FibroGen Inc (FGEN) Q3 2022 Earnings Call Transcript

FibroGen Inc (NASDAQ:FGEN) Q3 2022 Earnings Call dated Nov. 07, 2022.

Corporate Participants:

Michael Tung — Investor Relations

Enrique Conterno — Chief Executive Officer

Juan Graham — Chief Financial Officer

Mark Eisner — Executive Vice President, Chief Medical Officer

Thane Wettig — Executive Vice President, Chief Commercial Officer

Christine L. Chung — Senior Vice President, China Operations

Analysts:

Jason M. Gerberry — Bank of America — Analyst

Michael Yee — Jefferies — Analyst

Andy Hsieh — William Blair — Analyst

Paul Choi — Goldman Sachs — Analyst

Yaron Werber — Cowen — Analyst

Presentation:

Operator

Good day and thank you, for standing-by welcome to FibroGen Third Quarter 2022 Earnings call. At this time, all participants are in a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to today’s speaker, Michael Tung, Vice-President of Corporate Strategy and Investor Relations.

The floor is yours.

Michael Tung — Investor Relations

Thank you Gerald and good afternoon everyone. I’m Michael Tung, Vice-President of Corporate Strategy and Investor Relations at FibroGen. Joining me on today’s call are Enrique Conterno, our Chief Executive Officer; Dr. Mark Eisner, our Chief Medical Officer; Juan Graham, our Chief Financial Officer; Dr. John Hunter our Chief Scientific Officer; Thane Wettig our Chief Commercial Officer and Chris Chung, our Senior Vice-President of China Operations.

The format for today’s call includes prepared remarks from Enrique and Juan after which we will open the call for your Q&A. 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.

These 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.

And with that, I would like to turn the call over to Enrique Conterno our CEO, Enrique?

Enrique Conterno — Chief Executive Officer

Thank you Mike and good afternoon everyone and welcome to our third-quarter 2022 earnings call. On today’s call I will provide a high-level summary of the most important accomplishments and developments in the third quarter of 2022. Juan Graham our, CFO, will then review the financials after which we will open the call for your questions.

Starting with Slide 3 today, we announced a royalty monetization transaction with NovaQuest Capital Management security in $50 million of additional non-dilutive capital, strengthening our balance sheet. We will use additional proceeds to continue to support our strategic priorities advancing our late-stage development programs where we anticipate top-line data from seven pivotal Phase-III studies beginning in the first-half of 2023 through mid-2024, five Pamrevlumab and two from roxadustat, as well as progressing our early-stage pipeline.

You can read more about this transaction in our press release published earlier today. Moving to slide 4, FibroGen’s position to create significant value for patients and shareholders by executing on our three areas of focus number-one delivering pivotal Phase 3 Pamrevlumab data in three indications with significant unmet medical need idiopathic pulmonary fibrosis or IPF, Duchenne muscular dystrophy or DMD and locally advanced unresectable pancreatic cancer or LAPC. Number two, ensuring the commercial success of roxadustat in patients with chronic kidney disease outside the US as well as delivering Phase-III data in myelodysplastic syndromes.

MDS and chemotherapy induced anemia or CIA. Number three, increasing our research productivity to advance novel programs that leverage internal expertise and access external innovation for additional pipeline opportunities. Let’s move to our clinical trials on Slide 5. Throughout 2022 we have made significant progress in enrolling our Phase three studies, it’s very exciting to be anticipating data readouts from seven pivotal Phase 3 trials starting in the first-half of 2023 through mid-2024; let’s begin with Pamrevlumab.

Data from LELANTOS one our Phase-III trial of pamrevlumab in non-ambulatory patients with DMD is expected in the first-half of 2023. The Zephyrus-1 Phase-III trial of Pamrevlumab in-patients with IPF is expected to readout in mid-2023. Data from our LELANTOS-2 trial of pamrevlumab in ambulatory patients is expected in the second-half of 2023. Our LAPIS Phase 3 study of relevant being locally advanced pancreatic cancer patients is expected to readout in the first-half of 2024. And finally, we are pleased to announce today that our Zephyrus Phase-III trial of pamrevlumab in patients with is IPF is expected to report out mid-2024.

Moving to the roxadustat program, we anticipate readouts from the Matterhorn Phase-III trial of roxadustat in patients with anemia of myelodysplastic syndromes in the first half of 2023 and data from our China Phase 3 study of roxadustat in patients with chemotherapy-induced anemia expected in mid-2023. 2023 will be a transformational year for FibroGen and look we look-forward to sharing the results of these studies.

I would like to extend my gratitude to the patients, caregivers and investigators as well as my FibroGen colleagues for their commitment through these studies. I’d now like to spend a few minutes highlighting our perspective on the significant potential commercial opportunity we see with Pamrevlumab our wholly-owned monoclonal antibody program in each of the three disease areas on Slide 6 beginning with IPF.

With a diagnosed prevalence of approximately 330,000 patients across the US, EU, China and Japan IPF represents a significant opportunity, we did two approved IPF therapies generating almost $4 billion in net revenue in 2021. Important to note, there remains significant unmet need with these two approved therapies as characterized by continued disease progression and challenging tolerability. There is a sentiment in the IPF community of limitations with the current therapies and a desire for additional therapeutic options. We believe umbrella has the potential to help sizable number of patients with IPF via very relevant medicines for patients.

In the middle column, you can see that DMD opportunity. Given the devastating nature of DMD and the relentless progression of the disease we’re hopeful the LELANTOS Phase 3 program can lead to an approved therapy that is desperately needed by the DMD community. While the current approved Exon-skipping therapies produce an increase in dystrophin levels, they are targeted at the small proportion of DMD patients and have yet to demonstrate a meaningful clinical improvement in symptoms or disease progression. There is a clear need for therapies that [Indecipherable] disease progression by targeting the downstream pathological changes to improve muscle function and prolonged ambulation.

We believe the antifibrotic mechanism of Pamrevlumab may be a solution that can help these patients. And finally in the third column we wrap-up with a snapshot of the locally advanced pancreatic cancer opportunity. Pancreatic cancer represents one of the largest unmet needs in oncology given the diagnosed prevalence of over 90,000 patients across the major regions combined with the low five year disease-free survival rate of around 10%.

There have been limited treatment advances in the non-metastatic setting over the last two decades with immuno-oncology therapies failing to demonstrate survival benefits over the current standard-of-care. There is also a limited late-stage development activity in non-metastatic pancreatic cancer which creates a meaningful comp commercial opportunity for Pamrevlumab in LAPC if we can demonstrate a significant improvement in overall survival. In addition, the pancreatic cancer action networks Precision Promise adaptive trial platform evaluating pamrevlumab in combination with standard-of-care for patients with metastatic pancreatic cancer continues to progress.

Now, let’s move to roxadustat on Slide 7. We continue the ongoing roxadustat clinical trials for the treatment of anemia in myelodysplastic syndromes or MDS in the US and Europe. And for the treatment of patients with chemotherapy-induced anemia or CIA in China. Roxadustat is approved in China, Europe, Japan and numerous other countries for the treatment of anemia in chronic kidney disease patients. European commercial activity with roxadustat is accelerating as it was recently launched in the, United Kingdom, Germany, The Netherlands and the Nordic countries with further launches expected in the major EU markets over the coming months.

We believe the anemia of CKD opportunity in Europe is significant and while our initial uptake has been slower-than-expected where Evrenzo has launched the early feedback from healthcare providers prescribing Evrenzo has been quite positive and moving to China, roxadustat continues its strong performance and as you can see on, slide eight. We are reporting third-quarter total roxadustat net sales in China $59 million by FibroGen and the joint distribution entity compared to $57.8 million in the third quarter of 2021.

This represents an increase of 2% in US dollars despite the price reduction to the NRDL renegotiation and the impact of currency. This growth was driven by an increase in volume of over 80%. We continue to expect roxadustat net sales growth for the full-year 2022 in China driven by significant growth in volume. FibroGen’s portion of roxadustat net product revenue in China was $17.4 million for the third quarter on a US GAAP basis, Juan will elaborate further in the finance update.

Turning now to the updated external market data on Slide 9 roxadustat continues to be the number-one branded treatment for anemia CKD as measured by value share in the category which includes all ESA products on roxadustat. We expect this category leadership to continue as roxadustat volume continues to grow at a fast pace. Next, Slide 10 provides a snapshot of roxadustat unit growth as indexed to December 2020 on the chart on the left as well as year-over-year growth in the table on the right.

Of note is a significant unit growth of roxadustat where the leading ESA brand is slightly up reflecting the anemia CKD market expansion that has been driven by roxadustat since its original NRDL listing in 2020.

I will now turn the call over to our CFO, Juan Graham for the financial update. Juan?

Juan Graham — Chief Financial Officer

Thank you Enrique. Before jumping into the financial remarks I would like to begin by thanking our colleagues in the United States and China for their leadership focus in executing on our strategic priorities. As we have communicated, we’re fully enrolled in five of our seven Phase-III Pamrevlumab and roxadustat trials with pivotal readouts starting in the first half of 2023. Today, we have also announced a royalty monetization transaction with NovaQuest Capital Management which will further strengthen our balance sheet to continue supporting our strategic priorities.

Now, getting into our financial results, total revenue for the quarter was $15.7 million compared to $156 million for the same-period in 2021. It is important to note, the main drivers of change versus the third quarter of 2021 which are one a $120 million milestone payment in the last year period from our partner, Astellas, related to the European Commission approval of Evrenzo for the treatment of adult patients with symptomatic anemia associated with CKD and two a decrease of $24.1 million in co-development revenue from our partners due to substantial completion of the roxadustat development.

Breakdown of revenue sources is as follows. We recorded $17.4 million net product revenue for roxadustat sales in China compared to $13.4 million in the third-quarter of 2021 which represents a 29% increase quarter-over quarter. During the quarter, we also recorded development revenue of $2 million associated with codevelopment efforts for roxadustat with our partners as compared to $26.1 million during the third-quarter of 2021. Given the stage of roxadustat development and as anticipated and previously communicated, going-forward we expect codevelopment revenue to remain in range to this quarter’s results.

Finally, we recorded a reduction of $4.1 million in drug product revenue for roxadustat bulk drugs or active pharmaceutical ingredients sold to Astellas. This reduction was due to the change in our estimates related to the shipments as per US GAAP, primarily driven by the Japanese yen currency depreciation versus the US dollar. Now, shifting our focus into the operating results for our roxadustat business in China total roxadustat net sales from the joint distribution entity jointly owned by AstraZeneca and FibroGen or JDE was $59 million this quarter compared to $57.8 million in the third quarter of 2021.

This represents an increase of 2% despite the impact of the NRDL price reduction and currency headwinds. This sales performance is the result of a significant volume increase of over 80% versus third quarter of 2021 as we have previously communicated the growth experienced by our China operations continues to be strong and in-line with our expectations of year-over-year growth in sales. Moving from roxadustat net sales in China FibroGen’s net transfer price from sales to the JDE was $19.5 million for the third-quarter consistent with the 30% to 45% range of the JDE’s roxadustat net sales which we have continuously guided. During this quarter, we deferred $4.6 million in revenue due to the change in our future estimates as per US GAAP, primarily driven by unfavorable renminbi currency impact amongst other estimates.

As we have communicated in the past, the deferred revenue balance in FibroGen China fluctuates based on management estimates of future revenue. As a result, FibroGen recorded $14.9 million in net revenue for the quarter from roxadustat sales to the JDE and $2.4 million of direct to distributor sales from FibroGen China. Now making our way down the P&L operating costs and expenses were $109.4 million compared to $105 million for the third quarter in 2021. This increase in operating costs is driven by higher drug supply costs associated with our pamrevlumab programs offset by lower clinical trial expenses and overall cost management efforts and our infrastructure despite inflationary pressures.

Diving in deeper into our expenses, R&D continues to be our focus to support future growth. With roughly $75.2 million or 69% of our operating expense capital dedicated to research and development. Of the $75.2 million, $53.6 million was dedicated to Pamrevlumab development and CMC activities. $12.5 million funnel to support our early-stage pipeline and the remaining $9.1 million directed towards roxadustat development. During the third-quarter of 2022, net loss was $91.7 million or $0.98 net loss per basic and diluted share as compared to our to net income of $49.8 million or $0.54 per basic and diluted share for the third quarter last year.

On slide 11 of our presentation, we make reference that at September 30, we reported $441.6 million in cash, cash equivalents, investments and accounts receivable. Considering today’s announcement on the royalty monetization transaction with NovaQuest Capital Management, we estimate our 2022 ending cash balance of, cash, cash equivalents, investments and accounts receivable to be in the range of $380 million to $410 million. The royalty monetization transaction along with our focused financial discipline will provide additional strength to our balance sheet further enhancing our cash position to support our organization.

Finally, as we have previously stated we are privileged to be able to consider a variety of options to continue to strengthen our balance sheet. Thank you and now I would like to turn the call back over to Enrique.

Enrique Conterno — Chief Executive Officer

Very good, thank you Juan and in closing I would like to reiterate our third-quarter developments — our financing transaction, our royalty monetization transaction which gives us $50 million of non-dilutive capital further strengthening our balance sheet. Our commitment to advancing pamrevlumab as a potential first-in class medicine in Phase-III development in three indications with significant unmet medical need. We expect topline data in 2023 from three Pamrevlumab pivotal Phase-III studies, LELANTOS-1 in non-ambulatory patients with DMD. Zephyrus 1 in IPF and LELANTOS-2 in ambulatory DMD.

Roxadustat continues to perform very well in China, our partner Astellas is moving forward with the commercialization of roxadustat in Europe with further launches and reversal decisions expected in the major EU markets over the coming months. We anticipate top-line data in 2023 from two roxadustat pivotal Phase III studies, one global MDS trial and one China trial in CIA which are expected to readout in the first-half of 2023 and mid-2023 respectively.

We continue to have a strong financial position with $441.6 million in cash as of December 30, 2022 and expect to end the year with $380 million to $410 million in cash. We continue to have multiple options to consider to further strengthen our balance sheet to ensure our long-term success and now I would like to turn the call-back to the operator for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Jason Gerberry of Bank of America. Your line is now open.

Jason M. Gerberry — Bank of America — Analyst

Hi guys thanks for taking my questions. Couple from me, just on the IPF opportunity, can you speak to what underpins your confidence that you can enroll subjects of similar severity to the Phase-IIb PRAISE trial, and specifically when PRAISE was conducted I think patients or I’m sorry the market which is just kind of a thing, the rollout of new standard-of-care IPF medicines, so just wanted to get your thoughts on that and then secondarily if successful in the Zephyrus programs wanted to get your thoughts on running an [Indecipherable] trial given that BI is the market-leader and that they are running an adjunctive trial and so how important do you think that, that has to do or do you think that pamrev as a monotherapy — highly competitive with the program that you’re running? Thanks.

Enrique Conterno — Chief Executive Officer

Hello, thank you Jason for your question. I’m going to pass your questions here to Dr. Eisner.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yes, thanks so your first question about our confidence that we can enroll a patient population of IPF patients in the Zephyrus program of sort of range of severity similar to PRAISE, yes we’re highly confident. I mean we are enrolling a broad range of patients including more severe and we expect to have a very generalizable population of patients in the Zephyrus program and then your second question around the ADJUNCT [Phonetic] or combination trial, I’m going to start and then I’ll turn to my colleague Thane Wettig for any commercial kind of perspective that he might have, but we are certainly looking at lifecycle options assuming our Zephyrus trials are positive.

We will be looking at several options that could be one of them. I think we believe our data will be very informative, because they actually monotherapy design of the Zephyrus program will give us a very clean efficacy and safety signal compared to placebo that will really be very highly informative to clinicians. So, let me see what Thane thinks about us some of the more market-facing potential of your question.

Thane Wettig — Executive Vice President, Chief Commercial Officer

Yeah thanks Mark, hi, Jason. As we continue to speak with pulmonologists about Pamrevlumab and we highlight the PRAISE data to get the reaction and then speak about our Phase-III program with potential label scenarios, one of the key questions we ask them is how they perceive Pamrevlumab either as monotherapy or in combination even if we don’t have combination data to be able to share with them and what we consistently hear back is that when they see the Pamrevlumab profile they consider the options that they have right now in terms of standard-of-care.

And if they have somebody who is on Ofev or Esbriet that they believe needs additional efficacy without then the trade-off of further issues from a tolerability perspective they replay back to us just a natural inclination to add Pamrevlumab on top of current standard-of-care. And then when we further press just say, we don’t have any data. What they didn’t play back for us is, hey as long as I know that you have a strong efficacy profile and that I’m confident about the tolerability your product as I understand the mechanism of an anti-CTGF, they did understand how that product can go along well either Ofev or Esbriet and they just have a natural inclination to want to use them together.

And so unless we have payer restrictions, let’s say you cannot use Pamrevlumab without Ofev or Esbriet then we were pretty confident that physicians will go there and it’s not unlike other disease areas where if you think about hypertension or Type 2 diabetes for many other disease areas, these add-on therapies it’s a very common thing for physicians to do just — it’s a natural next step for them and we’ve heard that same thing over and over again as we research this with pulmonologists in the US.

Enrique Conterno — Chief Executive Officer

Jason, just let me add one more key points. Clearly with positive Zephyrus 1 data I think there will be a number of opportunities that will be in front of us. We have outlined some of those opportunistic here internally. What you describe is one of them, quite frankly of course we have to look at the data, but I would not consider that to be the top opportunity for us. So, a number of additional projects, including some what I’m going to call adjacent indications to IPF where we believe the product would work.

So, now we have to just wait for the data, we are of course highly enthusiastic and given the conviction that we have based on our results and we look-forward to having an incredible 2023.

Jason M. Gerberry — Bank of America — Analyst

Got it. Thanks guys.

Operator

Thank you. Our next question comes from the line of Annabel Samimy from Stifel. The line is now open.

Unidentified Participant — — Analyst

Hi this is Jack [Phonetic] calling in for Annabel, thanks for taking our questions. So, think about Pam and IPF right now, my understanding is that the trial is enrolling patients who haven’t been eligible or who have not tolerated current treatments. If you’re successful in IPF and there is some indication of fibrosis reduction, how do you expect the treatment paradigm to shift? Is just the study designed to potentially offer a first-line position before Ofev and Esbriet or after, and also do you have a sense of the percentage of the population enrolled who are naive to current therapies versus ineligible?

Enrique Conterno — Chief Executive Officer

Very good, I’m going to have once again Dr. Mark Eisner respond to your question, Jack.

Mark Eisner — Executive Vice President, Chief Medical Officer

Thanks for your question, so just to clarify on the Zephyrus program, we are enrolling both naive patients and patients who have previously been on standard-of-care and have discontinued standard-of-care prior to entry into the trial, so the good thing about that is we’re going to have a very broad patient population that includes both naive and experienced patients and we would expect very broad label for the treatment of IPF reflecting the patient population that we enrolled, so we expect also from a clinician point-of-view that they will have all the information they need to make good decisions for their patients based on the benefit-risk profile of Pamrevlumab for IPF.

Enrique Conterno — Chief Executive Officer

I think he also asked about the percentage.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yes. We haven’t really reported those percentages publicly, I mean they’re ongoing trials so we don’t have the data for you right at the moment.

Unidentified Participant — — Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Michael Yee of Jefferies, your line is now open.

Michael Yee — Jefferies — Analyst

Hey guys thanks for the questions, we had two questions. One, following-up on a lot of the IPF questions we wanted to understand or remind us what you’ve designed the Phase-III powering for in terms of assumptions on drug versus placebo and how that’s related to what we’re seeing in Phase II. And the reason I asked that is in-part because of the idea that you have patients that have either PVC failed or intolerable to the orals whereas in the Phase-II they had never seen it at all, so the idea here is that they’re sicker patients as you referred to.

So just wanted to triangulate the different populations sort of senior and what you powered at four based on Phase II? Thank you.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yeah, great question. So in terms of powerI mean we have powered the studies very robustly to be able to detect treatment effect of Pamrevlumab versus placebo. So, we think statistical power should be more than adequate for each trial individually ZEPHYRUS-1, ZEPHYRUS-2, and then the other part of your question it’s pretty interesting too is around how would you expect naive versus an experienced patient to perform in a clinical trial and it’s pretty interesting because I think what we’re learning from other studies in the placebo group in particular is that patients who are treatment experienced to go into trials continue to progress over the next year much more than you had anticipated based on the labels for Esbriet or Ofev.

So, they do progress and they actually are good patients to enroll in a trial just as naive patients are and the best theory about why that would be is that if you’re a patient on Esbriet or Ofev and you’re doing well, even if you discontinued the therapy and you’re doing well, you’re not really going to enroll in the trial. Patients who enroll in trials are patients who are continuing to progress, typically and are symptomatic from the disease, so they actually perform — they actually progress on trial, despite the fact they’ve been on standard-of-care in the past.

So I think that whether they’re naive or experienced, we expect those patients to progress on the trial and the placebo group thereby providing us the opportunity with Pamrevlumab to show a treatment benefit.

Michael Yee — Jefferies — Analyst

Thank you for that, yeah it could be interpreted in both — the faster placebo which could be a good thing or just some more difficult population in general, but the other — second question to follow-up has to relate to combination, so you made some nice comments about combination therapy which I think of course is attractive particularly if it works and I do recall that previously there was a combination study — a fairly good sized.

I think the safety was positive, but there never was any information ever which presented. Can you just sort of remind us your takeaways from that combination study and what you learned from that? Thank you.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yeah. I think you actually summarized it quite well. I mean, it was a very-very small number of patients really not able to draw any efficacy conclusions, but they’re certainly — the safety of combining Pamrevlumab and the tolerability with Esbriet to Ofev was more than acceptable.

Michael Yee — Jefferies — Analyst

Okay, thank you guys.

Mark Eisner — Executive Vice President, Chief Medical Officer

Great.

Operator

Thank you. Our next question comes from Danielle Brill from Raymond James, your line is now open.

Unidentified Participant — — Analyst

Hey guys this is Alex [Phonetic] on for Danielle thanks, for taking my question. Just another one on IPF considering the theme, just kind of curious to hear your thoughts on changing the Phase III enrollment criteria to include forced vital capacity down to 45% were you seeing screening failures and needed to expand? And just kind of curious if there was any post-hoc data cuts at the Phase-II — the efficacy as a function of baseline forced vital capacity. Just kind of curious to evident, the Pamrevlumab was still working in these low [Indecipherble] capacity that makes you confident that lowering it is not going to harm the trial? Thanks.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yeah, good question, so second question first. No, there really wasn’t — there was no post-hoc analysis looking at FVC as a predictor of efficacy in PRAISE. But what I can tell you is that question has been thoroughly looked at in both Esbriet and Ofev pivotal trials and interestingly lower or higher FVC greater or less severity does not predict Ofev or Esbriet efficacy in pivotal trials of those agents. So, we would expect similar in our trial.

Yes, you’re correct, we did lower the FVC from 55% in PRAISE to 45% in the Zephyrus program that’s for a couple of reasons; one, key one, you mentioned it’s really important to reducing screen failures in enrolling the trial, second point is that really harmonizes it with virtually all the pivotal Phase III programs in IPF that have been conducted in the past and are being conducted now and based on my other comments, we don’t expect that to have any adverse effect on the trial.

If anything, we think there are some advantages including the patients on a slightly more severe end of the spectrum.

Unidentified Participant — — Analyst

Great, thanks so much.

Operator

Thank you. Our next question comes from the line of Andy Hsieh from William Blair.

Andy Hsieh — William Blair — Analyst

Congratulations on getting that deal done. So regarding deal, just quick question on its firm. So first is, do we know roughly estimate how much are you getting from Astellas royalty wise per quarter? And also related to that, will future milestones count within the framework of this deal? Also — we also have a question on IPF, so obviously there is kind of the timing difference between the readout of the two Phase-III trials are about a year apart. [Technical Issues] whether you guys have strategies in terms of either — probably shrinking the timing is not possible, but maybe engaging in dialog earlier just to kind of mitigate that difference in time.

Third one is kind of a quick one, I noticed in the 10-Q you mentioned about this IP in China about the crystalline of roxadustat I’m just curious if you can comment a little bit further on that in the context of market exclusivity? Thanks so much.

Enrique Conterno — Chief Executive Officer

Sure, I’m going to have Juan comment on and respond to your questions on the deal, Mark on IPF and the timing between the trials and strategies that we could do or actions and then Chris, I’m going to give it to Chris to discuss our exclusivity position and in particular the IP question and the crystalline forms.

Juan Graham — Chief Financial Officer

Hey Andy, how are you this is Juan. With regards to your question I think with regards to the royalty I think the way to think about it more generally would be that we are under the context of the Astellas deal. We’re basically entitled to 20% royalty, clearly as you have probably been following we’re in launch mode in Europe so it’s difficult to talk about numbers at this point in time, but clearly we expect Europe to be fully reimbursed in the next couple of months — or in the next few months in the key territories there which will enable obviously growth in revenue and therefore growth in our royalty.

So that’s I think the way to think about that piece and I think I don’t know if I mentioned but we’re entitled to around 20% royalty from that transaction. In terms of near-term milestones I think there are just sales-based milestones out in the future. And yes there would be a portion that would be attributable here as well in this transaction. So, I think those are the two components.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yeah, so your question about IPF and the difference between the readouts Zephyrus 1 and Zephyrus 2, so we’ve previously communicated and continue to assert that — the base case is we’ll need both Zephyrus 1 Zephyrus 2, for filing in the US. That said with the positive Zephyrus 1 trial we would go to FDA if the data are strong and compelling and discuss with them the potential for filing one pivotal trial. I think there is precedence for that in a rare severe disease like IPF. So, base-case two trials but we do everything possible to discuss with FDA whether one pivotal trial could suffice for approval.

Christine L. Chung — Senior Vice President, China Operations

And with respect to market exclusivity we have multiple avenues to protect our exclusivity, in China patents are of course one form of exclusivity where we have a robust portfolio, including composition matter and yet crystalline patents and other method patents, so this is just one form of exclusivity. We also have regulatory and administrative exclusivity by virtue of being a domestic Class 1 innovative drug. With respect to the specific question about the crystal form patents, yes this is the first round of invalidation hearings.

We had three crystalline patents that — available information were invalidated which is consistent with our expectations as context — China during the first round the validation rate is 90%. So, we now go on to appeal, there are two rounds of appeals through the courts, we expect that to take two to three years to get resolved so we’re still very early on in that process.

Andy Hsieh — William Blair — Analyst

Hey Chris, just a follow-up, so during the process of appeal are all the patents still enforceable just like here in the US?

Christine L. Chung — Senior Vice President, China Operations

They are. They remain in effect until the appeal process is concluded.

Andy Hsieh — William Blair — Analyst

Got it. Great, thank you so much.

Operator

Thank you, our next question comes from Paul Choi from Goldman Sachs, your line is now open.

Paul Choi — Goldman Sachs — Analyst

Hi, thank you and good afternoon everyone, thank you for taking our questions. I wanted to switch gears, maybe for a moment to DMD and I know you’ve historically been somewhat cautious with regard to the prospects for the non-ambulatory trial, but in the case that it hits on the upper limb assessment, can you maybe just remind us what the regulatory feedback here has been on the approvability of that particular endpoint? I think it’s a little less well-understood relative to the to the ambulatory population and other drugs that have filed, for instance on endpoints?

Mark Eisner — Executive Vice President, Chief Medical Officer

Good question Paul, it’s, Mark. We believe that positive clinical data for either LELANTOS 1, the non-ambulatory population or for LELANTOS 2 the ambulatory population could support a regulatory filing and this a disease with a very-high unmet medical need. There are really no therapies approved based on clinical endpoints. The currently available therapies are approved on Dystrophin biomarker. So we believe that either trial could support filing by itself so that of course would be a discussion, we would have to have with the FDA based on the data but that’s our current assessment.

Enrique Conterno — Chief Executive Officer

Okay any questions — I think he was asking also about regulatory interactions related to the endpoints.

Mark Eisner — Executive Vice President, Chief Medical Officer

Yeah right, so FDA has supported both the performance of the upper limb for the non-ambulatory population and the North Star for the ambulatory population. You’re probably aware there’s a draft guidance — actually guidance on DMD endpoints where they’re pretty specific but these are both endpoints that have — that are supported in the guidance that have been used in other trials so we’re very confident about the endpoints.

Paul Choi — Goldman Sachs — Analyst

Thanks for that Mark. Then, I also have a financial question for Juan here, appreciate the cash burn guidance for the remainder of the year but as you look to next year you will obviously have several late-stage trials rolling-off and I just wanted to maybe ask what’s the maybe initial thinking on the rate of burn or just how you think about paring down opex as some of these trials come to end stage or completion?

Juan Graham — Chief Financial Officer

Hey. Thanks Paul. I think, as you called out probably a little bit — as we’re going through clearly our hurdle of our financial these planning and so on we’re looking at 2023 and we will come back in subsequent earnings call to provide more visibility but clearly there’s a lot of activity happening in 2023 with clinical trials, as you pointed out rolling-off but potentially as well we would potentially start ramping-up for launch depending on the readouts. So, I think all of those components is what we’re currently discussing and we will provide further perspective over the coming months-to what 2023 looks like.

Enrique Conterno — Chief Executive Officer

Yes. As you can expect Paul they are important dynamics here, on one-side you correctly stated we will have lower trial expenses as some of those trials. Include. But in some assuming positive trial, we will also have additional expenses related to bringing those products to market. So we need to think about how to — as we prepare for next year, we need to be thinking about how we’re going to provide that type of cash guidance given some of those dynamics but it’s an exciting time for FibroGen, exciting time for patients to have so many readouts of pivotal data coming in 2023.

Paul Choi — Goldman Sachs — Analyst

Okay great, thank you for taking our questions.

Operator

Thank you, our next question comes from Yaron Werber from Cowen.

Yaron Werber — Cowen — Analyst

First, can you just remind us what kind of efficacy you saw in that Phase II WHITNEY study in CIA and if we might see some more of that data when you report the China study next year? And then just quickly on the European launch roxadustat, when you say it’s been a little bit slower-than-expected, is that mostly a reflection of just kind of negotiations with individual country reimbursement processes or is there really something about the actual clinical or commercial opportunity in Europe that’s also contributing to some of these launch dynamic?

Enrique Conterno — Chief Executive Officer

Thank you for the question, I’ll have Mark answer the chemotherapy-induced anemia questions and Thane answer the European performance questions.

Mark Eisner — Executive Vice President, Chief Medical Officer

Sure, so the Phase-II WHITNEY study was open-label study that looked at two doses of roxadustat and what we showed there is we can in fact increase the hemoglobin and improve the anemia and we selected the 2.5 mg/kg dose to take forward into the China Phase III study which was head-to-head study versus ESA to non-inferiority design and that will read-out mid next year. That study is exclusively aimed at China and the China population and the China market.

Thane Wettig — Executive Vice President, Chief Commercial Officer

And then regarding the EU performance to date it is still early in the game reimbursement in Germany and through NICE in the UK and then awaiting reimbursement decision in France, Italy and Spain as Juan said in his previous remarks and as Astellas has guided, they expect reimbursement decisions in those other three markets by the end of their fiscal year which would be between now and the end of March. As we have stated in terms of the performance being slower-than-expected, that primarily relates to Germany because it’s still early in the UK, NICE approval was granted in July hospitals have 90 days to then adopt that NICE guidance and so it’s still really early in the UK.

And I think what we’re looking at and what we’re experiencing is the reality of a standard-of-care that’s been in-place for 30 years and the fact that physicians are so used to using ESAs that it’s just been a bit more difficult than anticipated breaking into that standard-of-care habit. As Enrique said in his remarks when physicians have replayed back to Astellas their experience in using roxadustat, it’s been very favorable and so just as we’ve seen in China where the drug has performed phenomenally well, there’s no doubt about the clinical relevance and the benefits of roxadustat relative to an ESA. I think it’s just going to take a little bit longer to penetrate into that standard-of-care habit than perhaps we anticipated.

Enrique Conterno — Chief Executive Officer

Maybe just to add, we recently conducted some market research in a number of European countries looking at intent to prescribe. Clearly, reimbursement is a huge catalyst but the intents of prescribers tends to be really, really high, so we need to get the reimbursement that’s critical catalyst but as we look at the future we remain — we continue to remain very excited about the overall opportunity for roxadustat in Europe, we think is very significant.

Yaron Werber — Cowen — Analyst

All right. Great, thanks guys.

Operator

Thank you, I would now like to turn it back to Enrique Conterno, Chief Executive Officer.

Enrique Conterno — Chief Executive Officer

Well, thank you. I want to thank everyone for your participation in today’s investor call and your interest in FibroGen and I hope you very much enjoy the rest of your day, thank you very much. [Operator Closing Remarks]