for Q&A. And I’ll now turn the call over to Greg.

Greg Madison

Thank you, Amy and thanks everyone for joining us on the call today. At the beginning of the year we talked about 2016 as the year of execution. We’re off to a good start and with all the pieces in place, we continue to execute. We also outlined the focus areas that will drive Keryx’s long term growth and define the path for achieving our vision of becoming a leading renal company.

2015 was a year of laying the foundation. We established solid fundamentals for Auryxia, including enhancing brand awareness, establishing reimbursement and late in the year embarking to expand our field based team to 95 sales representatives. As we look ahead in 2016, first on the commercial side, we continue to focus on increasing the adoption of Auryxia in the dialysis setting.

Second, on the medical peer side, we will continue to generate data to support our differentiation to showcase real world Auryxia utilization. And on the development side, we’ll define Auryxia’s potential in the non-dialysis dependent CKD community and we’ll be doing a lot of work to prepare for potential indication expansion.

As we move in to 2017 and beyond, we will remain focused on driving continued adoption of Auryxia in dialysis. At the same time, if we are successful in obtaining approval for the new indication, we’ll be ready to bring Auryxia to physicians and their patients with non-dialysis dependent CKD and iron deficiency anemia as quickly as possible. We have tremendous opportunities supported by the positive phase 2 results on IDA to establish a new [grievance] category with Auryxia, enabling us to drive to market leadership.

Now turning briefly to a review of our first quarter business highlights. In the first quarter, we reported 5.6 million in Auryxia net US product sales. We completed our field team expansion in the first quarter with the representative fully trained in the field in March. We expect our expanded field team to drive increased breadth and depth of prescribing resulting continued revenue growth throughout the year.

We achieved a major milestone in the first quarter with positive topline results from our pivotal phase 3 study, evaluating Auryxia for treatment of iron deficiency anemia in non-dialysis dependent CKD patients. The study met its primary end point in all pre-specified secondary end points with statistical significance.

With these results, we enhance our understanding and provide a greater clarity on the potential to expand the label of Auryxia in this important indication. We are maintaining a strong financial position heading in to the first quarter with more than a 170 million in cash. And finally, with a solid commercial infrastructure in place, and the potential to expand Auryxia’s label, we recently added two new Board members with deep, relevant industry experience to guide Keryx as we continue to grow and evolve.

Before I review some of the specific commercial metric in the dialysis [calculations] for the first quarter, I would like to remind everyone that we’ve initiated search for a Chief Commercial Officer. It’s been important for us to bring in a senior leader with significant market experience, who will complement our Vice President of Sales, Tony Chambers. Tony is a strong seasoned sales leader who joined us last August, and has led the turnaround of our field based organizations since that time, navigating the methods and changes we made and overseeing the expansion of our field team.

Now with some highlights from our first quarter. Total Auryxia prescription volume increased 17% from the fourth quarter, 2015 to the first quarter, 2016, which compares to a 2% decline in the overall phosphate binder market during the same time period. The increase in Auryxia demand was driven in part by continued gains from new prescribers, and an increase in the number of prescriptions per prescriber.

Our growth in the first quarter is in line with our expectations, as historically growth from the fourth quarter to the first quarter in the phosphate binder market is typically flat to down. Additionally, as we noted on our fourth quarter earnings call in February, we expected a slight disruption due to our field team expansion.

We continue to expect demand growth to ramp in 2016, as we realize the full impact of our expanded sales force. Of the 9,150 prescriptions recorded in the first quarter, 43% were generated on non-IMS reported entities, marking the third consecutive quarter that greater than 40% of our prescriptions have come from non-IMS reporting channels.

We also continue to see a steady increase in new writes each quarter. Cumulative target prescribers who have written a prescription grew approximately 25% quarter-over-quarter, expanding a number of our sales representative has enable the team to reach more physicians and improve the graph of prescribing.

We are pleased to report that the fundamental of Auryxia continue to remain strong across physicians, payers and patients. Now consistent with prior quarters we are seeing an increase in the breadth and depth of prescribing, resulting in increased adoption and positive clinical experience of Auryxia. Approximately 70% of Auryxia prescriptions are being paid at the pharmacy and approximately 74% of the co-pays are below $10. Meaning physicians continue to report high patient persistency rates of approximately 70% with no reported discontinuations due to lack of efficacy. With these fundamentals in place, along with the efforts of our expanded sales force ramping over the course in 2016, we are confident in our ability to achieve our net sales guidance.

Before I pass the call to Scott, I want to mention that the Nation Kidney Foundation kicked off its Annual Spring Clinical Meeting in Boston today. Important is this medical conference addresses the needs, concerns and interests of the entire renal care team that play integral role in managing hypophosphatemia in patients on dialysis. We’ve have a strong presence at this conference with a branded booth and members of our Commercial Medical Affairs Team who will be meeting with the attendees.

Looking ahead, if Auryxia is approved for the treatment of iron deficiency anemia, we’ll be in a position to leverage our infrastructure and give our sales team another indication to drive adoption with the very same nephrologists we call on today. Iron deficiency anemia represents a significant opportunity for the company and for patients, physicians and care givers, and I look forward to keeping you up to date on our progress.

With that update, I’ll now hand it over to Scott.

Scott Holmes

Thanks Greg and good morning everyone. I’m happy to report that we’re seeing very encouraging trends in the first quarter results. The work of our expanded field team is increasing the momentum of Auryxia’s uptick in dialysis, and from what I’ve seen firsthand during time spent in the field, our message is resonating with nephrologist and the entire dialysis care team.

During the first quarter, we recognized 5.6 million in Auryxia’s net US product sales. This 5.6 million is based on approximately 9,150 prescriptions or 17% increase in demand over the fourth quarter of 2015. The gross to net adjustment in the first quarter was 35%, which is in the expected 35% to 40% range.

Demand as captured through IMS represented 57% of the total prescriptions in the first quarter, with the remaining 43% coming from non-IMS reporting sources. In addition to Auryxia sales, we also recognized license revenues of 1.2 million, representing royalties received from JT Torii on the sales of Ferric Citrate in Japan. Total first quarter revenues of 6.8 million compared to the 1.2 million recognized in the same quarter last year.

Cost of goods sold in the first quarter totaled 1.1 million or 19% of Auryxia sales. As we move forward in 2016, we expect cost of goods sold as a percentage of Auryxia sales to be in the mid-20%. Total operating expenses defined here as SG&A and R&D expenses were 28.4 million in the first quarter, roughly in line with the first quarter of last year. These total operating expenses reflect the impact of our field team expansion activities and the resulting increased personnel costs and also the conclusion of the majority of our phase 3 study activities.

From a balance sheet perspective, we ended the first quarter with more than a 170 million in cash, which reflects a $9.5 million pay down of accounts payable accrued expenses during the quarter, which brings these items to more normal operating levels.

Now lets’ turn to slide 10, here we provide a reconciliation of total GAAP operating expenses, SG&A plus R&D to what we refer to as cash operating expenses. As you see here, total operating expenses on a GAAP basis included greater than 4.5 million in non-cash charges. We have backed out these non-cash charges to arrive at this non-GAAP measure that we refer to as cash operating expenses.

We believe that cash operating expenses is an appropriate and helpful metric when accessing the overall cash usage, and in the future cash generation of our business. This level of cash operating expenses is consistent with our expectations and in line with the guidance we provided on our year-end call in February, where we indicated that expenses would be more heavily weighted in the first half of the year.

2016 is off to a good start, the 5.6 million in Auryxia sales and the 23.9 million in cash operating expenses we reported today are both in line here or exceeding our internal forecast. As a result today we are reiterating our 2016 financial guidance. We expect full year Auryxia net US product sales to be in the range of 31 million to 34 million, and additionally we project our cash operating expenses to be in the range of 87 million to 92 million.

Our financial guidance and the future outlook are built on a strong foundation of operational excellence. With this focus we are confident that we can meet or exceed our 2016 financial objectives.

I’ll now hand the call over to John, who will review our clinical progress.

John Neylan

Thanks Scott. Today I would like to review some of the key data in the pivotal phase 3 study evaluating ferric citrate or iron deficiency anemia in non-dialysis dependent CKD. We view these data as a tremendous opportunity to treat many more patients struggling with CKD IDA.

As a reminder, in the US one out of every 10 people have chronic kidney disease. This disease carries a tremendous burden and specialists providing treatment deal with an extremely complex set of issues and manage many different medications in the course of care. And iron deficiency anemia is one of the most common of these complications.

According to CDC’s enhanced program anemia is twice as prevalent in people with CKD as in the general population. In the US, approximately 1.7 million people are under the care of a nephrologist and approximately 650,000 of these patients are currently being treated for the iron deficiency anemia. This is nearly double the size of the current phosphate binder dialysis patient population.

IDA is common in the non-dialysis dependent CKD population and the prevalence and severity increases with the stage of CKD. IDA is associated with fatigue, lethargy, decreased quality of life and is also believed to be associated with cardiovascular complications, hospitalizations and increased mortality.

There are five stages of CKD; in stages one and two, people are typically under the care of the primary care physician and have a mild loss of kidney function. In general, as people progress to stage three their hemoglobin level begin to fall. They experience moderate to severe loss of kidney function and it is at this stage when they are often referred to a nephrologist. Stage four is characterized as advanced disease with multiple complications and stage five is considered kidney failure, and is the stage in which a patient would initiate dialysis.

Without adequate treatment, IDA gets worse as a persons’ kidney disease advances. We believe we have a unique opportunity with Ferric citrate to address the high unmet need in CKD iron deficiency anemia. The objective of the phase 3 study was to compare the safety and efficacy of ferric citrate to placebo in the treatment of CKD IDA. The study enrolled 234 patients in CKD stages 3, 4 and 5 who did not have an adequate response or were intolerant to treatment with prior or iron specimens.

It was conducted to a total of 24 weeks, which included a 16 week randomized efficacy period followed by an 8 week open label safety extension period. We evaluated the targeted rise in hemoglobin which was the primary end point, as well as the five key secondary end points which were the mean change from baseline to end of efficacy period for hemoglobin, transparent saturation and ferritin, as well as the durability of the hemoglobin response and the change in phosphorus.

Based on the characteristics of the patients enrolled, we are well balanced between the treatment groups and we are consistent with the stage of our disease. We are extremely pleased that ferric citrate demonstrated clinically meaningful, statistically significant responses for the primary end point and all secondary end points.

During the 16 week efficacy period, ferric citrate demonstrated a statistically significant, prompt and predictable hemoglobin response in the majority of patients being receive ferric citrate compared to placebo. The totality of the data is striking while I’ll emphasize two aspects. One, the increase in hemoglobin levels was achieved as [monotherapy] and not on a background of any IV or oral iron or EFAs like [Epogen]. And two, the vast majority of patients who achieved the primary end point of one gram or greater improvement in hemoglobin also met the pre-specified definition of a durable response.

These results demonstrate an important and clinically meaningful treatment effect that was prompt and durable. In terms of safety, the data were consistent with our previously reported clinical studies, with no new untoward event recorded. The most common adverse events were mild to moderate with diarrhea reported as the most common.

In summary, ferric citrate mechanism of action due to its delivery of supplemental iron provides us with a unique opportunity to treat IDA in non-dialysis dependent CKD patients. On the regulatory front, we are making excellent progress towards our goal of submitting the sNDA in the third quarter of this year. We also plan to submit detailed results for presentation at the upcoming ASN medical meeting in November and are planning to submit summary data to a potential future publication in a medical journal.

This concludes my comments, and I’ll now turn the call back to Greg.

Greg Madison

Thanks John, and thank you all for joining us today. We couldn’t be happier with the results of the phase 3 IDA study. Today we validate our strategy of confirming the unique attributes of Auryxia’s mechanism of action to treat another complication of CKD in non-dialysis dependent patients.

If approved of this new indication, we will be well positioned to create a new treatment category with Auryxia and help more patients with chronic kidney disease. This is an important corporate objective for us and we continue to conduct market research and expect to provide more details on our commercial strategy by the end of 2016.

In closing, our vision requires continued execution and our team is focused on key strategic priorities for 2016 and beyond of driving Auryxia’s path with success in dialysis, evaluating the full phase 3 dataset and submitting the sNDA, beginning potential IVA launch activities and establishing Auryxia as a new treatment category and understanding that we can better manage kidney patient care during the transition to dialysis.

With that summary, operator, we are now ready for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Reni Benjamin from Raymond James. Your line is open.

Reni Benjamin - Raymond James

Maybe just a couple of questions, one starting with the sales force, can you talk a little bit about maybe the sales force retention rate, the caliber of the sales people and any metrics you can provide regarding the call volume or their productivity and what the goal is for that group for 2016.

Greg Madison

Yeah Ren, this is Greg. We’re very, very pleased with the sales team that we’ve got on board here and while its early days, the progress they are making in terms of what we look at internally in terms of metrics and productivity, we’re very pleased with the trend that we’ve seen thus far overall.

In terms of the amount of physicians we’re able to reach, the amount of calls that they are making. So we’re seeing all the right activities and based on those activities we do expect that that will translate in to results and ramping up as a reach for [effectiveness] throughout the year of 2016.

From a characteristic perspective, these are they are very strong reps that bring a lot of experience that is important for us as a big product key reimbursement type of product, very strong at comp management skills and specialty skills and both from a functional peak that’s what we want to have with someone at comp management, hard key focus and a very, very strong representative.

We don’t have to look at some of the other qualitative attributes. You really want the people that just bring a lot of passion, drive and persistency; those are really three of the key attributes that we look at in the sales team. Again, I think we’re making very good progress thus far, they are all fully trained and on the field with the March timeframe. It’s only been a couple of months to see them to kind of get out there. But based on what we’re hearing and seeing, we couldn’t be more pleased.

Reni Benjamin - Raymond James

And just in terms of retention, how does that look?

Greg Madison

Yeah, right now we’re doing well. We’ve had unique circumstance, right in the last 6 to 10 months of two other companies building renal sales forces directly in this space. So I think our current job opening that we have reflect any type of natural turnover as other companies build their sales organizations and our job is to take in to those openings whether it’s on our side that we just see of what is not performing up to speed and we decide to move on or they decide to move on themselves. Our job is to make sure that we backfill that territorial width with really qualified person based on the skillset, that’s what we’re just at. Yeah, we think we are in the exact spot that we’re expected to be overall and the team is off to a good start.

Reni Benjamin - Raymond James

And just as a follow-up, can you give us a sense just regarding the scripts that you’re seeing, how many are new patients versus not so - I mean is it as simple as 30% of the 9150 prescriptions for the first quarter were new scripts or is there a different dynamic going on there.

Greg Madison

No, it’s actually been remarkably consistent that we still have about 30% of our prescriptions are coming from new patients overall, and then about 70% of the prescriptions are coming from switch patients, meaning they are getting switch from another binder over to Auryxia.

Operator

Your next question comes from Yigal Nochomovitz from Citigroup. Your line is open.

Yigal Nochomovitz - Citigroup

I had a few market dynamics questions if I could, first on the new prescriber growth you cited is 25% which you could expand a little on where that’s coming from geographically in to new markets or new geographies or just more prescriber density in the markets you’re already in.

On the gross to net, if you could talk about whether that 35% is sort of the expectation going forward for this year and next. On COGS, I just had a question as to why the COGS you guided to going up to mid-20s versus 19%. I am just trying to understand that better. And then finally, on the IMS capture rate, I think it’s been too consecutive quarters at 57%. So just want to understand if that’s sort of better estimate or run rate for modeling purposes going forward. Thanks.

Greg Madison

Sure thing Yigal, this is Greg. I’ll handle the first and fourth question and then Scott can handle the two middle ones there as well. Starting reverse order the IMS capture rate, yeah we’ve seen pretty consistently now as you much last two quarters have been 57% or another way to say it 43% coming from non-IMS reporting channels.

As I commented in the prepared remarks, that’s actually the third consecutive quarter we’ve seen the non-IMS reporting channels coming in at greater than 40%. At this point it certainly looks like that’s starting to be a trend. We can get caught up in the exact number if its 43 or 44 or 42, but generally we’re definitely seeing it be slightly north of 40%.

In terms of your first question as far as where the new prescriptions and where the new prescribers I guess are coming from. Right now what we’re seeing is basically the impact, I think we’re starting to see the impact of the expanded sales force. To recall that; we didn’t expand geography in terms of the coverage area that we had, when we expanded the reps from 60 to 95.

What we did is just put additional reps in there, that was the same 5000 nephrologist that we were calling on with 60 reps. It’s the same 5,000 nephrologist we are now calling with 95 reps. So the goal there was obviously to allow the reps to reach more doctors and do it on a more frequent basis, and that’s where we see a lot of prescription growth starting to come. Scott do you want to held (inaudible)?

Scott Holmes

Sure, here you go. So with regards to gross to net question and the cost of goods question, I think we start with the gross to net. At 35% in the first quarter, we’ve kind of spoken to in the past, as it being in the range of 35% to 40%. So this is pretty consistent with what we saw on those ranges that we provided really on a full year basis.

So, if we are depending on the mix of the business on any quarter, you can end up slightly higher than you came in this quarter, but certainly there’s a little bit favorability this quarter, but being at the low end of that range, but we still seen by that 35% to 40% range through 2016 period.

As we progress and would be on 2016 which we haven’t provided any real guidance around, you have to take things in to consideration like contracting and then like continued mix of the business.

On the cost of goods side, you pointed out it was 19% of Auryxia sales this quarter. I think we’ve said mid-20s, again that’s more of a guide post for what a full year might look like. In the first quarter we still had some, let’s call it lower cost of material pre-approval material that was flowing through cost of goods from our comps perspective. So that really - was provided that benefit in the first quarter, but again we still believe that on a full year basis the mid-20s is the right thing to be assuming there.

Yigal Nochomovitz - Citigroup

And Greg just one market dynamics question, as you may remember there was that authorized generic entry of Renvela I think it was in 2014 from impacts which sort of flooded the market briefly and then went away. It seems you haven’t heard much on that front as far as any other generic Renvela. Have you any comments there or any market intelligence on that?

Greg Madison

No, I don’t Yigal. You are well past year and a half post patent as far as Renvela and we’re focused on what we need to do to drive our sales and there aren’t any updates.

Operator

[Operator Instructions] Your next question comes from Whitney Ijem from JP Morgan. Your line is open.

Whitney Ijem - JP Morgan

I just wanted to dig in on the IMS capture rate a little bit more. If I recall correctly, it’s been about 30% or I guess 30% non-captured for other [types] of vendors. So what are you guys doing differently or what’s driving the difference for you and why shouldn’t it trend back down to 30 where others have been overtime.

Greg Madison

Whitney, its Greg. If you look at the total phosphate binder market as you alluded to, it’s typically run around 30% overall. We are not doing anything really different. Again we focus on the top 5,000 prescribers in the US, whether the prescribers felt, whether it be a diabetic clinic or Fresenius clinic or another clinic overall, it almost doesn’t matter. To us we really are just focused on the prescriber and where those high volume targets are.

Now you have seen both Fresenius and diabetic continue to enroll more patients in to their mail order pharmacies, which could be one reason why you’re just seeing whatever reason a higher ramp up on our sales versus other areas. But there’s no real strategic or tactical approach for us that we’re targeting those two areas. True we’re getting a lot more of our business out of those specialty type or mail order pharmacies. But there is nothing, no focus area and there’s no real reason behind why we’re seeing a disproportion and one of our business come out of those.

Whitney Ijem - JP Morgan

Got it. And then on your last slide you mentioned that you’re sort of working to establish Auryxia as a new therapy and sort of the benefit of using it as you transition patients from non-dialysis to dialysis. So are you continuing to follow patient in the non-dialysis study to generate data on that transition or are there any other studies on going to generate that type of data?

Greg Madison

John you want to comment on it?

John Neylan

I might be happy to. Whitney this is John. We had completed the study and we did not incorporate an additional extension. I mentioned the 8-week safety extension that was built in to it, and right now we’re focused on taking those data and bringing them to FDA with the goal of submission of an sNDA in the third quarter of this year. We’re very excited about that opportunity, and look forward to moving that along.

I could also mention that there is a study ongoing that we had provided support for, although it’s an independent sponsored research conducted by Geoff Block and his group in Denver that is looking at a sizeable population of patients at later stage in their CKD, and comparing the progress of patients who are randomized to ferric citrate to that of standard of care and Geoff has called this the transition study.

And the hypothesis is that with the use of ferric citrate to manage both iron deficiency anemia and manage phosphate control that these patients that transition to dialysis will have smoother course. Nephrologist often refer to the transition to dialysis for many patients as crashing in to dialysis and in the first 90 days in fact of that initiation, there’s a substantial increase in morbidity and mortality.

So you can find that study on clinicaltrials.gov and we’re very excited to be supporting Geoff in conducting this trial and it will to your question provide us additional data in the CKD population.

Whitney Ijem - JP Morgan

And when could we see data from that trial?

John Neylan

Well it’s more than half way enrolled. We know that from talking to Geoff, but probably it’s in the later 2017 if the enrollment continues at the present pace.

Operator

Your next question comes from Christopher James from FBR & Company. Your line is open.

Christopher James - FBR & Company

My question really is specific to Auryxia and iron deficiency anemia. Can you explain your strategy for reimbursement and specifically do you expect any pushback from payers, given that you win against placebo? Thanks.

Greg Madison

Sure Chris, this is Greg. So right now we’re in the process of developing our reimbursement dossier for discussion with the payers. We believe that the data we have is quite strong. John might throw off details there, and we’ll support the necessary imbursement we need to launch Auryxia and develop it for iron deficiency anemia in the pre-dialysis population.

Christopher James - FBR & Company

And may be can you touch upon your additional sales force expansion in the non-dialysis setting? Thanks.

Greg Madison

Yeah, it’s a little early to speculate on what the sales force may or may not look like for a potential launch in to IVA. As we commented the nice thing here is that nephrologist that we’re talking today in the dialysis setting will be the very same nephrologist that manage the care of these patients in the pre-dialysis setting and will diagnose and treat iron deficiency anemia. So we’re very pleased with where we’re going right now, and I think the current structure we have in place would be more than sufficient to attack that market, as we do additional research, we’ll keep you updated along the way.

Operator

Your next question comes from Mike King from JMP Securities. Your line is open.

Mike King - JMP Securities

My question is really a follow-up to previous one which is, the CKD market has always been one that has tremendous potential, but one that I would say is fallen well short. So of the 650,000 of the 1.7 million that are being treated with phosphate binders, what do you guys identify as the key obstacles to uptake and what kind of things do you believe the company can do to address those to overcome them. Thanks.

Greg Madison

Mike this is Greg, and just to clarify one point, the 650,000 that we comment on those are patients that are being seen by a nephrologist and are being treated for iron deficiency anemia not necessarily being treated with phosphate binders, just an important distinction there.

But I think as we look at a potential uptick there, if we are approved in the launch for IDA, the good news is we’ll overcome many of the hurdles that we faced when we launched in dialysis, right. So we’ll have better brand awareness, we already have had some access, the reimbursement side that’s been built.

That said if you’re wearing a [surrogate] today is really defined more so as a phosphate binder. So I think it’ll take some time to educate physicians on the iron deficiency anemia aspect of Auryxia and almost get them to start thinking of it not only just phosphate binder, but now as an improved treatment for iron deficiency anemia in the pre-dialysis market place.

So that’s a lot of the work that we will think about doing as we move in to this year in terms of starting to build up in to these awareness among nephrologist out there around iron deficiency anemia. So I think that will be probably one of the bigger obstacles to just to kind of get out there and drive awareness of this product, not just as a phosphate binder dialysis, but now as a potential treatment for IDA in the pre-dialysis market.

Operator

Your next question comes from the line of Boris Peaker from Cowen. Your line is open.

Boris Peaker - Cowen & Company

Just wanted to know, do you think there’s any seasonality in the first quarter, or do you expect any seasonality in any particular quarter going forward.

Greg Madison

Boris this is Greg. What you typically see there’s really not a lot of seasonality to answer your question around phosphate binder. But you do typically see in the first quarter in the phosphate binder market which isn’t too dissimilar to what you see almost industry wide right now. As in the first quarter you typically see that as a down quarter.

A lot of that is tied to reimbursement; with us particularly you got Part D as a big part of our business. You got patients that switch Part D plans or restart high deductible plans overall. So I think typically in the market place you see first quarter is typically down in terms of prescription, while all this is getting worked through, and it typically rebounces up in the course of the year.

On year-over-year growth for the phosphate binder market, it’s been humming along at 3% to 4% year-over-year, which is staying relatively consistent.

Boris Peaker - Cowen & Company

And also what do you estimate to be the gross to net for the year?

Scott Holmes

Boris this is Scott. We said publicly is we expect gross to net for the year to be in the 35% to 40% range.

Operator

Your next question comes from Stephen Willey from Stifel. Your line is open.

Stephen Willey - Stifel Nicolaus

Just wondering if you’ve planned to try to use the phase 3 CKD data to supplement the existing product label in Europe and then also just wondering if there’s any kind of update on the case of ex-US, ex-Japan collaborate discussions. Thanks.

Greg Madison

Steve this is Greg. No, we don’t plan to use the data we have on the phase 3 study to supplement the label in Europe. As a reminder, the label in Europe already includes both the dialysis and the pre-dialysis population for treatment of Hyperphosphatemia and we have not had any discussions of taking this new data and trying to expand the indication.

Scott Holmes

In terms of Europe we continue to work with financial partners in Europe. It’s kind of taking longer than we’d like to see. At the core issue there, there’s just a lot of uncertainty today around pricing with some of the introduction of generic Renvela in certain market places.

Now we believe we have a product profile which supports pricing similar to other branded phosphate binders and so we do plan to continue our reimbursement work with our dossier, so we start at the beginning of the year and plan to continue to submit those to the pricing authorities overall in 2016.

So we’ll continue the pricing work, we’ll establish our reimbursement, but we’ll also continue to have discussions. And what we want to make sure is that we get the proper value for this product overall, based on what we think it could be and again we’ll continue to advance those, but we don’t have any timeline to update at this point.

Operator

Your next question comes from the line of Hartaj Singh from BTIG. Your line is open.

Hartaj Singh - BTIG

Actually all my questions have been answered, so I just had a question on the European and the gentlemen asked that, so I appreciate it.

Operator

[Operator Instructions] Your next question comes from Wangzhi Li from Ladenburg. Your line is open.

Wangzhi Li - Ladenburg

This one is really from Matt Kaplan. Two questions, number one is now you have a large sales team to reach more physicians and also dieticians and entire [guidelines] of your team. I just wonder how you learned any kind of new message or feedback inside of how you used to reach on the expanded reach.

Greg Madison

It’s a great one Li. Yes as we mentioned, the goal to really expand the sales team overall was to drive increased reach and better frequency, not only with the nephrologist but with the dialysis care team as you alluded to. And while the team has been out there since March up and fully trained, internally when we look at kind of productivity and the activity metrics overall, again we’re really pleased to see that we are making the right number of calls, we’re making the calls to the right number of doctors and we’re seeing that increase dramatically versus what we saw during the fourth quarter, all of which is indicative of that sales team getting out there and doing exactly what they need to do, and the confidence that that increased activity will then turnaround and continue to drive and continue to update the prescription and ran throughout the year as the sales team comes up to full effect in this.

Wangzhi Li - Ladenburg

But at the same time, did you learn anything new like from - you had a lot of feedback from the dieticians or the other care team members.

Greg Madison

What we are seeing right now is, if you recall we’ve kind of rolled out a revised messaging strategy during the early part of the fourth quarter, and I think honestly what we’re hearing is that it just continues to be reinforced as we get out there and talk to more and more doctors and with dieticians.

But that strategy is the right strategy. So the people are interested in the products. What we’re doing focused right now is talking about the new patients (inaudible) to dialysis and also the 30% to 40% of patients that has phosphate levels above KDOQI target ranges overall that are under the phosphate binders they are not reaching targeted goals, therefore that’s a really good population for these clinicians to try Auryxia out and see if you can help those patients. And we’re hearing very consistently that our approach is exact right now, we’re executing that well, and I think that will be to our continued increase uptake with our clinicians.

Wangzhi Li - Ladenburg

Another question is about the cost, it looks like right now it remained around 90%. So just wanted to know will we see any economic effect when your sale will continue to embark.

Scott Holmes

Yes. When we commented on cost for the 2016 period is we expect to be in the mid-20% range on a full year basis with cost of goods. We haven’t commented on kind of economies of scale in future periods at this point.

Operator

Your next question comes from Reni Benjamin from Raymond James. Your line is open.

Reni Benjamin - Raymond James

Can you talk a little bit about any off label used that might be occurring with Auryxia right now and then setting up? Our survey work seems to suggest that that’s already happening, but maybe you can run some color on that. And maybe a follow-up for John, there were 48% roughly patients who didn’t respond with a 1 gram improvement. But when you look at that data, whether other benefits were the other 48% close to achieving that 1 gram and was that maintained for the duration of the study.

Greg Madison

This is Greg, I’ll comment quickly on the off label. It’s just very difficult to try to track any type of off label use right now, based on where we are and the messaging strategy we rolled out and the awareness level that is up there today versus what will be a year from now. I think it’s safe to say that I would expect a very little off label at this point in time, most of our uses is likely coming from dialysis, and it is difficult to track. And I’ll John to comment on your second question.

John Neylan

Yeah, Ren, a couple of answers I’d like to give you on that. First of all, the mean change overall from baseline to the endpoint of 16 weeks was 0.75. So that’s been the entire (inaudible) we trade on and that is a very clinically significant change.

The second point I’d make is that for the primary endpoint to the responder analysis the 52% is certainly in line if not exceeding the kinds of results with other iron therapies in previous trials and certainly compares extremely well to any oral irons given to the same patient population.

The last comment I’d make is that we have additional analysis that we’re undertaking now to address other aspects that are built in to your question and these are going to be I think the important additional data that we’re planning to submit to the scientific reading American Society Of Nephrology in November. So we’ll encourage you to look forward to that.

Reni Benjamin - Raymond James

And John maybe just as a follow-up, what kind of additional data or questions do you think are [burden] than wish that you guys will be presenting?

John Neylan

There’s a range there that further expands upon the magnitude of change in patients looking at certainly baseline characteristics to see how they correlate with the safety and efficacy and subsets stages (inaudible) I mean there’s a host of things that I think will be adventurous to the nephrology community. Thank you.

Operator

There are no further questions at this time. I’d like to turn the call back over to CEO, Greg Madison.

Greg Madison

Great. Thanks operator and thank you for joining us this morning. We look forward to keeping you updated on our progress throughout the year and wish you a good day.

Operator

This concludes today’s conference call. You may now disconnect.

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