FibroGen's (FGEN) CEO Thomas Neff on Q2 2016 Results - Earnings Call Transcript

| About: FibroGen (FGEN)

Start Time: 16:30

End Time: 17:22

FibroGen, Inc. (NASDAQ:FGEN)

Q2 2016 Earnings Conference Call

August 08, 2016, 16:30 PM ET

Executives

Thomas B. Neff - Chairman, Founder, and CEO

Pat Cotroneo - VP, Finance, and CFO

Peony Yu - Chief Medical Officer

Chris Chung - VP, China Operations

Seth Porter - VP, Fibrosis Therapeutics

Jennifer Williams - IR

Analysts

Andrew Tsai - RBC Capital Markets

Cameron Bradshaw - Goldman, Sachs & Co.

Richard Goss - Leerink Swann

Slanix Alex - Credit Suisse

Tahel Noy - Stifel, Nicolaus

Joel Beatty - Citi

Operator

Welcome to the Quarter Two 2016 FibroGen, Inc. Earnings Conference Call. My name is Katie, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now like to turn the call over to Jennifer Williams. Please go ahead.

Jennifer Williams

Thank you, Katie. Good afternoon and thank you all for joining our call. On this call we expect to make forward-looking statements regarding our business, including our collaborations with AstraZeneca and Astellas, financial guidance, the initiation, enrollment, design, conduct, and results of clinical trials, research and development activities, and certain other business matters.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes that are difficult to predict, and many of which are outside of our control. For risks and uncertainties regarding our business and statements made on the call today, as well as factors that may cause differences between current expectations and actual results, we refer you to our Form 10-K for the fiscal year ended December 31, 2015 and Form 10-Q for the quarterly period ended March 31, 2016 and our Form 10-Q for the quarterly period ended June 30, 2016 filed with the Securities and Exchange Commission, copies of which can be found in the Investors section of our Web site. We undertake no obligation to update any forward-looking statement whether as a result of new information, future developments, or otherwise.

A webcast of this conference call will be available for replay on the Investors page at FibroGen’s website, www.fibrogen.com.

I will now hand the call over to Tom Neff, Chief Executive Officer of FibroGen.

Thomas B. Neff

Thank you, Jennifer. Good afternoon to everyone. I hope you’re enjoying your summer. On today’s call we will provide updates on our programs, discuss recent accomplishments and highlight key near-term and long-term goals.

Joining me for this discussion are Mr. Pat Cotroneo, Chief Financial Officer; Dr. Peony Yu, Chief Medical Officer; Dr. Seth Porter, Vice President of Fibrosis Therapeutics. In addition, Ms. Chris Chung, Vice President of China operations is also present to answer any questions for China that may come up during the period following the scripted portion of the call.

Let me start with an update regarding our Phase 3 anemia program. Our roxadustat global clinical program features four independent regulatory pathways; U.S., Europe, China and Japan. We and our partners have not advanced to Phase 3 in each of these jurisdictions and are conducting various Phase 3 studies that are well supported by extensive Phase 2 data showing roxadustat correction and maintenance of hemoglobin levels in multiple subpopulations of CKD.

With the addition of the Japan Phase 3 studies at some point this fall, we and our partners will have 15 studies open in Phase 3 for roxadustat targeting approval in all four major regulatory regions around the globe. For the studies in the U.S. with AstraZeneca and for our studies in China, we remain on track to initiate a new drug application submissions in 2016 for China and 2018 for the United States.

In the U.S. program, FibroGen is responsible for three studies and agreed with AstraZeneca as to target enrollments for each of our studies. We previously announced that we have met these target enrollments in two of the three; study 064 last September in dialysis conversion, study 060 February this year in CKD non-dialysis patients.

With respect to 060, we continue to enroll patients into this non-dialysis study to meet the overall enrollment goals of our partners. For our incident dialysis study 063, we continue to be on track to reach the agreed upon target enrollment by the end of Q3 this year and we are adding 150 patients to be enrolled again to support enrollment goals amongst the partners.

Near-term goals in the program include completing U.S. incident dialysis enrollment. We continue to plan for optimization discussions later this year with the adjudicated event rates and look forward to updating you as information becomes available.

In terms of safety, the most recent Data Safety Monitoring Board or DSMB review was in the last week of July. The DSMB again has recommended that the current clinical program continue without modification.

We noted previously that Astellas has completed roxadustat Phase 2b studies in Japan. The Japanese Phase 3 program is now being initiated with the first patient dosed in early June. This triggers a milestone payment of $10 million to FibroGen by Astellas and we recognize this in the second quarter financials. The Japan approval involves six Phase 3 studies. I will ask Dr. Peony Yu to provide more detail regarding these studies later in the call.

Turning to our China program, our Phase 3 enrollment is preceding on schedule. We completed enrollment of our Phase 3 dialysis study in May. Primary analysis is this 300-patient study will be at completion of six months of treatment. With respect to our non-dialysis study, a placebo-controlled study targeting 150 patients with the primary assessment after eight weeks of treatment. This study is now over 70% enrolled and we remain on track to complete the enrollment in Q3. Thus, we expect to have first reportable data in each of the Phase 3 studies by the end of the year.

We have previously announced enrollment sufficient for the requisite 100 roxadustat treated subjects and a 52-week safety assessment in China, which is required to complete our NDA package and to meet ICH guidelines for drugs intended for chronic therapy. We continue to expect to complete this assessment in Q2 2017.

Regarding our program to expand roxadustat into areas of additional unmet need such as on oncology-related anemias, we are pleased to announce that our myelodysplastic syndrome or MDS clinical trial application was accepted by the China FDA, CFDA/CDE in the second quarter of this year. We expect a CFDA review period of approximately 10 to 12 months from acceptance. This is through April or June of next year and subsequent initiation of a pivotal placebo-controlled trial.

Additional efforts in such areas continue and we and our partner AstraZeneca plan to submit a CTA for the use of roxadustat to treat chemotherapy-induced anemia to the China Food and Drug Administration prior to the end of the year. And our pre-IND meeting regarding MDS with the U.S. FDA in May, we reached agreement on MDS Phase 3 study design and we will provide further updates as they become available.

Let’s turn now to our second major clinical program and which we are investigating therapeutic uses of FG-3019, a monoclonal antibody targeting the activity of CTGF or connective tissue growth factor. First, we have been assigned the International Nonproprietary Name or INN of pamrevlumab for FG-3019. I believe Usain [ph] has also accepted this naming, so you’ll be hearing this language going forward.

With respect to our ongoing clinical program in the treatment of idiopathic pulmonary fibrosis or IPF, I am very pleased to report that as of the end of June we have completed enrollment of the placebo-controlled portion of the IPF study with 103 subjects. In this Phase 2 study of pamrevlumab or FG-3019 for treatment of IPF patients with mild-to-moderate disease, the primary efficacy endpoint has changed from baseline and forced vital capacity or FVC.

Secondary endpoints include various assessments of pulmonary function as well as pulmonary fibrosis measured by quantitative high resolution computer tomography or HRCT. Enrollment continues in a sub-study in which the patients will receive FG-3019 in a combination with pirfenidone or nintedanib. This sub-study will provide needed safety data for pivotal combination trials. We plan to complete sub-study enrollment by the end of the year. We continue to expect to report top line data for both study arms in mid-2017.

Turning now to pancreatic cancer. We continue to advance our Phase 2 trial in patients with unresectable locally advanced pancreatic cancer. In this proof of concept trial, we are targeting enrollment of up to 42 patients, randomized 2 to 1 to six months of treatment with FG-3019 in combination with standard of care chemotherapy or standard of care chemotherapy alone. Patients are eligible for enrollment in the 069 study only if they have been fully evaluated for tumor resection and have been scored as ineligible for resection surgery.

We are working on the optimal study design for a follow-on pivotal trial in this patient population. We still plan to give feedback from the FDA near the end of the year. We still expect to present 069 data early next year at the ASCO-GI meeting and we will provide further updates on this study as available.

A final point regarding our pancreatic cancer program. We know there has been some interest in the overall study design in this area and later in this call, I will ask Dr. Seth Porter to provide some further discussion of our prior study 028, the results of which we have recently submitted for publication in a peer-reviewed journal and how that study informs our thinking for clinical development of pancreatic cancer.

Next, an update on our ongoing Phase 2 program for the use of pamrevlumab, FG-3019 and the treatment of Duchenne muscular dystrophy. Our Phase 2 open label study for non-ambulatory DMD patients is a single arm study in which patients will receive FG-3019 every two weeks. The primary endpoint is pulmonary function as measured by forced vital capacity and key secondary endpoints include arm strength and function.

We hope to report data from a preliminary assessment after a full year of dosing. In addition, we are planning for a study in ambulatory DMD patients and we are looking forward to receiving feedback from our recently submitted briefing package. Our thesis is that CTGF contributes to the process through which muscle is replaced by fat and fibrosis and also that FG-3019 blockade of CTGF may improve muscle strengths and exercise endurance highlighting FG-3019 as a potential therapy for DMD.

Finally moving briefly to financial highlights, in terms of cash balance we had 368 million at the end of Q2 or as of June 30, 2016. For purposes herein the term cash includes items such as cash equivalents, receivables and investment grade corporate bonds of two years or less. The sum of 368.6 million is compared to 336.9 million at the end of Q4, or as of the year of December 31, 2015.

In addition, our net income for the quarter ending June 30, 2016 was 24.3 million or $0.39 per primary share. We reaffirm our expectation that year-end cash will exceed $310 million.

I will now ask Dr. Peony Yu, our Chief Medical Officer to provide some additional detail regarding the roxadustat Japan program. Peony?

Peony Yu

Thank you, Tom. Before addressing Japan, I’d like to comment on the status of our global Phase 3 program. We and our co-development partners continue to enroll patients from over 1,000 study sites in 50 countries into roxadustat U.S. and EU global studies.

As we continue to advance to Phase 3, we’ve identified some adjustments appropriate to optimize the overall program. We previously announced achievement of target enrollment goal of 600 in our CKD non-dialysis study, study 060. We are now expanding this study by adding 300 extra patients to meet the overall enrollment goals among our partners. We intend to meet this additional enrollment goal by the end of this year.

We are on track to meet the initial target enrollment of 750 in the 063 incident dialysis study by Q3 2016. We are also expanding this study by adding 150 extra patients in order to maximize incident dialysis patients in the U.S.

Next, I would like to highlight the progress our partner Astellas has made in the development of roxadustat in Japan. We recently issued a joint press release announcing the start of Phase 3 in Japan and presenting data from Japanese Phase 2 studies, which represents the first new roxadustat study data since our IPO.

In the 107 patients double-blind, placebo-controlled non-dialysis study, those response was demonstrated for the three different starting doses over the first six weeks of treatment. Over the full course of the 24-week study, a 93.8% hemoglobin response rate was achieved in roxadustat treated patients versus a 14.8% response rate in placebo patients.

Roxadustat dose response was also demonstrated in the Japan Phase 2 study in dialysis patients. Astellas has met with PMDA and gained alignment on a Phase 3 plan that includes six studies, which includes four in dialysis and two in non-dialysis. Three of the four dialysis studies are already underway and the rest of the studies are under preparation.

The Japan Phase 3 program will cover a broad range of patients, including patients not on dialysis, patients on hemodialysis and patients on peritoneal dialysis. These studies are designed to show anemia correction in treatment-naïve patients as well as conversion and hemoglobin maintenance in patients who were previously treated with ESA.

Thank you. I will now hand this back to Tom.

Thomas B. Neff

Thank you, Peony. I would like to ask Dr. Seth Porter, our Vice President of Fibrosis Therapeutics to expand briefly on 028 study and the proposed publication mentioned early in this call. We hear and received questions from some of our longest standing institutional holders regarding our rationale for study 069 study design and we have heard that the background information was helpful. So I’d ask Seth to cover such data comprising human studies in the past as well as certain enlightening results in the rodent models with pancreatic cancer. Seth?

Seth Porter

Thank you, Tom. I’d like to give some additional perspective regarding our pancreatic cancer program. The take home message is that in a completed study of FG-3019 in largely metastatic pancreatic cancer, study 028, and now on an ongoing study of locally advanced pancreatic cancer, study 069, we are observing indications of substantial benefit of FG-3019 therapy based on clear objectives and quantitative criteria.

In the current study 069, enrollment is restricted to patients with locally advanced pancreatic tumors scored as unresectable, which patients are normally assigned to a six-month standard of care regimen. In 069, we compare that standard of care regimen to standard of care plus FG-3019. After six months of treatment, eligibility for rescoring is determined by evaluating treatment response against specific objective criteria.

Improvements in tumor response is quantified by CT scan, decrease in biomarker CA19.9 and decrease in PET imaging. Although we’ve observed improved scores against two out of three of these measures if and only if patients have met one of these objective criteria can they be evaluated by the site surgeon to determine eligibility for resection.

We want to point out the development of these advancement criteria derives largely from observations of response in a prior 028 study. As Tom mentioned, we have submitted a manuscript describing study 028 for peer review and I’ll briefly touch on the highlights of that study.

As presented in part at the 2014 ASCO-GI meeting, study 028 was an open labeled dose escalation Phase 2 trial in patients with locally advanced stage-three or metastatic stage-four pancreatic cancer. Most of these 75 patients were in fact metastatic, only nine had locally advanced disease. FG-3019 was evaluated in combination with gemcitabine and erlotinib as first-line therapy.

A key important observation in the 028 study was that once doses were high enough to surpass a certain threshold of FG-3019 blood levels, several statistically significant results were found. The most notable result in this study was that one-year survival was at 34.2% for patients who had circulating 3019 levels of 150 micrograms per ml or higher versus 10.8% for those with lower plasma levels.

Those statistically significant results in higher dose cohorts included improved median overall survival and improved median progression-free survival. FG-3019 was well tolerated with no dose-related trends observed in type or incidents at SAEs and no FG-3019 dose-limiting toxicities were observed.

Data from study 028 were consistent with early studies we published in 2012 obtained in a KPC mouse model of pancreatic cancer showing that FG-3019 in combination with gemcitabine improved survival by making tumor cells more susceptible to chemotherapy-induced cell death through quantitative reduction in survival gene expression. Ongoing studies in that model are evaluating the potential for FG-3019 to modulate an immune surveillance in pancreatic cancer.

Dr. Vincent Picozzi at Virginia Mason Medical Center in Seattle is the lead author for the 028 manuscript. Among his many responsibilities, Dr. Picozzi is the Director of the Pancreas Center at Virginia Mason and the Chair of the program for non-colorectal GI cancers for the ASCO annual meeting. Since participating in the 028 trial and observing the tolerability of FG-3019 as well as progression and survival data from the study, Dr. Picozzi has been a strong advocate for FG-3019 development in pancreatic cancer.

In particular, he saw the objective biomarker, imaging and survival improvement in the FG-3019 treated patients in that study and thought to investigate whether FG-3019 could lead to a clinically meaningful increase in the number of locally advanced unresectable patients who could following treatment subsequently qualify for resection. This is a potential outcome that could create significant clinical benefit in a population for which under current standard care, the outlook is universally considered to be dim.

Recognizing we can use identified standard response criteria to evaluate improvement and eligibility for resection after six months led us to test Dr. Picozzi’s ideas in the 069 trial. Study 069 thus serves as an assessment of whether objective responses seen in the 028 trail if replicated in 100% locally advanced pancreatic patient population may translate into an improved rate of resection of locally advanced pancreatic cancer patients who have previously failed resection scoring.

At the end of the treatment period in the 069 study, patients are evaluated against the specified response criteria. Standard tumor response is quantified by CT scan, 50% or more decrease in biomarker CA19.9 and 30% or more decrease in FDG-PET. As we stated, only if patients meet one or more of these objective criteria are they evaluated by the site surgeon to determine the eligibility for resection.

To-date, we can report that on patients that qualify for resection surgery at six months after failing at baseline, positive responses are typically seen in more than one of these criteria. Relatively few prior studies have focused on the outcomes for locally advanced pancreatic cancer after standard of care therapy.

There is one reasonably sized study in which over 440 patients with locally advanced unresectable pancreatic cancer published in 2016 in the Journal of the American Medical Association that found that only 4% of these patients underwent resection following standard of care chemotherapy or chemoradiotherapy.

In the 069 study to-date, we have observed that less than 20% of the subjects treated with gem/Abraxane where the score is eligible for resection compared to over 80% of the subjects treated with gem/Abraxane plus FG-3019. Numbers are still small but we expect to report on additional patients who have completed and I’ll update next quarter.

In summary, the study 028, a study in which over 85% of the study population was metastatic and the remainder were locally advanced, results show improved survival as a function of FG-3019 exposure. The interim study 069 results indicate a greater rate of resection eligibility and conversion in subjects treated with FG-3019. Thus both studies indicate that combining FG-3019 with chemotherapy may provide a survival benefit in pancreatic cancer.

As we continue to obtain more data from the 069 study, we are talking to experts and will consult with regulators to assess viable trial design options and endpoints for a pivotal trial in locally advanced pancreatic cancer. Again, we have recently submitted study 028 to a top peer-reviewed journal and will update our investors and review the reported results when the manuscript is published.

Tom, back to you.

Thomas B. Neff

Thank you, Seth. Moving on to a discussion of our financial position, our Chief Financial Officer, Mr. Pat Cotroneo will now review the financial highlights for the company. Pat?

Pat Cotroneo

Thank you, Tom. As announced in our press release today, total revenue for the quarter ended June 30, 2016 was $89.3 million. For the same period, operating expenses were $62.8 million and net income was $24.3 million or $0.39 per basic share and $0.35 per diluted share.

Included in operating expenses for the quarter ended June 30, 2016 was an aggregate non-cash portion totaling $10.8 million of which $8.4 million was a result of stock-based compensation expense.

As Tom mentioned, in terms of our cash balances as of June 30, 2016, we had $368.6 million in cash as compared to $336.9 million at the end of 2015. We confirm our expectation of year-end cash to exceed $310 million.

For these purposes, cash refers to cash including restricted cash, cash equivalents, receivables and investments consisting primarily of investment grade corporate debt. On our balance sheet, the category of long-term investments consists entirely of investment grade corporate debt with remaining maturities of two years or less.

During the quarter, we received a scheduled $62 million license payment from AstraZeneca. This has completed $202 million of non-contingent license payments under the 2013 collaboration agreement. As Tom mentioned, we also received a $10 million milestone payment from Astellas in July, which is included in second quarter financial results.

I will now turn the call back over to Tom.

Thomas B. Neff

Thank you, Pat. We are now ready to start the question-and-answer session.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. Our first question comes from Michael Yee from RBC Capital Markets. Please go ahead.

Andrew Tsai

Hi. This is Andrew Tsai on for Michael Yee. Thanks for taking my question. Could you please remind us the timing of completion of enrollment, specifically for your partner’s Phase 3 programs? I think you mentioned but I didn’t catch that precisely. And when exactly would data occur in 2017? Are you prepared to give guidance by the start of next year? And last, do you have an estimate for the time of data based on estimating event rates? Thanks.

Thomas B. Neff

Okay, Andrew. So I think I understand your questions, so let me try to take it on. We do not have permission from our partners to report on their progress. Each company is operating within confidentiality agreements that govern their activities. We are subject to those with respect to both Astellas and AstraZeneca. The guidance is with respect to end of studies. Similarly we don’t have the ability to provide anything. What’s the other part [ph] to this question?

Peony Yu

The question was if we would disclose event rate, I do not believe that we have our partners’ permission to --

Thomas B. Neff

Thank you for reminding me. So with respect to event rates, let me say that in the first instance we have to do something called adjudication, so we’re doing studies. Event rates are happening and we have to go through an adjudication process to get them into the shape to become relevant for purposes of figuring out the point at which an event driven trial can be completed. We have not given guidance on their rates per se, that is to say the rates seen in dialysis or in non-dialysis to-date. I think that that’s probably where I should leave that question.

Operator

Our next question comes from Terence Flynn from Goldman Sachs. Please go ahead.

Cameron Bradshaw

Hi. This is Cameron Bradshaw on for Terence. Thank you for taking my questions. Two questions from us. First of all, what is your current thinking around disclosure of these three data in China for roxadustat? And then secondly, can you help frame expectations for us for the next update of 3019 in pancreatic cancer? Thanks.

Thomas B. Neff

Okay. So with regard to Phase 3 in China, there are a couple of reporting events to note. Near the end of the year we will have top line efficacy and safety data and we will try to provide summary top line information at that time. We believe that the study which is a non-dialysis study will be finished and ready to report just a bit earlier than dialysis, so our timeline is really tied to the dialysis program. And the dialysis study will end right at the end of November, so the question becomes how fast can we get data locked on and so on? So we’re thinking early in January for that – we may do better but somewhere in that time period. Second, because of the desire to follow the chronic therapy regulations that ICH propagates for oral product used drugs, we are very interested in completing a safety assessment at 26 weeks and then for the single arm roxadustat patients at 52 weeks. We would expect to provide information when each of those things happens. And so the 52-week single arm portion is the last event in the Phase 3 as currently planned. And so if things go according to our plan, it would be such that that information will be available in March of next year 2017. And we probably would be able to report that out probably three months later as it relates to the overall NDA, because that will be the last part of what is needed for the NDA submission. And so somewhere June-July is what we’re thinking for that final safety assessment and obviously the 26 week is somewhere between December-January and June-July. So that’s how much we know right now and that’s what we intend to do based on current requirements in the study. With respect to pancreatic cancer, for sure there will be data reported at the ASCO-GI meeting. Depending on a variety of issues we may take time in the next call to possibly a following one to provide a summary update on that program. This call we felt that having people understand that the rescoring or resection eligibility is actually tied to objective criteria where the responses that we require are quite unusual evidencing real response to the antibody. We thought that was a real key idea to get out. So we used this call for that purpose. I can’t say for sure, we might not use next two calls for that as well. So it’s not absolutely guaranteed that every quarter we’re going to report data out of that study but we’re trying to do the best we can, given all the circumstances.

Cameron Bradshaw

Great. Thanks.

Operator

Our next question comes from Seamus Fernandez from Leerink Partners. Please go ahead.

Richard Goss

Hi. This is Rich Goss calling in for Seamus. Thanks for taking my questions. I understand you can’t say too much about the event rates right now but I believe you mentioned that you have a planned meeting with Astra and Astellas later this year to discuss this. Just wondering if you can take us through when this might happen and what the possible outcomes for the meeting might be if the events are coming in slower than expected? Thanks.

Thomas B. Neff

Yes, so we have to have enough information about event rates in each sub-segment of the patient population to be able to project them. And so we’re sort of in the middle of that. We have pointed out that there is more focus on U.S. incident dialysis now and so you can probably infer there that that’s a portion that we need a little more in the way of observation rates. Similarly with respect to the non-dialysis study, we have mentioned before that this population’s much sicker than the one that was encountered in the TREAT study Amgen performed in 2004 to 2010, which was considered sort of the analog best practices study to look at. It’s sufficiently different that we have patients that are in span of shape that they’re entering this study just before dialysis. So it’s a little different situation than people had expected and we intend to talk to FDA about this and define what’s considered to be the adjudicated data net of any such thing as needed and any thoughts they have about the overall rate and so on in that study. So these things are happening just prior to the optimization exercise, the two things I just mentioned incident dialysis and non-dialysis very sick patients are things that are in the U.S. studies. So this is something that AstraZeneca and FibroGen have to sort out. And then with respect to the next event, the optimization, that’s a three-way activity. And in that circumstance we intend to move forward as soon as we have clear reads on items that I briefed you on today, incident dialysis and the non-dialysis low EGFR population. And so that’s the thinking. And so everybody’s very anxious to have the meeting on optimization studies and so on. Part and parcel of that meeting is Astellas has to decide if they are filing in Europe, this came up on their call last week, soon or if they’re going to want to have more data approval and that issue is still open as they noted.

Richard Goss

Okay, great. Thank you.

Thomas B. Neff

Thank you, Rich.

Operator

Our next question comes from Kennen MacKay from Credit Suisse. Please go ahead.

Slanix Alex

Hi. This is Slanix Alex on for Kennen. Thanks for taking the questions and congrats on the progress. Just regarding expanding the enrollment for 060 and 063 trial, could you tell me a little bit more about which geographies you might be focusing on there in terms of the expanded enrollment?

Thomas B. Neff

Okay. In study 060 there’s no particular bias in geographies. There is enrollment in several parts of the world going on now. We probably will be doing more U.S. just simply because U.S. came online last, but there’s other proportions in that mix. And Latin America and Asia Pacific are places we’ve been doing for now. 063 we’ve mentioned before, I’ll say it again, there is very laser-tight focus on getting U.S. incident patients both study 002 at AstraZeneca and study 063 at FibroGen have been tasked with getting this done as fast as possible. And this is in consideration of FDA instruction back at the time of the company Affymax and the drug candidate OMONTYS, FDA indicated they wanted a population of incident dialysis patients sufficient that at least arms could be stratified statistically. So I think sort of puts the challenge out there. When we started our Phase 3 negotiations with FDA, they made it clear that that instruction also applies to us. And so we’re focused on getting that done.

Slanix Alex

Okay, great. Thank you. And second question is in regard to the IPR filing that GSK has filed earlier this year. Any updated guidance on that front? And in terms of timelines, when might we hear whether or not that the IPR has been accepted or not?

Thomas B. Neff

Okay. So we generally don’t make it a practice to talk about IP; however, this is a public event and so let me just make some simple points. With respect to roxadustat or FG-4592, we have valid and issued claims with respect to composition and the dates go far out into the future and none of that is affected by any of this litigation. So our freedom to operate in exclusivity on roxadustat enjoys U.S. patent protection out to 2033, for instance. There are many other patent filings that were made by us over the years, starting in 2001 that related to anemia and many of those filings have resulted in issued claims where it would be reasonable for competitors to think that they might run into one or another of these claims in the prosecution of the program. And so we’ve certainly mentioned this to everybody at the appropriate times during the IPO, roadshow and interviews with analysts and one-on-ones and so on. So we’ve made this known, right. There’s substantial amount of IP out there in favor for FibroGen. In fact, if you go to USPTO and just type in FibroGen you’ll see all the stuff. It’s pretty easy to follow. And so in this respect it doesn’t particularly surprise me GSK is doing what they’re doing. It makes sense that they have to get themselves convinced that they can advance. IPR obviously new terrain and it’s hard to predict what will happen, but we’ll figure it out and do the best we can to defend ourselves. And it’s obviously the case that we believe that all of the discovery and invention with respect to the HIF system, like recognizing the iron [indiscernible] enzymes and iron flux and so on as well as the HIF-PHI and inflammation effects. We think that we were the first in the world to document and the claims as it relates to therapeutic uses we think we’re definitely entitled to and those are examples of the things that are at issue and this kind of situation. So to recapitulate, these litigations do not have any effect on our freedom to operate with our compound and we have composition of matter claims that go far out into the future over roxadustat. Things such as HIF-PHI and the treatment of inflammation and no need for IV iron and stuff like that are discoveries that resulted in patent claims. We think we’re entitled to appropriate protection for those ideas, but this is why they have dispute mechanisms in courts to sort these things out. So we’ll see what happens as time goes on.

Slanix Alex

Sure, understood. And if I could just ask a follow-up question regarding IP. Any update on the EU patent ruling and the appeal process there?

Thomas B. Neff

So in the European Union there are many oppositions that are going on. These affect similar subject matter in Europe but the system’s completely different. What happened thus far in Europe was that the court decision which followed a certain set of rules that are different than EMAS patent finding and granting rules there was a finding against us which we appealed. And we are advised that that appeal will be four or five years before it is heard. During that time period, the patent at issue is still effective. So don’t take away the idea that because somebody won an opposition hearing that anything has changed and there are multiple classes or claims that are needed to be gotten through if someone expects to be competing with us in Europe. It’s not quite as clear cut as in the U.S. because in the U.S. any single infringement often times is a basis to exclude competitive molecules. In Europe, it’s more complex. But at the same time there are many other active oppositions and we are very optimistic about where these will all turn out as time goes on.

Slanix Alex

Okay, great. Thanks, Tom.

Thomas B. Neff

Yes, my pleasure.

Operator

Our next question comes from Tom Shrader from Stifel. Please go ahead.

Tahel Noy

Hello. This is Tahel Noy for Tom Shrader. I have a question regarding the incident dialysis patients, you definitely identified this population as the one that have the most desperate need for a new treatment approach. Do you expect that this population will be specifically identified on the future label of ESA? In addition, do you expect that most of the single arm [ph] study will be driven by this population?

Thomas B. Neff

So that’s a very good question and let me start by saying that with respect to incident dialysis, none of the ESA products that have been on market have done evaluations in incident dialysis. This is why FDA ordered Omontys/Affymax to do this. We concur this is the most fundamental comparison in the sickest patients. What we have learned over the past couple of years is that within the incident population there are as a subset of patients that have high degree of inflammation as measured by factors like CRP, and as a result they use much higher levels of EPO and much higher levels of IV iron. In the U.S., this is possible because under the ESRD rules that were propagated during the Nixon administration, the government essentially reimburses for all drug use in dialysis. So the U.S. is completely different than anywhere else in the world. In other places, 10 times as much EPO, it’s sort of tough luck Charlie in terms of getting reimbursement. So it doesn’t happen. But in the U.S., there’s a cohort of about 40% of the dialysis population if you look at the slides we used in the IPO period which I think are on our Web site, you can see the data and I think the citation is 2012 or '13 which was after the bundling and all the other restrictions on use that FDA propagated. And so it’s a pretty accurate picture what’s going on. We have since been informed by CMS that they view the subgroup within that pool of patients with hyper response to ESA and high inflammation, in other words HIF-PHI elevation that CMS doesn’t believe is adequate standard of care for those beneficiaries and they’ve encouraged us to take a very close look at that sub population. And they are aware of the possibility roxadustat could not only avoid really high EPO level requirements to work because roxa tends to be at the same basic dose level no matter how much inflammation there is. But in addition, roxa is able to down regulate the HIF-PHI reliably. So it portends the possibility of treating that subset group, which is 30% to 40% of the dialysis population we reported on in our IPO slides and our current company slides. And so we think that’s an opportunity in which we can gain several reimbursement and we’ve been advised to this, albeit outside of the bundle. So we’re very interested in where that goes. In order to test that pool you have to incident dialysis studies because you’re not going to get to those patients and [indiscernible] studies where the typical patients after four or five years of being on dialysis use very little ESA, because they’re really the survival population – enrich population where there’s been problems with EPO with their classmates when they first started dialysis. And so the population shrinks by about two-thirds by the end of year four. And the ones that are hyper responsive and only require little doses are the only ones left. So, yes, indeed this is a population that we believe incident is necessary to prosecute the potential for roxadustat in American patients.

Tahel Noy

Thank you very much. Can I ask another one about the program outside of CKD? Would you need to conduct a study in each malignant indication or will some sort of a basket study or region study will be sufficient there?

Thomas B. Neff

Peony, you want to take that one on maybe?

Peony Yu

Yes. So currently in China we have filed a CTA for MDS and that is a single Phase 3 study with placebo control. Now in the U.S. for the same indication MDS anemia, we have already met with the FDA in May and reached an understanding about what the Phase 3 study design needs to look like. And as Tom mentioned, we plan to provide more update when it becomes available. As for chemotherapy-induced anemia there is a great deal of unmet medical need both in U.S. and in China as well as in the rest of the world, particularly in China where there is no chronic transfusion available. The treatment guideline for patients who have intractable anemia is considered transfusion when hemoglobin is below hemoglobin 6. So these patients are very short of oxygenation to their organ tissues. Now under the setting, we have discussions with Chinese CFDA who are in strong support of us pursuing this indication. The prior approval for CIA in China were based on one study that consist of multiple cancer types. We are in discussions with the CFDA regarding the requirement for our study at which approach to take. Does that answer your question?

Tahel Noy

Yes. Thank you very much.

Operator

Our last question comes from Joel Beatty from Citi. Please go ahead.

Joel Beatty

Hi. Thanks for taking the questions. So for the Phase 3 non-dialysis dependent studies, what happens to some patients in those studies that become dialysis dependent and how are they analyzed?

Thomas B. Neff

That’s a good question. Patients that enroll with low GFRs will proceed to dialysis during the term of a one or two or three-year study. That’s normal. We have continued to treat them in dialysis, and such that’s a subset of patients that are pretty unique. This is turning into a pretty large first-in-class study in a lot of respect and this is certainly one of them – one of the issues that we’re looking to get some guidance from agency about is how they will admit those patients. But in our studies the concept is that they stay on study whether they’re given drug or placebo because it’s blinded, so we have no idea who’s getting what, right, but the protocol assumes that people stay on drug in dialysis.

Joel Beatty

Okay. Thank you.

Operator

We have no further questions at this time. I’ll turn the call back over to Tom Neff for closing remarks.

Thomas B. Neff

Thank you. Thanks to everyone on the line today for participating in our call. We look forward to speaking with you again and proving future updates. Thank you for your time today. Have a good summer.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.

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