Kyntra Bio - Q2 2024

Executive Summary

• Q2 2024 delivered 14% year-over-year revenue growth to $50.6M, primarily on strong China roxadustat performance and an $18M deferred revenue release; net loss improved to $15.5M (from $87.7M YoY) and EPS to ($0.16) (from ($0.90)).
• China roxadustat net sales reached $92.3M (+21% YoY) on 33% volume growth; FibroGen raised FY24 China net product revenue guidance to $135–$150M (from $120–$135M) and China roxadustat net sales to $320–$350M (from $300–$340M).
• Pamrevlumab failed Phase 2/3 Precision Promise and Phase 3 LAPIS primary OS endpoints; management announced a ~75% U.S. workforce reduction and pivoted R&D focus to FG-3246/PET46 in mCRPC, with Phase 2 initiations and data milestones planned for 1H 2025.
• CFO guided Q3–Q4 total operating expenses to $45M–$55M per quarter (ex-restructuring), with cash, equivalents, and AR at $147.1M and runway projected into 2026; focus on repatriating China cash continues.

What Went Well and What Went Wrong

What Went Well

• China roxadustat execution: total net sales $92.3M (+21% YoY) on 33% volume growth; FibroGen’s US GAAP net product revenue was $49.6M (+108% YoY) and value share ~46% maintained.
• FY24 guidance raised on strong China momentum: net product revenue to $135–$150M and China roxadustat net sales to $320–$350M; CIA sNDA decision expected 2H 2024 (potential $10M milestone).
• Clear strategic refocus: prioritizing FG-3246 ADC and companion PET46 biomarker; CEO: “we continue to be very excited about the prospects of FG-3246 and PET46… roxadustat continues its strong momentum in China”.

What Went Wrong

• Pamrevlumab trials missed primary endpoints: Precision Promise (common HR median 1.170; Pr(HR<1)=0.13977) and LAPIS (OS 17.3 vs 17.9 months; HR 1.08) failed; immediate wind-down announced.
• Astellas territories weak: drug product revenue fell to $0.7M (vs $14.3M YoY); management expects lower future projected cash inflows from those territories.
• Restructuring impact: U.S. workforce reduced ~75% and immuno-oncology programs halted internally; OpEx reduction comes with near-term organizational disruption.

Transcript

Operator (participant)

...and welcome to the FibroGen Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. 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 (VP of Investor Relations)

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 about 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 investor 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 (CEO)

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 1 top-line results. 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 PanCAN's Precision Promise phase 2/3 adaptive platform trial, which compared treatment with pamrevlumab combined with gemcitabine plus nab-paclitaxel to 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 pancreatic cancer, we were hopeful that pamrevlumab would demonstrate a meaningful overall survival benefit, especially after we learned of the graduation from Stage One to Stage Two of the 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 U.S. 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 I 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 U.S. GAAP to be between $130 million and $150 million, up from $120 million-$135 million. Full-year roxadustat net sales in China of $320 million-$350 million, up from our previous guidance of $300 million-$340 million. Juan will cover our financials in more detail later in the call.

We are also expecting an approval decision from the China 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 U.S. 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 the difficult decision to stop internal development of the two immuno-oncology programs we licensed from 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 de-risk 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 (CMO)

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 1 in 8 lifetime risk of developing the disease. There are approximately 290,000 new diagnoses of prostate cancer each year in the U.S., with 65,000 diagnoses where the cancer has metastasized, became castration-resistant, and are drug treatable. The 5-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 ARSIs, 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%-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, YS5, 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 YS5 antibody coupled to the radionuclide zirconium-89, and in preclinical studies demonstrates specific targeting and 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 studied throughout the clinical development program. Now, let's go into the top-line results from the monotherapy phase 1 study in metastatic CRPC, slide 9. In the phase 1, 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 DLT. The endpoints were safety, tolerability, and antitumor activity, as measured by the decline of prostate-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 1 trial includes a total of 56 metastatic castration-resistant prostate cancer patients, who were 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 response-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 1 data in a 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 announce positive interim results from this dose escalation component of the study, which is a phase 1b/2 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 2 prior ARSIs, which included prior enzalutamide. The primary endpoint was determination of the maximum tolerated dose, or MTD, for FG-3246 in combination with enzalutamide. The MTD was established at 2.1 mg/kg adjusted body weight with primary G-CSF prophylaxis in combination with enzalutamide at the prescription dose of 160 mg 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 2 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 radiographic PFS is a critically 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 PSA 30 and PSA 50 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 a heavily pretreated, unselected population, and radiographic PFS of 10.2 months in combination with enzalutamide in an earlier treatment line, with pretreated ARSI patients is very compelling versus existing standards 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 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 a 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 II dose optimization study in mCRPC in the first quarter of 2025, and expect top-line results from the phase II 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 (CEO)

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 U.S. 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-month period, ending of 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 be a meaningful addition to the Roxadustat business in China. Given that there have been several generic applications filed and 2 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 U.S. 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 a generic enter the market. Despite the expiration of our composition of matter patents in June 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 EU5 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 its 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 and 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 (CFO)

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. 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. 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 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 U.S. 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 transfer price is the best reflection of FibroGen's portion of the cash received from roxadustat in China.

During the 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 for roxadustat sales to the JDE and $3.6 million of direct-to-distributor sales from FibroGen China, totaling $49.6 million on a U.S. GAAP basis. Our revenue growth highlights the continuous 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-$150 million on a U.S. GAAP basis, which assumes a forecast of roxadustat net sales in China to range from $320-$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-$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 for 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 thirtieth, 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 continuously communicated, we expect our cash, cash equivalents, and accounts receivable to fund our operating plans into 2026.

Thank you. Now I will turn the call back over to Thane.

Thane Wettig (CEO)

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. Our partner, Astellas, continues with the commercialization of roxadustat in Europe, Japan, and other markets. Additionally, given that we regained rights for roxadustat for US 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 will publish the totality of the phase 1 data in an upcoming manuscript.

We've 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 stream, 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 (participant)

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Andy Hsieh with William Blair. Please go ahead.

Andy Hsieh (Biotech Equity Research Analyst)

Hi, 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 U.S. entity, access the cash derived from roxadustat revenue? Thank you.

Thane Wettig (CEO)

Hey, Dalton, this is Thane. Thanks for your questions. I'll touch on the FG-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 FG-3246, you know, 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 two trial, and we would expect then to be able to plan on the initiation of the phase two program after that point in time. So yeah, we are prosecuting it as quickly as we can.

Juan Graham (CFO)

Yeah, Dalton, with regards to your second question, this is Juan. You know, 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 that money back to the US.

Andy Hsieh (Biotech Equity Research Analyst)

Great. Thank you.

Operator (participant)

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

Jason Gerberry (Equity Research Analyst)

Hi. Yes, this is Dina Ramadane on for Jason Gerberry. I just had 2 questions from us. The first is just, I guess, on sort of an expected timeline of how soon you could look to partner your 2 preclinical candidates. You know, 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 I have one follow-up.

Thane Wettig (CEO)

Yeah. 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 you know, what the path forward could mean and the potential value to them. For CCR8, you know, we had previously stated that we expected to file an IND sometime in the 2025 timeframe.

And so, you know, we've done, as I've said in the opening comments, you know, 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, you know, that as best we can compare them, you know, in 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, you know, the, there, 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 spinoff.

And so we think we're in a really good position from a timing perspective with our Gal-9 antibody. And then with the CCR8 category, while we aren't in as favorable of 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, you know, we feel good about the ability to partner both of these assets, and we're gonna start those activities immediately.

Jason Gerberry (Equity Research Analyst)

Got it. Thank you. And then, one more follow-up from me here. Just what is, I guess, 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 number of patients and duration of follow-up that we could expect to see. And then wondering if you could please, maybe set, you know, 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. Thank you.

Thane Wettig (CEO)

Yeah, that's, 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, you wanna take that one?

Deyaa Adib (CMO)

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 2 prior ARSI. This population is... They have also failed abiraterone acetate. They don't constitute this area of medical need. 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 2 prior ARSI, is around 6 months rPFS.

So as you can see, the combo has already exceeded the current bar, which is only 6 months. In terms of moving up the treatment line, once they ... 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 18-20 months. This is the current bar with abiraterone acetate and enzalutamide in the first, strictly first line setting. So this is where 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.

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 (CEO)

Thanks, Deyaa. That was, that was excellent. But, 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. You know, small numbers, but it will be an important additional data point for us.

Jason Gerberry (Equity Research Analyst)

Appreciate all the color. Thank you so much.

Operator (participant)

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

Paul Choi (Biotechnology Analyst)

Hi, good afternoon, and thank you for taking our questions. 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 may be 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 off 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 (CEO)

Yeah. Thanks, Paul. It's Thane. I'll go ahead and start, and then I'm gonna 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 CKD indication, and that indication by itself. There's no, you know, 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.

You know, 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, there's not a 12% price headwind. There was a 7% price headwind. And then, you know, 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, you know, intimate knowledge of the environment there.

Chris Chung (Senior VP of China Operations)

... Yeah, thank you, Thane. So, Paul, we have not seen the launch of either 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 is, are no plans to change pricing in response to generic entry, until we are subject to VBP.

Paul Choi (Biotechnology Analyst)

Okay, great. And if I could squeeze in one pipeline question, please, just on FG-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 a PET positive population?

Thane Wettig (CEO)

Yeah, so I'll start off, and then, Deyaa, I'm gonna turn it over to you.

Deyaa Adib (CMO)

Sure.

Thane Wettig (CEO)

And so really what we're gonna 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 a, a 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 (CMO)

Yeah, Paul, so thank you for the question. I completely, you know, 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 in 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 preselecting 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 a 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 preselection.

Paul Choi (Biotechnology Analyst)

Okay, got it. Thank you very much.

Thane Wettig (CEO)

And guys, we still have a few more minutes, so Dalton, Dina, Paul, if you have any additional questions?

Operator (participant)

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 (CEO)

Now, thank you, and we really appreciate the participation in today's call and your interest in FibroGen. Enjoy the rest of your day. Thanks, guys.

Deyaa Adib (CMO)

Thank you.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.