FibroGen, Inc. (NASDAQ:FGEN) Q2 2024 Earnings Call Transcript

FibroGen, Inc. (NASDAQ:FGEN) Q2 2024 Earnings Call Transcript August 9, 2024

Operator: Good day and welcome to the FibroGen Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David DeLucia, VP of Investor Relations. Please go ahead.

David DeLucia: Good afternoon, everyone. Thank you for joining today to discuss our second quarter 2024 financial and business results. I’m David DeLucia, Vice President of Corporate FP&A and Investor Relations at FibroGen. Joining me on today’s call are Thane Wettig, our Chief Executive Officer; Dr. Deyaa Adib, our Chief Medical Officer; Juan Graham, our Chief Financial Officer; Chris Chung, our Senior Vice President of China Operations; and Dr. John Hunter, our Chief Scientific Officer. Following our prepared remarks, we will open the call to your questions. I would like to remind you that remarks made on today’s call include forward-looking statements by FibroGen. Such statements may include, but are not limited to our collaborations with AstraZeneca and Astellas; financial guidance; the initiation, enrollment, design, conduct and results of clinical trials; our regulatory strategies and potential regulatory results; our research and development activities; commercial results and results of operations; risks related to our business; and certain other business matters.

Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in FibroGen’s filings with the SEC including our most recent Form 10-K and Form 10-Q. FibroGen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The press release reporting our financial results and business update and a webcast of today’s conference call can be found on the Investors section of FibroGen’s website at www.fibrogen.com. With that, I’d like to turn the call over to our CEO, Thane Wettig.

Thane Wettig: Thanks, Dave, and good afternoon, everyone and welcome to our second quarter 2024 earnings call. On today’s call, I will focus our stakeholders on the updated go-forward strategy for the company and highlight the attractive opportunities that FibroGen has in front of it. Dr. Deyaa Adib, our Chief Medical Officer will provide an overview of the prostate cancer landscape, discuss the development plan of our CD46 targeted antibody drug conjugate FG-3246 and associated PET46 imaging agent in metastatic castration-resistant prostate cancer and articulate why we feel so strongly about recently released Phase I top-line results. And Juan Graham, our CFO will review the financials after which we will open the call for your questions.

On Slide 3, I would like to provide a recap of the recently announced late-stage pamrevlumab clinical trial results in pancreatic cancer. Last week, we reported top-line data from the pamrevlumab experimental arm in PanCANs Precision Promise Phase II/III adaptive platform trial which compare treatment with pamrevlumab combined with gemcitabine plus nab-paclitaxel, two gemcitabine plus nab-paclitaxel alone for the treatment in first-line and second-line patients with metastatic pancreatic ductal adenocarcinoma. The pamrevlumab arm of the study did not meet the primary endpoint of overall survival as determined by the protocol pre-specified Bayesian statistical analysis. We also announced top-line data from the FibroGen-sponsored Phase III LAPIS trial which compared treatment with pamrevlumab combined with gemcitabine plus nab-paclitaxel or FOLFIRINOX to placebo combined with gem plus nab-paclitaxel or FOLFIRINOX for the treatment of locally advanced unresectable pancreatic cancer.

The study also did not meet the primary endpoint of overall survival. When FibroGen advanced pamrevlumab into Phase III development, we knew the challenges associated with a first-in-class mechanism targeted at three very difficult diseases; idiopathic pulmonary fibrosis, Duchenne muscular dystrophy and pancreatic cancer diseases with substantial unmet need and little advancement in patient outcomes over the past several years. Most unfortunately for patients as well as other FibroGen stakeholders, pamrevlumab will not be a solution that will enable patients to live longer and more productive lives. Specific to prostate — to pancreatic cancer, we were hopeful that pamrevlumab would demonstrate a meaningful overall survival benefit, especially after we learned that the graduation from Stage 1 to Stage 2 as a Precision Promise adaptive platform trial.

This was simply not the result. We would like to thank the patients and clinical trial investigators for their dedication and participation in both pancreatic cancer trials. Due to these results, the company is implementing a significant cost reduction plan which unfortunately includes reducing headcount in the US by approximately 75%. I would like to express my deepest gratitude to our FibroGen colleagues who have dedicated so much of their time and energy for the prospect of bringing much needed therapies to some of the most challenging and deadly diseases affecting humanity. On Slide 4, I would like to highlight the exciting assets that FibroGen has. First is FG-3246, a first-in-class potent antibody drug conjugate or ADC targeting CD46 for the treatment of metastatic castration-resistant prostate cancer and potentially other solid tumors.

This program also includes the development of an associated CD46 targeted PET imaging agent. In April, we released compelling data from our FG-3246 Phase 1 monotherapy trial and in June, additional compelling preliminary data from the dose escalation portion of the Phase I/II investigator-sponsored study of FG-3246 in combination with enzalutamide in patients with mCRPC. The combination data was presented at the 2024 ASCO Annual Meeting. Deyaa will provide more detail on these two Phase I studies later in the call. We anticipate two catalysts for FG-3246 in 2025. Top line data from the Phase II portion of the combination trial in the first half of 2025 and the initiation of the Phase II monotherapy trial in the first quarter of 2025. Second is roxadustat.

Roxadustat is approved in over 40 countries, generates significant net revenue and positive cash flow and provides FibroGen with material and growing economics through our partnerships with AstraZeneca and Astellas Pharma. Due to strong roxadustat performance in China, we are raising our guidance for full year 2024. We now expect FibroGen’s full year net product revenue under US GAAP to be between $130 million and $135 million and $150 million, up from $120 million to $135 million and full year roxadustat net sales in China of $320 million to $350 million, up from our previous guidance of $300 million to $340 million. Juan will cover our financials in more detail later in the call. We are also expecting an approval decision from the Chinese authorities in the second half of 2024 for chemotherapy-induced anemia, which if approved would represent meaningful revenue growth on top of the substantial revenue generated by roxadustat in anemia associated with chronic kidney disease.

Next, FibroGen has a number of partnering opportunities for our remaining pipeline. Earlier this year, we regained the rights to roxadustat from AstraZeneca in the US and ROW territories, excluding China and South Korea. This allows us the opportunity to potentially partner roxadustat in certain indications with high unmet needs, such as anemia in patients with lower-risk myelodysplastic syndromes. Based on the data presented at ASH in December of last year, which demonstrated a meaningful difference in transfusion independence between roxadustat and placebo in patients with anemia associated with lower-risk MDS, who entered the trial with a higher transfusion burden, we believe roxadustat is an excellent candidate for a focused Phase III trial in lower-risk MDS a condition which represents a significant unmet need with a substantial commercial opportunity.

Second, we have made a difficult decision to stop internal development of the two immuno-oncology programs we licensed for HiFiBiO in 2021. Given the organizational changes we announced last week, we simply don’t have the substrate to advance these programs as quickly as they deserve. We continue to be very excited about the potential of these programs and believe there are partnering opportunities for both of these assets. We have made important advancements to derisk these programs including optimizing the affinity of and receiving IND clearance for FG-3165 our anti-galectin-9 monoclonal antibody enabling the product to be Phase I ready. We have also made significant progress optimizing the activity of FG-3175, our anti-CCR8 monoclonal antibody advancing it to a point where we believe it has best-in-class potential.

As we announced in June, we have also signed a clinical trial supply agreement with Regeneron to study both of these assets in combination with LIBTAYO. We will begin partnering discussions for both FG-3165 and FG-3175 with interested parties in the near future. Lastly is our strong cash position. We finished the second quarter with approximately $147.1 million in cash, cash equivalents and accounts receivable. We expect our balance sheet to be sufficient to fund our operating plans into 2026. In summary, we believe that we have a strong foundation to drive significant shareholder value creation today and into the future. I will now turn the call over to Deyaa Adib, our Chief Medical Officer to discuss prostate cancer and FG-3246. Deyaa?

Deyaa Adib: Thank you, Thane. Moving on to Slide 6, I would like to provide a brief overview of the prostate cancer landscape and the high unmet need in late-stage disease. Prostate cancer is the most common cancer in men in the United States, who currently have a one in eight lifetime risk of developing the disease. There are approximately 290,000 new diagnosis of prostate cancer each year in the US, with 65,000 diagnosis, where the cancer has metastasized, became castrate-resistant and are drug treatable. The five-year survival rate in these late-stage patients is approximately 30%. There is a significant unmet medical need for therapies that extend survival in these late-stage patients that have progressed on Androgen Receptor Signaling Inhibitors or ARSI and chemotherapy.

Turning to Slide 7. FG-3246 is a potential first-in-class ADC targeting CD46 in development for metastatic castration-resistant prostate cancer. With potential future development in colorectal cancer and other tumor types, FG-3246 binds to a cell receptor target that internalizes upon antibody binding and is present in approximately 50% to 70% of prostate tumors. But that demonstrates very limited expression in most normal tissues, making it an ideal ADC target candidate. FG-3246 is comprised of an anti-CD46 antibody, YS-5 linked to the anti-mitotic agent MMAE which is a clinically validated and FDA-approved ADC payload. An associated PET imaging agent, PET46 utilizes the same targeting antibody as FG-3246 and is under clinical development at UCSF.

It is constituted of the YS-5 antibody composed to the radionuclide zirconium-89 and in preclinical studies demonstrates specific targeting of an uptake by CD46 positive tumor cells. On Slide 8, we highlight the importance of the companion PET imaging agent, PET46 to the development pathway of FG-3246. We believe that utilizing PET46 as a patient selection biomarker will allow FG-3246 to achieve a differentiated clinical profile in prostate cancer treatment paradigm. We believe that PET46 biomarker will be superior to CD46 IHC due to the fact that PET46 is applicable to the entire mCRPC population, while IHC is reserved for patients who have biopsy accessible disease. This will allow the company to better enrich the patient population turning throughout the clinical development program.

Now, let’s go into the top-line results from the monotherapy Phase I study in metastatic CRPC, Slide 9. In the Phase I dose escalation component of the trial, dose levels of FG-3246 were administered in 21-day cycles. In the dose expansion arm of the trial patients were treated at 2.7 milligrams per kg adjusted body weight capping to 100 kilograms until disease progression or the occurrence of an unacceptable toxicity for example a DLD. The endpoints were safety tolerability and anti-tumor activity as measured by the decline of prosthetic specific antigen from baseline, objective tumor response rate in patients who have measurable disease and radiographic progression-free survival using the prostate cancer working group criteria for tumor response assessment.

The completed Phase I trial includes a total of 56 metastatic castration-resistant prostate cancer patients who are biomarker unselected and have received a median of five prior lines of therapy before they were administered FG-3246. In the efficacy population, we observed a median radiographic progression-free survival of 8.7 months. For RECIST evaluable patients 20% met the criteria of a partial response or a tumor reduction in size of at least 30% with a median duration of response of 7.5 months. PSA reductions of more than 50% were observed in 36% of patients. FG-3246 demonstrated an acceptable safety profile with adverse events consistent with those observed in other antibody drug conjugate therapies that have an MMAE payload. We look forward to publishing the totality of the Phase I data in the manuscript in the upcoming months, as we plan the advancement of the program further in the clinic.

Moving to Slide 10. There is also a combination study with enzalutamide that is currently being run at UCSF as a sponsored trial as an investigator-sponsored trial. We announced positive interim results from this dose escalation component of the study which is a Phase Ib/II trial of FG-3246 in combination with enzalutamide in patients with mCRPC at the ASCO 2024 Annual Meeting. The presentation included data from 17 biomarker unselected patients in the dose escalation component of the study. Over 70% of patients in the study received at least two prior ARSIs, which included prior enzalutamide. The primary endpoint was determination of the maximally tolerated dose or MTD for FG-3246 in combination with enzalutamide. The MTD was established at 2.1 milligram per kg adjusted body weight with primary G-CSF prophylaxis in combination with enzalutamide at the prescription dose of 160 milligrams per day.

The combination treatment demonstrated an encouraging preliminary result showing an estimate of radiographic PFS of 10.2 months with PSA declining observed in 71% or 12 out of 17 evaluable patients. We’re excited to announce that we expect top-line results from the Phase II component of this investigator-initiated study in first half of 2025. And these results will also include additional data on patients screened with PET46 during the Phase 2 component enrollment periods. On slide 11, I would like to discuss a few endpoints in metastatic CRPC. We believe that the radiographic PFS is a clinically meaningful endpoint versus other surrogate signals such as PSA50 and objective response rate. Other earlier stage data in the same space has only shown results from PSA30 and PSA50 as signals of clinical activity in a very limited number of patients, but have not yet shown survival data, which constitutes the clinically meaningful endpoints in metastatic castration resistant prostate cancer.

For FG-3246, we believe a radiographic PFS of 8.7 months as monotherapy in heavily pretreated unselected population and radiographic PFS of 10.2 months in combination with enzalutamide in an earlier treatment line with pre-treated ARSI patients is very compelling versus existing standard of care in the mCRPC set. Moving to slide 12. We highlight all the recent and ongoing studies for FG-3246. We are expecting to see more data generated for PET46 biomarker in prostate cancer that is in progress at UCSF this year. As we have articulated the goal is to develop a companion PET imaging agent to select those patients with high CD46 expression who are most likely to benefit from the treatment with FG-3246. PET46 will be part of a Phase 2 dose optimization monotherapy study sponsored by FibroGen and could potentially enhance screening, patient selection and enrichment ensuring proper selection of patients for the targeted therapy to receive a clinically meaningful benefit.

On slide 13, we highlight the upcoming catalysts for FG-3246 program. We are meeting with the FDA this quarter. We expect to file FibroGen’s IND for FG-3246 this quarter, as well as filing the FibroGen’s IND for PET46 next quarter. We anticipate the initiation of a Phase 2 dose optimization study in mCRPC in the first quarter of 2025 and expect top-line results from the Phase 2 portion of the combination study being run at UCSF in combination with enzalutamide in first half of 2025. Finally moving to slide 14. We want to summarize the unique opportunity that FG-3246 represents. The molecule represents a novel mechanism of action and a first-in-class opportunity, bearing an antibody against a novel target with a validated chemotherapy payload.

FG-3246 may offer a treatment beyond prostate cancer with potential applications in multiple treatment lines of mCRPC in combination with enzalutamide and other solid tumors such as colorectal cancer. FG-3246 could potentially represent a paradigm shift in oncology, offering not only a novel mechanism of action but also promising efficacy, safety and potential across various cancer types. We look forward to updating you on FG-3246 as studies progress. I will now turn the call back to Thane to discuss roxadustat. Thane?

Thane Wettig: Thank you, Deyaa. Moving now to slide 16. Roxadustat for anemia of chronic kidney disease continues to perform extremely well in China. Second quarter total roxadustat net sales in China by FibroGen and the distribution entity jointly owned by FibroGen and AstraZeneca totaled $92.3 million compared to $76.4 million in the second quarter of 2023, an increase of 21%. This growth was driven by an increase in volume of 33%. FibroGen’s portion of roxadustat net product revenue in China was $49.6 million for the second quarter on a US GAAP basis, compared to $23.9 million in the second quarter of 2023, an increase of 108%. Moving to slide 17. Roxadustat continues its category leadership and brand value share in China, maintaining a 46% share in the most recent three months period ending on May of 2024.

The potential addition of the chemotherapy-induced anemia indication would provide an important new treatment alternative for patients with chemotherapy induced anemia and a meaningful addition to the roxadustat business in China. Given that there have been several generic applications filed and two applications approved in China; I would like to reiterate the dynamics of the generic market in China and the exclusivity of roxadustat. The impact of a generic approval and launch in China is meaningfully different than in the US market. Generic players face lead time and execution risk of market adoption after approval as they need to be admitted into individual hospital formularies one listing at a time. Originator products do not experience a meaningful deterioration in revenue until they are subjected to volume-based purchasing, which only occurs after at least four generic products are approved and the government includes the originator in the VBP process.

Even then originator products in China, have historically been able to maintain a stream of net revenues and profits after generics enter the market. Despite the expiration of our composition-of-matter patents in June of 2024, we do not expect meaningful deterioration of the roxadustat business in the near term. In addition to the continued outstanding performance of roxadustat in China, roxadustat penetration in Europe, continues to increase showing quarter-over-quarter growth. We expect this growth to continue given the fact that roxadustat is reimbursed in all EU-5 countries and is the only HIF-PHI indicated in the EU for the treatment of anemia of CKD in both non-dialysis and dialysis patients. Importantly. roxadustat has exclusivity into 2036 in the EU.

positioning it to continue its growth and HIF market leadership over the next decade plus. Moving to Slide 18. Earlier in the year. we announced that AstraZeneca returned all US and RoW roxadustat rights to China with the exception of South Korea. FibroGen’s collaboration agreement with AZ for roxadustat in China remains firmly in place. Regaining the rights to roxadustat in the US, allows us to pursue roxadustat development opportunities with potential partners in indications such as anemia associated with lower-risk myelodysplastic syndromes. I will now turn the call over to Juan to discuss the company’s financials. Juan?

Juan Graham: Thank you, Thane. Firstly, I would like to take a few moments to thank the entire FibroGen team for their hard work and dedication over the years. The organization has courageously focused on developing therapies in very difficult diseases, affecting humanity. And while our objective was not achieved, I expect our learnings to provide valuable information for the development of new therapies in the future to provide options for patients affected with pancreatic cancer. I will focus my remarks with a revenue summary for the second quarter of 2024, subsequently providing financial performance details on our China business for the quarter. And finally, I will wrap up with operating expense results and our cash outlook.

For the second quarter of 2024, total revenue was $50.6 million compared to $44.3 million for the same period in 2023, an increase of 14% year-over-year. We recorded $49.6 million of net product revenue for roxadustat sales in China compared to $23.9 million in the second quarter of 2023, representing an increase of 108% year-over-year. The drivers for this increase were: One, volume growth of 33% versus last year; and two, changes in assumptions of our future revenue expectations leading to a deferred revenue release of $18 million. Roxadustat performance in China continues to deliver strong results supporting patients with CKD. In Q2 2024, we recorded $0.3 million in development revenue compared to $5.2 million during the second quarter of 2023.

As mentioned last quarter, after the termination of the AstraZeneca US Rest of World agreement, we expect quarterly development revenue to be below $0.5 million for the remainder of the year. In Q2 2024, we recorded $0.7 million of drug product revenue compared to $14.3 million during the second quarter of 2023. The performance of roxadustat in the Astellas territories has continuously been weaker than expected. We continue to assess the impact of future forecasted net sales performance and associated royalties to FibroGen, which we anticipate will lower the future projected cash inflows related to Astellas territories. I will now move to provide further detail on our financial performance in China. Total roxadustat net sales from the joint distribution entity or JDE owned by AstraZeneca and FibroGen and direct to distributor sales from FibroGen was $92.3 million this quarter, compared to $76.4 million in the second quarter of 2023, an increase of 21% year-over-year.

This growth has enabled us to achieve and maintain a brand value share of 46% in the category in China. From total roxadustat net sales in China, FibroGen’s net transfer price from sales to the JDE was $28 million this quarter compared to $23.8 million in the second quarter of 2023, an increase of 18% year-over-year. Net [indiscernible] is the best reflection of FibroGen’s portion of the cash received from roxadustat in China. During this quarter, as I stated earlier, we also released $18 million from deferred revenue due primarily to changes in forward-looking expectations for roxadustat in China. As a result, FibroGen recorded $46 million in net revenue for the quarter from roxadustat sales to the JDE and $3.6 million of direct to distributor sales for FibroGen China, totaling $49.6 million on a US GAAP basis.

Our revenue growth highlights the continued robustness in execution and physician and patient adoption of roxadustat in China. For full year 2024, for your models, we are raising our forecast for FibroGen China net product revenue to be between $135 million to $150 million on a US GAAP basis, which assumes a forecast of roxadustat net sales in China to range from $320 million to $350 million. Now, moving down the income statement. Operating costs and expenses for the second quarter of 2024, were $61.6 million compared to $132.4 million for the second quarter of 2023, a decrease of $70.8 million or 53% year-over-year. Operating expenses for the quarter came in below our guidance range of $70 million to $80 million, a reflection of our continuous drive on disciplined spend showcased in our second quarter results.

R&D expenses for the second quarter of 2024 were $34.1 million compared to $95.5 million in the second quarter of 2023, a decrease of 64% or $61.4 million year-over-year, primarily reflecting reductions in pamrevlumab clinical trial spend, R&D infrastructure, and one-time Fortis acquisition expenses. Of our $34.1 million of R&D expenses, approximately 58% was related to pamrevlumab, 18% directed to FG-3246, 18% to support our immuno-oncology pipeline assets, with the remaining 5% directed towards roxadustat development activities. We expect our pamrevlumab and immuno-oncology R&D expenses to decline significantly in the second half of the year. SG&A expenses for the second quarter of 2024 were $22.3 million compared to $31.2 million in the second quarter of 2023, a decrease of 29% or $8.9 million year-over-year, primarily driven by the company’s cost reduction efforts resulting in a leaner SG&A infrastructure.

Finally, cost of goods sold for the second quarter of 2024 was $5.2 million compared to $5.7 million for the second quarter of 2023. During the second quarter of 2024, we recorded a net loss of $15.5 million or $0.16 net loss for both basic and diluted share as compared to a net loss of $87.7 million or $0.90 per basic and diluted share for the second quarter of 2023. Given the recent negative pamrevlumab outcome, we are winding down any remaining obligations related to pamrevlumab and our immuno-oncology assets during the second half of 2024. We have also announced a reduction in our U.S. workforce of approximately 75%. With this backdrop and excluding any restructuring charges in the third or fourth quarter, we expect our total operating expenses including cost of goods sold in the third and fourth quarter to be between $45 million and $55 million per quarter with the third quarter estimated to be at the higher end and the fourth quarter estimated to be at the lower end of this range.

Now, shifting towards cash. As of June 30th, we reported $147.1 million in cash, cash equivalents, and accounts receivable. It is important to spend a few moments highlighting the changes in our cash balance. Our cash burn in the second quarter reflects a true-up payment to Astellas of $35.3 million. We expect any future true-up payments to be significantly lower moving forward as Astellas has reduced their future orders of roxadustat to reflect a slower-than-anticipated launch in their territories. Additionally, we also had a one-time inventory settlement payment of $11.5 million to AstraZeneca in the quarter due to the termination of our U.S. rest of world agreement. Excluding these cash outflows, our net operating cash burn was $20.8 million in the second quarter.

We expect our second half 2024 quarterly net operating cash burn to be lower than what we experienced in the second quarter. We believe that the focus towards cost reduction and cash maximization initiatives will enable us to continue to pursue our strategic direction. Finally, and as we have continually communicated we expect our cash, cash equivalents, and accounts receivable to fund our operating plans into 2026. Thank you. And now I will turn the call back over to Thane.

Thane Wettig: Thank you, Juan. In closing, we remain excited about the company’s prospects and the potential value they provide to stakeholders. Roxadustat continues to perform very well in China where we expect an approval decision of our sNDA for the chemotherapy-induced anemia indication in the second half of this year and our partner Astellas continues with the commercialization of roxadustat in Europe, Japan, and other markets. Additionally, given that we regain rights for roxadustat for U.S. ROW territories from AstraZeneca we are actively exploring potential partnering opportunities in anemia in patients with lower-risk MDS. With regards to FG-3246 and PET46, we recently reported compelling top line data from the Phase 1 monotherapy study of FG-3246 in metastatic castration-resistant prostate cancer and we’ll publish the totality of the Phase 1 data in an upcoming manuscript.

We have also presented compelling preliminary top line data from the dose escalation Phase 1b study of FG-3246 in combination with enzalutamide in mCRPC at the 2024 ASCO Annual Meeting in June. We anticipate initiation of our Phase 2 monotherapy dose optimization study of FG-3246 in mCRPC in the first quarter of 2025 and we anticipate top line results from the Phase 2 portion of the combination study in the first half of 2025. As we stated earlier in the call we will initiate partnership discussions for our two early-stage immuno-oncology assets FG-3165 and FG-3175 with the aim of ensuring their continued development and providing FibroGen with potential access to non-dilutive capital. Finally, we have a strong balance sheet and expect our current cash position as Juan said to fund operations into 2026.

In summary, we have made some very difficult, but necessary decisions based upon the outcomes of our two late-stage pamrevlumab trials in pancreatic cancer. We believe these decisions best position FibroGen to successfully execute against our updated strategic priorities as we strive to attain a valuation that we believe is more reflective of our current and future roxadustat revenue streams, first-in-class ADC and companion PET imaging agent and our strong balance sheet. I would like to thank all of the employees of FibroGen for their continued hard work and perseverance over the last few months. I would now like to turn the call over to the operator for Q&A.

Operator: Thank you. We will no begin the question-and-answer session. [Operator Instructions] The first question comes from Andy Hsieh with William Blair. Please go ahead.

Q&A Session

Dalton Greenwood: This is Dalton Greenwood on for Andy Hsieh. Thank you for taking our questions. Given the singular focus on FG-3246 now do you have any plans on accelerating its development just to maximize the asset’s value for shareholders? In parallel, you have a very robust China business based on the strength of roxadustat’s clinical profile. Could you comment on the liquidity of cash generated in China? In other words how do you as a US entity access the cash derived from roxadustat revenue? Thank you.

Thane Wettig: Hello, Dalton. This is Thane. Thanks for your questions. I’ll touch on the 3246 question and then I’ll ask Juan to touch on the question about the liquidity of cash from our China operations. And obviously, Chris Chung is here as well to complement Juan if needed. As it relates to 3246 we — it has always been a priority asset for us since we acquired it from Fortis in May of last year. We just didn’t highlight it to the extent that we highlighted pamrevlumab just because of the proximity of the catalyst for pamrevlumab from that time. And so it has been and will continue to be an asset that we will try to prosecute with speed because that’s the name of the game in our business is quality and speed. We have an important interaction coming up with the FDA this quarter which will help inform the design of the Phase 2 trial and we would expect then to be able to plan on the initiation of the Phase 2 program after that point in time.

So yes we are prosecuting it as quickly as we can.

Juan Graham: Yes, Dalton. And with regards to your second question — this is Juan. With regards to the cash in China cash generation in China over the course of the last year or so we have been repatriating cash from China based on a facility that we had set up as registered debt with our China operations. We will continue on that front. And beyond that we are also exploring other facilities other avenues to continue to repatriate cash from China. So those are I think some of the elements that we’re continuously evaluating to bring and bring money back to the US.

Dalton Greenwood: Great. Thank you.

Operator: The next question comes from Jason Gerberry with Bank of America. Please go ahead.

Dina Ramadane: Hi. This is Dina Ramadane on for Jason Gerberry. I just had two questions from us. The first is just I guess on sort of an expected timeline of how soon you could look to partner your two preclinical candidates? How early could you begin to have those discussions? Is it kind of fair to assume that you’d look to generate some Phase 1 data beforehand? Or would that be on the back of more of like a preclinical data? And then I have one follow-up.

Thane Wettig: Thanks Dina for the question. So the data package that we would have to showcase to potential interested parties will be a preclinical data set. Clearly for the anti-galectin-9 antibody it’s a very extensive data set because of the fact that we had — recently had the IND cleared. And so we believe there’s sufficient information there for potential partners to be able to make the determination of what the path forward could mean and the potential value to them. For CCR8 we had previously stated that we expected to file an IND sometime in the 2025 time frame. And so we’ve done as I’ve said in the opening comments. We’ve done quite a lot of work on affinity maturation, specificity potency and feel like as we compare our antibody to other antibodies other CCR8s as best as we can compare them and SAR comparisons and things of that nature that we feel very, very good about the optimization work that our team has done on the CCR8 antibody.

And so that would be information that a potential partner would have access to as well. And just to maybe reiterate there’s really a couple of different dynamics in play with these two particular targets. There’s only one other anti-Gal9 antibody in the clinic and that’s from Gallop Oncology which is a PureTech spin-off. And so we think we’re in a really good position from a timing perspective with our Gal9 antibody. And then with the CCR8 category, while we aren’t in as favorable a competitive position, it is an incredibly hot space right now, as I’m sure you’re aware, there’s a lot of activity. And it seems like there’s emerging excitement about the mechanism as well. So we feel good about the ability to partner both of these assets and we’re going to start those activities immediately.

Dina Ramadane: Got it. Thank you. And then one more follow-up for me here. Just what is — what’s the nature of the update we can expect from the top-line data of FG-3246’s combo trial with enzalutamide? Just in terms of patients — number of patients and duration of follow-up that we could expect to see? And then wondering if you could please maybe set a bar that you would consider clinically meaningful on the PFS benefit that you’d like to see sort of confirm the durability of response that we saw at the prior data cut.

Thane Wettig: No, that’s a really good question, Dina. I’ll turn it over to Deyaa to answer that one and then I’ll follow-up if needed. Deyaa, do you want to take that one?

Deyaa Adib: Sure. Thank you, Thane, and thank you, Dina, for this question. So the combination study at UCSF as you have seen at ASCO has already completed the Phase 1 dose escalation, and they have already started the Phase 2 expansion component after realizing the recommended Phase 2 dose. So having said that, the data that you have seen from dose escalation is very, very encouraging, because of the fact that the majority of those 17 patients were post two prior ARSIs. This population is — they have also failed abiraterone acetate. They don’t constitute this area of PET medical needs. So for those patients to have 10.2 months radiographic PFS, this is very exciting. The bar for this setting, meaning after patients have failed two prior ARSIs, is around six months rPFS.

So as you can see the combo has already exceeded the current bar, which is only six months. In terms of moving up the treatment line, once the — more patients in the second line setting, meaning patients who have completed only one prior ARSI, we are going to see potentially much higher rPFS, and in this case, the comparison will be somewhere between 18 to 20 months. This is the current bar with abiraterone acetate and enzalutamide in the first, strictly first line setting. So this is the current landscape and we are hoping that in the Q1 of — or I mean first half of next year, we will be able to publish the top-line results from the combination having a total of 36 patients in the study. So it will be a robust data set to give us a meaningful signal of clinical activity in either line, second line or first line setting.

Thane Wettig: Thanks, Deyaa. That was excellent. Dina, one thing that I would add is that these additional patients that are being enrolled now as part of the expansion cohort will also have PET imaging data as well. So that’s in addition to a more mature rPFS that Deyaa spoke to. We’ll also begin to see some information and be able to characterize CD46 expression and potential response as well. Small numbers, but it will be an important additional data point for us.

Dina Ramadane: Appreciate all the color. Thank you so much.

Operator: Next question comes from Paul Choi with Goldman Sachs. Please go ahead.

Paul Choi: Hi. Good afternoon. Thank you for taking our question. My first question is on the updated guidance. And can you maybe comment on how much of this may be driven by a potential raise in guidance maybe driven by potential approval of a CIA indication versus continued volume growth from the CKD indication? And then my second question is, I believe in July a generic roxadustat was approved. Curious if you are starting to see it in the marketplace there yet, and just what your thoughts are on the pricing impact? I think you had about a 12% headwind of — from pricing on your volume — offsetting your volume this quarter. So any updated thoughts on the pricing impact from the competitive launch would be appreciated.

Thane Wettig: Yes. Thanks Paul. It’s Thane. I’ll go ahead and start and then I’m going to turn it over to Chris as well. In terms of the underlying performance of roxadustat in China and the raise of the guidance, it’s 100% due to continued strong performance by the team in the anemia of CKD indication in that indication by itself. There’s no pre-ordering in anticipation of a CIA approval or anything like that. So it’s all just inherent strong underlying demand. In terms of the generic entrants, as we said in our opening remarks, there have been two generics that are approved. This walk down from 33% volume growth to 31% to 21%, revenue growth there was a 7% price reduction as part of the VBP renewal at the end of last year.

And so there’s not a 12% price headwind. There was a 7% price headwind. And then the expected pricing will really be dependent upon what happens if and when the government calls for VBP for roxadustat to be included in VBP. Let me ask Chris to add some additional color given her intimate knowledge of the environment there.

Chris Chung: Yes. Thank you, Thane. So Paul, we have not seen the launch of the generic on the market. So it’s very difficult to give you a sense of market adoption. With respect to pricing, at this point in time there are no plans to change pricing in response to generic entry until we are subject to vote.

Paul Choi: Okay. Great. And if I could squeeze in one pipeline question please just on 3246 to follow-up on the combination data. I guess, as you think about planning that obviously, you’ll work on the dose optimization starting next year. But as you look down the road, is there any particular population beyond the PET positive that you think might be additionally benefiting from the combination? Or will your primary focus in terms of like increasing the probability of success be focused primarily on the PET positive population?

Thane Wettig: Yes. So, I’ll start off and then Deyaa, I’m going to turn it over to you.

Deyaa Adib: Sure.

Thane Wettig: So really what we’re going to be exploring in the Phase 2 Paul is with the PET is trying to understand if there is a correlation between CD46 expression in response to the drug that could then allow us to enrich the Phase 3 portion of the trial. And so we’re not using it as any sort of the diagnostic or patient selection criteria as part of the Phase 2. We’re using it to understand if there is a correlation and if there is then that would really enable us to enrich the Phase 3 portion of the trial. Deyaa will go ahead and add to that and then Paul we’ll see if that addressed your question.

Deyaa Adib: Yes, Paul. So thank you for the question. I completely confirm what Thane has just mentioned. But on top of that remember that data derived from our Phase 1 study that was conducted by Fortis in addition to the current combination UCSF with enzalutamide has all been conducted in an unselected population. So that is very true. Our primary focus will be to enhance the opportunity for patients to derive clinical benefit by pre-selecting them with PET46. But when we talk to our KOLs, they also tell us that there could be another opportunity in all-comers, if the data continue to show robustness and strong signal of rPFS. So this is like not something that we will abandon, but it is going to be another opportunity in all-comers as long as we continue to see very strong data. But the primary focus will be PET46 pre-selection.

Paul Choi: Okay. Got it. Thank you very much.

Thane Wettig: Guys, we still have a few more minutes. So Dalton, Dina, Paul, if you have any additional questions?

Operator: There appear to be no further questions in the queue. So, this will conclude our question-and-answer session. I would like to turn the conference back over to Thane Wettig for any closing remarks.

Thane Wettig: No, thank you. We really appreciate the participation in today’s call and your interest in FibroGen. Enjoy the rest of your day. Thanks guys.

Deyaa Adib: Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.