Akebia Therapeutics - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was Akebia’s first full quarter with Vafseo U.S. sales: total revenues $57.3M, net product revenue $55.8M, and diluted EPS $0.03; net income of $6.1M versus a loss of $18.0M in Q1 2024.
• Results materially beat Wall Street consensus: revenue $57.3M vs $44.5M consensus (+$12.8M), EPS $0.03 vs -$0.045 consensus (+$0.075); Vafseo net revenue $12.0M exceeded company’s prior $10–$11M guidance range; Auryxia delivered $43.8M.
• Strong commercial launch metrics: >640 prescribers, ~12 prescriptions per prescriber by March, ~1/3 prescriptions were refills, and orders placed by the top five dialysis organizations; inventory at ~4 weeks with at least 12 months of Vafseo U.S. inventory on hand free of potential incremental tariff payments.
• Near-term catalysts: LDO protocol activation pilot expected to start in Q3 with broader rollout in Q4, potential continued Auryxia revenue resilience prior to first ANDA approval, and VALOR Phase 3 NDD trial initiation in 2H 2025.

What Went Well and What Went Wrong

• What Went Well

  • Vafseo launch outperformed: $12.0M in Q1 net revenue, beating $10–$11M guidance; >640 prescribers with ~12 prescriptions per prescriber by quarter-end and refills at ~1/3 of total prescriptions.
  • Profitability inflection: net income of $6.1M driven by higher product revenues and lower COGS after Auryxia intangible amortization ended; cash increased to $113.4M following a $50M offering.
  • Strategic access and reimbursement: contracts covering nearly 100% of dialysis lives; orders from top five LDOs; ~80/20 split fee-for-service vs other plans and encouraging Medicare Advantage coverage early in launch.

• What Went Wrong

  • Large Dialysis Organization timing: broad LDO protocol activation still pending; one LDO plans an operational pilot in Q3 with broader rollout in Q4, pushing step-function growth to 2H 2025.
  • Auryxia generic overhang: authorized generic entered post-March 20; while first ANDA not yet approved, future Auryxia sales are difficult to predict due to potential additional generic competition.
  • Launch operational complexity: early-quarter specialty pharmacy capacity constraints created multi-week backlogs across TDAPA products, though they subsided by late Q1.

Transcript

Operator (participant)

Thank you for standing by. Welcome to Akebia's First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Ms. Mercedes Carrasco, Senior Director of Investor Relations. Please go ahead.

Mercedes Carrasco (Senior Director of Investor Relations)

Thank you, and welcome to Akebia's First Quarter 2025 Financial Results and Business Updates Conference Call. Please note that a press release was issued earlier today, Thursday, May 8, detailing our first quarter 2025 financial results, and that release is available on the investor section of our website. For your convenience, a replay of today's call will also be available on our website after we conclude. Joining me for today's call, we have John Butler, Chief Executive Officer, Nicholas Grund, Chief Commercial Officer, and Erik Ostrowski, Chief Financial and Chief Business Officer. I'd like to remind everyone that this call includes forward-looking statements. Each forward-looking statement on this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements.

Additional information describing these risks are included in the financial results press release that we issued on May 8th, as well as in the risk factors and management discussion and analysis section of our most annual report and quarterly reports filed with the SEC. With that, I'd like to introduce our CEO, John Butler.

John Butler (CEO)

Thanks, Mercedes, and thanks to everyone for joining us this morning. During our last call, we shared initial progress on our Vafseo vadadustat U.S. product launch, and I'm extremely pleased to report we continued our strong performance. We delivered U.S. net product revenues of $12 million versus our guidance of $10-$11 million in the first quarter. I believe our strong early performance is a reflection of nephrologists' desire for a new treatment option to treat anemia in CKD patients on dialysis. Though I continue to express caution that we're in the early stages of product introduction, it is one of the strongest launches I've ever seen in the dialysis market. I want to acknowledge the excellent job our commercial and medical affairs teams are doing, educating dialysis providers, prescribers, anemia managers, and other members of the patient care team about Vafseo.

The complexity of selling a product in the dialysis market should never be underestimated, but our strategy to build prescriber demand and quickly transition patients onto Vafseo is playing out as planned. Importantly, we're also encouraged to see that patients are staying on therapy, as evidenced by the growing number of refills being written, and as expected, we're also seeing the utilization of higher doses as patients' doses are titrated to achieve and maintain appropriate hemoglobin levels. As we've said in the past, we have commercial contracts in place with dialysis organizations covering nearly 100% of dialysis patients. The top five dialysis organizations have now ordered Vafseo. However, nearly all the revenues are still coming from the small to mid-sized dialysis organizations, who treat approximately 150,000 patients collectively. One of the large dialysis providers is planning a large pilot to operationalize its protocol.

We expect that pilot to begin in the third quarter. The other large provider is earlier in their process, but I'm encouraged that they're making the product available on an exception basis for patients. Given that each LDO treats over 200,000 patients, bringing one on board with a broad protocol will more than double the number of patients with access to Vafseo. Now, shifting gears, the VOICE study in collaboration with U.S. Renal Care continues to march towards full enrollment and now has about 75% of patients enrolled. As you recall, the target enrollment is approximately 2,200 subjects. In just five months of enrollment, this is tremendous progress. We believe VOICE could generate data on the benefits associated with Vafseo treatment, including potential improvements in hospitalization, which is critical information for prescribers and dialysis organizations.

We also continue to pursue an approval of Vafseo in the non-dialysis patient population and remain on track with our goal to initiate our phase three VALOR trial in NDD in the second half of 2025. We're planning to meet with the FDA to further discuss the VALOR trial, which will study the use of vadadustat in treating anemia in CKD patients who are not on dialysis. We'll continue to update you on our progress as appropriate. While the Vafseo launch and initiating VALOR remain our top priorities, we'll also update you throughout 2025 about our plans to advance our pipeline of HIF-PH inhibitors and other assets. We are working towards having multiple product candidates enter the clinic this year. Akebia is in an incredibly strong position, and the team has worked very hard to get us here.

Now, first, Nick is going to give you a detailed view of our launch progress, and then Eric will talk to you about our strong first quarter results and enhanced financial position. Now, let me turn it over to Nick to give you more color on the Vafseo launch.

Nicholas Grund (Chief Commercial Officer)

Thanks, John. Good morning, folks. I am also pleased with the strength of the Vafseo launch and the sales achieved through the first quarter. As we have discussed previously, during the launch, we are focusing on breadth, the number of physicians prescribing, and depth, the amount physicians are prescribing. On those efforts, we see multiple indicators of strong demand from the field. First, we ended the quarter with more than 640 prescribers, which represent a nearly 25% increase compared to the end of February when we last updated you. We are adding to the breadth of prescribers from various dialysis organizations, though still most are ordering for patients at U.S. Renal Care. While prescribers at other dialysis organizations are writing, U.S. Renal Care makes up the vast majority of prescriptions.

In order to continue to increase breadth, we will not only need to continue to grow within our current customers, but we must also continue to expand into new small to mid-sized dialysis organizations, many of which have protocols in place or have recently operationalized the protocols. John noted that we have now generated sales from the top five dialysis organizations who treat approximately 85% of patients, though orders from the top two dialysis organizations were to address patients with medical exceptions. We continue to work with large dialysis organizations and expect one of them to operationalize Vafseo in the third quarter of this year. This will allow us to continue to grow our breadth of prescribers substantially. Second, depth of prescribing is tracked by looking at prescriptions per provider.

Prescriptions per provider have grown to approximately 12 at the end of March from nearly 8 at the end of February. The increase speaks to our focus on depth that I described during our last call. Our team has worked diligently to help prescribers identify appropriate patients and work through the ordering process. Though there is a broad range of utilization within the prescribers, we believe for some physicians it reflects a shift from initial trial to sustained use across a broader number of patients. Once a patient starts therapy, it's important for them to maintain on therapy. We measure this through the refill rate. Refills are coming in as expected. About one-third of all prescriptions written in quarter one were refills. Notably, the refill data demonstrate an increase in dose as prescribers titrate towards levels we observed in our clinical trial. Lastly, we are closely monitoring purchasing patterns.

At the end of the quarter, we have seen channels stocking at about four weeks of inventory, which is about one week higher than earlier in the quarter. As we move further through the launch, we should expect inventory fluctuations as we bring on more customers, and we believe inventory will settle between two to four weeks on hand. For clarity, we estimate Vafseo Q1 sales were composed of about two-thirds demand and one-third inventory. Anecdotally, many of our key account managers have commented on the positive reception among prescribers. Though just a small sample size, we are hearing that physicians and anemia managers are commenting on hemoglobin stability, ease of dose and titration, minimal dose adjustments, and efficacy in ESA hyporesponders.

We are hopeful that this is an early sign that dialysis clinic staff will be able to maintain a patient's hemoglobin within the target range and be able to focus on other aspects of a patient's care. We have also heard the disappointment and, importantly, willingness to advocate from physicians affiliated with dialysis organizations that have yet to make Vafseo available for prescribing through a broad protocol. Physician advocacy is important as we continue to work closely with dialysis organizations to operationalize protocols. Reimbursement trends remain encouraging. As we previously discussed, we have been initially focused on the access for Medicare fee-for-service patients within the TDAPA reimbursement system. We also indicated that we expected Medicare Advantage coverage where dialysis organizations had contracted with Medicare Advantage plans for a TDAPA-like or innovation payment. We continue to see reimbursement outside of Medicare fee-for-service.

We believe that this is a signal that even early in the launch, prescribers want to use Vafseo for patients regardless of the health plan the patient is on, and that some Medicare Advantage plans are also ready to cover Vafseo. The launch is proceeding as we planned. Demand continues to grow, and we are establishing a strong foundation for Vafseo. Our team is highly focused on continuing to increase breadth and depth of prescribing at current customers, unlocking new customers, and supporting the largest dialysis organizations in protocol activation. Let me now turn it over to Eric.

Erik Ostrowski (CFO and, Chief Business Officer)

Thanks, Nick. As mentioned, we're very pleased with the initial quarter of Vafseo sales, which, along with solid Q1 Auryxia sales performance, drove strong Q1 results. I will now provide an overview of those results. Total revenues, which are comprised primarily of net product revenues and also include licensing collaboration revenues, increased to $57.3 million in Q1 of this year as compared to $32.6 million in Q1 of last year. Of these amounts, net product revenues increased to $55.8 million in Q1 of this year as compared to $31 million in Q1 of last year, driven by the introduction of Vafseo this quarter, which generated $12 million in net revenues, as well as by an increase in Auryxia net product revenues, which were $43.8 million in Q1 of this year as compared to $31 million in Q1 of last year.

As a reminder, Auryxia lost IP exclusivity in March, and an authorized generic for Auryxia has now entered the market, though no other generics have been approved nor entered the market at this time. We are pleased with this quarter's strong Auryxia results, though caution future Auryxia sales levels are challenging to predict due to the uncertainty around the timing of potential additional generic competition. Cost of goods sold of $7.6 million in Q1 of this year was lower as compared to $11.6 million in Q1 of last year, even with higher sales levels in this year's quarter. A driver of this lower level of cost is that we are no longer recording a $9 million quarterly non-cash amortization charge related to the acquired developed product rights for Auryxia, which was fully amortized as of the end of last year.

Of note, Vafseo sales were derived from pre-launch inventory, which does not include the full cost of manufacturing, as a portion of those inventory-related costs were previously expensed prior to Vafseo's FDA approval. Also, during Q1 of last year, we realized a $3.7 million benefit due to our ability to sell inventory previously written down as excess inventory. On the topic of inventory as related to tariffs, I want to highlight that we have at least 12 months of Vafseo inventory on hand in the U.S. and do not expect any meaningful tariff-related impact on Vafseo or Auryxia at this time. We will continue to monitor developments in this area and work to be ready to react to potential scenarios that could play out. R&D expenses of $9.8 million and SG&A expenses of $25.7 million in Q1 of this year were essentially flat as compared to Q1 of last year.

Turning to the bottom line, we generated net income of $6.1 million in Q1 of this year as compared to a net loss of $18 million in Q1 of last year. This quarter's net income was driven by the increase in net product revenues, which was partially offset by $5.4 million in interest expense related to the settlement royalty liability in connection with the July 2024 Vafseo termination and settlement agreement. We ended Q1 with $113.4 million in cash and cash equivalents. During the quarter, we bolstered our cash position via an underwritten public offering completed in March, which raised over $46 million in net proceeds and, importantly, also served to expand institutional investor support of Akebia. We believe we are financed to achieve profitability based on our current operating plan, which includes pursuing label expansion for Vafseo and advancing our other existing programs.

In closing, we exited Q1 with strong initial Vafseo launch, solid financial position, and an overall positive business momentum. That said, our work is not done, and we will continue to diligently work to execute on our business plan. With that, we welcome questions.

Operator (participant)

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Your first question comes from the line of Roanna Ruiz from Leerink Partners. Your line is now open.

Roanna Ruiz (Senior Managing Director)

Hey, morning, everyone. A couple from me for Vafseo. Could you update us about your expected timelines for adding it to protocols and implementing them at the large dialysis organizations since it sounds like most of the growth has been driven by mid and small-sized ones right now? When the LDOs do order and use more Vafseo, how do you expect that to increase the prescribing rates or other launch metrics over time?

John Butler (CEO)

Great. Roanna, thanks so much for the question. The timelines for the LDOs, and I'm going to ask Nick to give more detail, but in the first, as I mentioned, they're starting a large pilot to operationalize their protocol. Their protocol's written, but they need to ensure that because they're so large that they can operationalize it across the system without issues and patients can continue to get drugs. Remember, they're going to be shipping drugs to patients' homes, so it's a different mechanism for treating anemia. Let's let Nick talk more about that pilot because we're really excited that that's moving forward.

Nicholas Grund (Chief Commercial Officer)

Yeah. This pilot is a large operational pilot. Again, to reiterate, this is not seeking efficacy data. It is to make sure patients can get their initial fill, the systems work to make sure they get formulary access, they can get refill data. Typically, these pilots can be between 50 and 200 sites. You talk about a pilot of 200 sites, that is bigger than most dialysis organizations. We have a number of physicians that have raised their hand to be on that pilot, and we have heard back that many of our KMEs who we interact with have already heard that they will be part of that pilot. This train is enrolling on this thing. Typically, how these pilots work is they roll it out through training their staff, and they will probably spend a month or so training their staff on what to expect.

As John mentioned, it's a little bit different way of treating anemia, and so we want to make sure the staff is well-trained. Then they'll enroll the sites. They'll spend one to three months probably in the pilot, more like probably two to three months than one because they want to make sure patients get a refill. Once they check the box that all the systems are working and everything's connected, they're going to roll it out more broadly. When we think about that, pilot in third quarter, broader rollout in fourth quarter.

John Butler (CEO)

Right. As we said, I mean, that really kind of doubles the number of patients who can access the product once that one LDO goes. When you think about how physicians will prescribe, I mean, the folks at U.S. Renal, the physicians who are writing now, what was the number, Nick? Something over 50%.

Nicholas Grund (Chief Commercial Officer)

50%.

John Butler (CEO)

50% also have patients at one of the large providers. You have already got physicians who are used to writing the product and want to write the product. We think, and frankly, a lot of those are the ones who are raising their hands to be a part of the pilot. They will start increasing their prescribing quickly. Now, the second LDO is earlier in their process. We are working with them to share data, etc. As I said in my remarks, I am very encouraged that they have ordered product and they are allowing physicians on an exception basis to get the product. That is why we wanted to make sure we had that contract in place with them. We clearly see that they are going to take longer before you get broad use from them.

Of course, we're doing all that we can to move that as quickly as we can. The idea that as you think about Q2, Q2 will clearly still be driven by the small and medium providers. 150,000 patients at the small and medium providers. Lots of room to grow. When you think about the number of patients we have on today, at the end of the third quarter, sorry, the end of the first quarter, something just over 5,000 patients, right? Think that in the context of 150,000 available patients. There's lots of room to grow at the small and medium providers. We're incredibly excited to get the first large provider up and running because I think that's the step function that comes into growth.

Roanna Ruiz (Senior Managing Director)

Got it. That's really helpful. Quick follow-up from me. It sounds also like the average prescriptions for Vafseo is increasing at a nice rate. How do you expect that to keep going or ramping into Q2 based on some of the metrics you saw exiting first quarter?

John Butler (CEO)

Clearly, some of the increase in breadth is refills, right? I mean, so the patients are staying on, and that's a really good thing. I will let Nick comment.

Nicholas Grund (Chief Commercial Officer)

Yeah. I talked in my comments about we're seeing some physicians moving towards, we'll call it standard utilization, where they're using it in a broad set of patients. That being said, the range of utilization is still really, really broad. We have a number of prescribers that are still only in the early trial stage with one or two prescriptions for patients. Certainly, there's a ton of growth still within the prescribing base as those physicians become comfortable with Vafseo and roll it out to broader patients. We have all of the physicians who have yet to prescribe at some of the medium and smaller dialysis organizations that are poised to. Protocols are in place. They're operationalizing those protocols. Certainly, we expect the prescriber base to continue to expand and thus adding to the number of prescriptions per provider.

John Butler (CEO)

Yeah. Roanna, as you know, I mean, the interesting thing about dialysis is you normally think about a launch and you have your early adopters who can start writing the drug, and then you kind of march through. What you have to do in dialysis is you add that layer of access at the dialysis provider. So you've got folks who are early adopters at DaVita, Fresenius who just can't access the product yet. Those are the people that we're using truly to advocate for that broadened access and to accelerate that. I think that's paid off in the speed with which the first LDO is moving towards their large-scale pilot. It does create that level of complexity that you've got to go through that.

As Nick said, I mean, most of our prescriptions are coming from U.S. Renal, but we've had orders from the other mid-sized providers, but they're just at the early stages. We are really excited about what they can yield in Q2 and Q3 and beyond.

Roanna Ruiz (Senior Managing Director)

Got it. Thanks very much.

Mercedes Carrasco (Senior Director of Investor Relations)

Thank you.

Operator (participant)

Thank you. Your next question comes from the line of Julian Harrison from BTIG. Your line is now open.

Hi. Congrats on all the progress. This is Rayon for Julian. Thanks for taking our question. Just one for us. Has there been any material shift from Auryxia prescriptions to the currently authorized generic? Just curious how we should be thinking about generic penetration going forward.

John Butler (CEO)

Thanks so much for the question. As you know, the authorized generic only entered the market post-March 20, right? In the quarter, it was very, very little. We know exactly how much product went into the market and how much the AG will receive over the course of the year. We know certainly in the first quarter, that's minimal and will not be a large percentage of the business even in Q2. The real question will be the next, the first filer getting approved. We have always been, as we have said in the past, very cautious. As you know, the way the dynamic works, you have the AGs out, the first filer has six months of exclusivity as well. During that time, we think we can maintain a significant amount of revenue.

We have the right to match prices within our contracts because having Auryxia in the bundle has changed things. Without an ANDA approval from the FDA, there's a great opportunity for us. We just have no idea how long that's going to last. Every day that it does, here we are on May 8th. Again, March 20th was the first day that our contracts suggested an ANDA filer, a generic, could enter the market, and no one's been approved yet. We're enjoying that situation. We have the product, and we'll be able to service the market for as long as that lasts. I just can't give you guidance on when a generic might be approved. We're hoping it takes a while.

Got it. Thank you.

Sure.

Operator (participant)

Thank you. Please stand by for your next question. Our next question is from the line of Roger Song from Jefferies. Your line is open.

Roger Song (Senior Equity Research Analyst)

Excellent. Thanks for taking our question and for the update. Just a question related to the net price. Given right now, you're focusing on the small to mid dialysis provider and then how this will change over time when you get more patients from the launch deal. Thank you.

John Butler (CEO)

Yeah. No, thanks, Roger, for the question. It's good to have you on the call. As it comes to net price, this is a very competitive environment that we are selling Vafseo in. We're obviously incredibly careful about what we talk about. A couple of things just to remind you. The way the contracts are structured, it's an off-invoice and then a rebate. Of course, the net that Eric described includes the discount for that rebate, although it won't be paid until sometime in the future. What we've also said is over time, we expect the net price per patient to decrease as volumes increase. What you really see as you think about the dynamic of the kind of mid-sized providers coming in, you just see lumpiness in the net price over some period of time. I will say you have our net revenue.

You have our number of prescribers, prescriptions per prescriber. I think you can get pretty close to our net price per prescription with the data that we've given you.

Roger Song (Senior Equity Research Analyst)

Great. That's helpful. I think you provided the new script versus repeat script as the one-third, two-thirds, two-thirds, one-third. How should we think about over time this will change, particularly when you have the launch? Basically, you have the broader rollout for the prescriptions. Thank you.

John Butler (CEO)

Great question, Nick. Do you want to take that one?

Nicholas Grund (Chief Commercial Officer)

Yeah. Early in the launch, obviously, most of our prescriptions are new patients as those are coming on. And those patients over time will continue to get refill rates. I wish compliance in dialysis were a little bit better, but you'll have an average compliance rate through market research at about kind of 65% range. You can expect those refills will grow as our percentage of total prescriptions. Again, lumpiness will exist, right? That lumpiness as new providers come on and then, for example, an LDO in the second half, all those could be new prescribers for new patients. When we think about that, that lumpiness will play out in the second half as well. The important thing about the refill is to get the dose right, right?

When we think about dose titration, in our clinical trials, we saw that the starting dose was obviously 300 milligrams and that the average dose once folks were fully titrated was about 50% above that number. When you think about refills, it's really important to pull in that dose increases. And we're seeing that in those prescriptions that are refilled.

John Butler (CEO)

Yeah. That's a very, very important point. I mean, that is going to be a little bit of a moving target as patients come on. That ultimately, most prescriptions are going to be closer to, I think the average was 430 milligrams in Innovate. That is probably where we'll land is somewhere. I think in real life, it's usually a little bit lower than that. When you think about that from a revenue perspective, you do have to factor that in. We've talked about that $15,500 WAC. That's at 300 milligrams. Once you start adding that increase in dose, thinking about that ratio between new and existing, you're going to see that WAC price, that gross price increase to some extent.

I think as physicians become more comfortable with where patients are going to land and they understand the focus data for three times weekly dosing and the modified data, they may even be starting more patients at higher doses. We will keep updating you on that, but that will take some time to develop.

Roger Song (Senior Equity Research Analyst)

Wait, maybe just one last one, quick one. In terms of the NDD trial, given all the changes happening on the background at the FDA side, how confident you are, given the trial design you have been guiding, how confident you can start the trial second half with the design you proposed? Thank you.

John Butler (CEO)

Yeah. It's a great question. I mean, there are clearly things happening at the FDA. I mean, remember, we are regulated by CDER, not CBER. So while we've had a change in the division director for non-malignant hematology that happened a few months ago, we know the division director who's there now, the interim, we think she's great. We've interacted with her on a number of occasions and found her very pragmatic. We haven't seen any other changes at this point to our review team. So we don't have any reason to believe that we can't do that. I mean, we are doing a lot of work to initiate this trial. I'll call it at risk because we want to be ready to start dosing patients before the end of the year.

Again, a lot of the comments that we're expecting and discussion will be around the statistical analysis plan and how we're handling that versus some of the more operational aspects of the trial. We think we can do that with very little risk. We still feel we're on target. If that changes, obviously, as appropriate, we're going to update you. We are still working towards that end-of-year timeline.

Roger Song (Senior Equity Research Analyst)

Thanks for the comment. Thank you.

John Butler (CEO)

Thanks, Roger.

Operator (participant)

Once again, to ask a question, you may press star on your telephone keypad. Your next question is from the line of Alisson Bratzell from Piper Sandler. Your line is now open.

Alisson Bratzell (Vice President and, Senior Research Analyst)

Hey, good morning. Thanks for taking the question. It's a couple for me. First, just bigger picture, could you talk about what's driving demand so far for Vafseo, the clinical profile versus economic incentives created by TDAPA? And then second, just a question on Vafseo reimbursement trends. Any detail on what you're seeing in terms of coverage at Medicare Advantage plans? Are you seeing innovation payments or just what does that look like? Any color or detail there would be helpful. Thank you.

John Butler (CEO)

I'm going to let Nick answer most. From the demand perspective, I think just a broad statement is we're seeing most of the sales today at U.S. Renal. Whether it's at U.S. Renal or the other dialysis providers, it's fundamentally driven by a belief in the opportunities that Vafseo, a HIF product, can give to patients. The economic side is enabling, right? It allows the access. It's great when the business side of the dialysis provider is happy to see the product be used, but it's being driven in someone like Jeff Block, who's the principal investigator on the VOICE trial and a senior person at U.S. Renal on the medical side. I mean, he's talking to everyone, every physician, because he's a believer, right? That kind of advocacy, we're seeing that at other dialysis providers, the smaller providers as well.

I probably answered too much of it for Nick Damberger to add there. If they do not believe in the clinical advantages, the economic does not hold. It might help you for a couple of years, right? We are in this to make the standard of care, and they have to believe in the clinical benefit.

Nicholas Grund (Chief Commercial Officer)

Yeah. I can always talk more, John. Don't worry about that. Really, I went through kind of the anecdotal feedback we're hearing from physicians. At the end, to summarize that, they're finding value in the product, right? You can see that in a couple of different ways. One, if they didn't find value, patients might be one and done, right? They get a bad experience. They move them off of therapy. Wouldn't see a refill. Refills are tracking exactly as we thought they would. That's one indication of the clinical profile. Two, they're continuing to broaden into other patients. If they weren't seeing value in their initial patients they put on, they wouldn't have expanded their prescribing.

That initial value, a little still early in the launch, but it gives us that confidence that folks are seeing the clinical value and they'll broaden their use. Of course, TDAPA, nobody does anything if they lose money on it. There is an economic value there as well. That is underpinning it. Without the clinical foundation, the economics does not matter if the product does not work.

I mean, it may for a short period of time, but it's not sustainable. That's not what we're seeing here.

Exactly. The second part of your question was reimbursement. We've seen a number of Medicare Advantage plans. Frankly, there's been broad trial across a number of health plans. You see folks when they want to put a patient on, they'll do a trial balloon prescription to make sure it gets covered and reimbursed, and then they'll go broader. There are a number of Medicare Advantage plans that are seeing that broadening of prescribing. In other words, they're covering it. The dialysis organization has seen that they're covering and they're expanding. Right now, we're seeing roughly an 80/20 between fee for service and other plans. As that evolves over time, we expect it to expand, obviously. Also, the larger dialysis organizations have more negotiating leverage with the Medicare Advantage plans.

As they begin their pilot in the second half of the year and then they fully operationalize in the fourth quarter, that may shift favorably towards the end of the year.

To be clear, that 80/20 split is better than what we had planned or expected. We're encouraged by that. As Nick said, some of it is early trial balloon kind of prescriptions, but we haven't heard of pushback yet. That's encouraging. Ali?

Operator (participant)

We stand by for your next question.

John Butler (CEO)

Okay.

Operator (participant)

Your next question is from Les Sulweski from Truist Securities. Your line is open.

Les Sulweski (VP and Biotechnology Equity Research)

Good morning. Thank you for taking my questions. Congrats on the progress. Just first, on the inventory stocking trends, perhaps maybe just comment on that. I know you put out there's a potential week out there. As far as the LDOs come on, do you expect the bolus for the inventory stocking to increase when they first onboard? Maybe just provide an, I guess, a highlighted overview of the market landscape for the label expansion opportunities. Thank you.

John Butler (CEO)

Nick, do you want to handle the inventory?

Nicholas Grund (Chief Commercial Officer)

Yeah. When we think of inventory, we talked about kind of a week higher at the end of the quarter versus when we were talking to you guys back in February. Still, four weeks of inventory is within the normal range of two to four weeks. USRC continues to grow the patient population. Four weeks on a forward-looking where there's growth expected in that next quarter isn't unusual for the product. We felt it was important to kind of highlight it as we did, obviously, beat the original guidance that we proposed, but we wanted to give you some flavor there. Still, all within kind of normal ranges. When we think about as futures come on, what will happen, and let's just use the LDO that's going to start their large pilot, they'll stock for the pilot. That pilot isn't broad utilization.

As they see that demand and see how physicians want to utilize the product, that'll give them good insights to what that stock level needs to be when they broaden it out. I don't expect it to be giant stocking and then kind of waiting around to see if the demand comes. I think they'll put some stock in to make sure they have the appropriate level. They'll see some demand, and then they'll be able to gauge so they can kind of accurately project the range between two and four weeks of usage. That being said, the distribution network for these LDOs is efficient. We spent a lot of time working on the distribution network in quarter four to allow for prescriptions to get to the patient's home with some efficiency.

We've seen that play out throughout the late part of Q1, that these prescriptions should be able to reach the patient's homes quickly, and we can restock them very quickly. We do not anticipate, even if they carry minimal inventory or undercall the inventory, to have any issues at all.

John Butler (CEO)

Right. I mean, I think focusing on the prescriptions and the prescriber demand gives you that underlying sense of the demand for the product and the excitement about the product. Inventory is just going to follow demand in a really tight way. It's not like we're shipping thousands of bottles to retail pharmacies and you don't know what happens to them. We know exactly what's happening with all of these here. Thanks, Nick. Les, your other question was around label expansion and NDD. I appreciate the opportunity to reiterate the excitement about that market for us and our desire, and such as our desire to get to that market. I mean, again, I say it every time. I think every time I'm out in the field meeting physicians, universally, they will tell me that they want to use this product in their non-dialysis patient population.

The demand is there. That's an important and a wonderful place to start. The market is there as well. The patient population, if you just look at stage four and stage five, non-dialysis patients who are anemic, it's roughly the same size as the dialysis market. It's about 550,000 patients. These are all patients who have hemoglobins below 10 who are anemic or being treated with an ESA today, which is a small percentage. What's important for us too, from a business standpoint, is recall we have this TDAPA period where we have a higher price in the market. Even as that price declines, as our volume grows, it's still higher than the average ESA price for dialysis. We have said in the past, we do expect our average price post-TDAPA to mirror that of the ESA, which is about $2,500 per patient per year.

Remember, that's a billion-dollar market in dialysis. Still a very substantive market that we can be very successful in. You do not have that same kind of limitation in the non-dialysis market. It's a more traditional market, 50% commercial payers, 50% government, Part D, and Medicaid. Recall our average price, our WAC at $15,500 would be the starting price for non-dialysis as well. The average dose there is a little lower than dialysis, about 400 milligrams from our PROTECT study. That would be something around $20,000 on a WAC basis. You take a discount, a kind of normal gross-to-net discount, a discount for compliance, you're still north of $10,000 per patient per year, which is 4x the price that you'd see in dialysis.

That 500,000 patient population times 10,000 gives you the sense of how significant from a financial standpoint that non-dialysis market is. Again, we're the only oral product looking to bring a product into that space. It's a wonderful market opportunity for us.

Les Sulweski (VP and Biotechnology Equity Research)

Very helpful. Thank you.

John Butler (CEO)

Lesy, thanks for joining the call.

Operator (participant)

I'm showing no further questions at this time. I would now like to turn it back to Mr. John Butler for closing remarks.

Mercedes Carrasco (Senior Director of Investor Relations)

Thank you so much, Operator. Thank you everyone for your questions and your time this morning. Hopefully, we effectively conveyed our enthusiasm about the progress of the Vafseo launch. We are absolutely driving to make Vafseo standard of care to treat anemia due to CKD and to improve treatment alternatives for CKD patients. We look forward to updating you on our progress in August on our Q2 call. Hopefully, we'll see many of you during our investor meetings in the coming months. Thank you very much. Have a great day.

Operator (participant)

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Have a great day. Goodbye.