Q2 2023 FibroGen Inc Earnings Call
Participants
Christine L. Chung; SVP of China Operations; FibroGen, Inc.
David DeLucia
Enrique A. Conterno; Former Director; FibroGen, Inc.
John J. Hunter; Chief Scientific Officer; FibroGen, Inc.
Juan Graham; Senior VP & CFO; FibroGen, Inc.
Mark Eisner; Executive VP & Chief Medical Officer; FibroGen, Inc.
Thane Wettig; Interim CEO; FibroGen, Inc.
Alexandra V. Ramsey; Research Analyst; William Blair & Company L.L.C., Research Division
Annabel Eva Samimy; MD; Stifel, Nicolaus & Company, Incorporated, Research Division
Jason Matthew Gerberry; MD in US Equity Research; BofA Securities, Research Division
Paul Choi; Equity Analyst; Goldman Sachs Group, Inc., Research Division
Unidentified Analyst
Presentation
Operator
Good day, and thank you for standing by. Welcome to the FibroGen's Second Quarter 2023 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, David DeLucia. Please go ahead.
David DeLucia
Good afternoon, everyone. Thank you for joining today to discuss our second quarter 2023 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 Interim Chief Executive Officer; Juan Graham, our Chief Financial Officer; Dr. Mark Eisner, our Chief Medical Officer; Dr. John Hunter, our Chief Scientific Officer; Chris Chung, our Senior Vice President of China Operations; and Enrique Conterno, our outgoing Chief Executive 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 Investors section of FibroGen's website at www.fibrogen.com.
With that, I would like to turn the call over to Enrique Conterno.
Enrique A. Conterno
Thank you, Dave, and good afternoon, everyone.
First, I would like to take a moment to thank my FibroGen colleagues. Thank you for your commitment and dedication during my tenure as CEO. It is important for me to highlight that despite the setback we have recently faced, I remain enthusiastic about FibroGen's opportunities given our remaining near-term readouts from our pamrevlumab trials with Duchenne muscular dystrophy and pancreatic cancer, a thriving roxadustat business in China and our exciting early-stage pipeline. Furthermore, we have a strong cash position that allows us to see through the evolution of our pipeline as well as a talented team across the board.
I am proud of the quality of our leadership team and delighted that Thane will be leading FibroGen as interim CEO. I have known Thane for over 25 years and I have worked closely with him at FibroGen during his 3 years as Chief Commercial Officer and at Lilly for about 10 years in his capacity as Chief Marketing Officer for Lilly Diabetes, where he launched several blockbuster medicines during a period of unprecedented growth of Lilly's Diabetes business. During our time working together, I have appreciated his excellent judgment, keen business instincts and ability to lead organizations effectively. So without further delay, I'd like to pass the call to Mr. Thane Wettig.
Thane Wettig
Thank you, Enrique, for all that you have done for FibroGen over the past 3 years. We have built an outstanding leadership team, created a performance-oriented culture and built our early-stage pipeline. And personally, I've had the benefit of working with you for the better part of the past 14 years at Lilly and here at FibroGen, and I will do my best to lead FibroGen toward a bright future. I am personally excited about the opportunities we have in front of us to bring value to patients and create value for shareholders, many of which we will highlight in this call.
Good afternoon, everyone, and welcome to our second quarter 2023 earnings call. On today's call, I will focus our stakeholders on the 4 strategic pillars that will guide the company into the future as well as provide an update on our pamrevlumab and roxadustat assets. Dr. John Hunter, our Chief Scientific Officer, will then review our exciting early-stage oncology pipeline, providing a perspective that we have not yet discussed in this type of forum. Lastly, Juan Graham, our CFO, will review the financials, after which, we will open the call for your questions.
Starting on Slide 3. FibroGen has 4 key strategic pillars that we believe offer significant value today. First is pamrevlumab with 3 upcoming late-stage readouts starting this quarter and through the first half of next year. Each indication, which I will walk through in more detail in the coming slides, represents a significant commercial opportunity in diseases of substantial unmet need. Second is roxadustat. Roxadustat is approved in over 40 countries around the world, generates significant net revenue and provides FibroGen with material and growing economics through our partnerships with AstraZeneca and Astellas Pharma. Third is our early-stage oncology pipeline. We recently completed the in-license of FOR46, now known as FG-3246, a first-in-class potent antibody drug conjugate or ADC for the treatment of metastatic castration-resistant prostate cancer. This license also includes a biomarker-driven opportunity through the development of an associated PET biomarker diagnostic. In addition to FG-3246, we are also undertaking IND-enabling activities on 2 innovative oncology molecules with the intention of commencing clinical activities in 2024.
Fourth is our strong cash position. Post our ZEPHYRUS-1 results, we have implemented a company-wide cost reduction plan that extends our cash runway into 2026, which provides the company a bridge to achieve numerous value inflection points across our portfolio. We have taken the necessary steps to improve our strong financial position, and we'll continue to focus on financial discipline.
In summary, we believe there are a few biotechnology companies of our market cap that have such a compelling mix of commercial, late-stage and early-stage assets. When you combine our assets, our strong balance sheet and the quality of our talented colleagues at FibroGen, we believe that we have a strong foundation to drive significant shareholder value creation today and into the future.
Moving to Slide 5. Pamrevlumab is an anti-CTGF human monoclonal antibody in clinical development for the treatment of ambulatory Duchenne muscular dystrophy, or DMD, locally advanced unresectable pancreatic cancer, or LAPC, and metastatic pancreatic cancer. Pamrevlumab has been studied in over 1,000 patients and has demonstrated a favorable adverse event and safety profile, including in patients who have been dosed for up to 7 years.
On Slide 6, I would like to provide a recap of recently announced pamrevlumab results as well as review our upcoming milestones. In June, we reported top line data from our Phase 3 LELANTOS-1 study, a placebo-controlled trial of pamrevlumab for the treatment of nonambulatory patients with DMD on background corticosteroids. The study did not meet the primary endpoint of performance of the upper limb 2.0 score at week 52 compared to baseline. FibroGen would like to thank the patients, caregivers and clinical trial investigators for their dedication to participating in these important studies, which contribute towards the understanding of this devastating disease.
In June, we announced top line data from our ZEPHYRUS-1 study in IPF. The study compared treatment with pamrevlumab to placebo and did not meet the primary endpoint of change from baseline in forced vital capacity or FVC at week 48 with a p-value of 0.29. The mean decline in FVC from baseline to week 48 was 260 mL in the pamrevlumab arm compared to 330 mL in the placebo arm correlating to a placebo-corrected difference of 70 mL, the secondary endpoint of time to disease progression, which is a composite of FVC percent predicted decline of greater than or equal to 10% or death was also not met with a hazard ratio of 0.78. Based upon these results, we discontinued ZEPHYRUS-2, our second Phase 3 IPF clinical trial. We would like to thank the patients and clinical trial investigators for their dedication and participation in both of these IPF trials.
Looking ahead, we anticipate upcoming results from 3 pamrevlumab trials. We expect top line data from LELANTOS-2, in ambulatory DMD later this quarter. We expect results from LAPIS and LAPC in the first quarter of 2024, and we expect results from the Pancreatic Cancer Action Network's Precision Promise adaptive trial platform evaluating pamrevlumab in both first-line and second-line settings in combination with standard of care for patients with metastatic pancreatic cancer in the first half of 2024.
I will now go into each of these opportunities in more detail, starting with Duchenne muscular dystrophy. DMD is a rare and debilitating neuromuscular disease that affects approximately 1 in every 5,000 newborn boys. About 20,000 children are diagnosed with DMD globally each year. The failed disease is caused by a genetic mutation leading to the absence or defect of dystrophin, a protein necessary for normal muscle function. The absence of dystrophin results in muscle weakness, muscle loss, fibrosis and inflammation. Patients with DMD are often wheelchair bound before the age of 12 and their progressive muscle weakness may lead to serious medical problems relating to respiratory and cardiac muscle.
On Slide 8, we note that LELANTOS-2 enrolled 73 ambulatory DMD patients 6 to 12 years of age. The primary endpoint is the North Star Ambulatory Assessment, a measure of ambulatory function, and we expect top line results later this quarter. Given the devastating nature of DMD and the relentless progression of the disease, we are hopeful that LELANTOS-2 Phase 3 study can lead to a regulatory filing and ultimately provide desperately needed therapy for these patients.
On Slide 9, we provide a perspective of the commercial opportunity for pamrevlumab in DMD. In 2022, branded revenue of DMD therapies exceeded $1.1 billion despite the fact that the currently approved exon skipping therapies target only a small proportion of DMD patients and have yet to demonstrate a meaningful clinical improvement in symptoms for disease progression. There is a clear need for DMD therapies that can attenuate disease progression by targeting the downstream pathological changes to improve muscle function. We are hopeful that the antifibrotic mechanism of pamrevlumab may be a treatment that can help these patients and their families and represents a significant commercial opportunity for pamrevlumab.
Moving on to pancreatic cancer on Slide 11. Pancreatic cancer represents one of the largest unmet needs in oncology with an annual incidence of nearly 0.5 million patients across the major regions combined and an overall 5-year disease-free survival rate of approximately 12%. On Slide 12, we would like to provide a brief overview as to why we believe an anti-CTGF antibody like pamrevlumab would provide benefits to patients diagnosed with pancreatic cancer. Based on preclinical data, CTGF plays an important role in the growth and progression of pancreas tumors. Mouse tumor studies have shown that pamrevlumab can have both direct antitumor effects and effects on the surrounding stroma providing a strong clinical rationale for the use in both LAPC and metastatic pancreatic cancer.
Moving to Slide 13. Late-stage trials are being conducted with pamrevlumab in both LAPC and metastatic patients. These patients represent almost 90% of all diagnosed pancreatic cancer patients today, giving pamrevlumab a potential opportunity to treat a vast majority of patients across this devastating disease.
On Slide 14, we provide an overview of the Phase 3 LAPIS trial, a double-blind, placebo-controlled trial in 284 patients with locally advanced unresectable pancreatic cancer, comparing pamrevlumab to placebo in combination with standard of care chemotherapy. The primary endpoint is overall survival, and we expect top line data from this study in the first quarter of 2024.
On Slide 15 is an overview of the Pancreatic Cancer Action Network's Precision Promise trial. This is a Phase 2/3 registration study with an FDA-approved study design. The primary endpoint is overall survival, which represents a definitive registration endpoint. The pamrevlumab combination therapy is offered to patients as either a first or second line treatment option. Pamrevlumab was the first experimental treatment arm to be offered as a first-line treatment in PanCAN's innovative Precision Promise trial. We expect top line data from this study in the first half of 2024.
On Slide 16, we review the commercial opportunity for pamrevlumab in pancreatic cancer. There have been limited treatment advances over the last 2 decades in both unresectable and metastatic disease with immuno-oncology therapies providing benefit to a small subset of metastatic patients. This creates a potential multibillion-dollar commercial opportunity for pamrevlumab if it can demonstrate a significant improvement in overall survival in either locally advanced or metastatic patients.
Moving on to roxadustat on Slide 18. I would like to provide a recap of recently announced roxadustat results as well as review our upcoming milestones. In May, we announced top line data from our MATTERHORN Phase 3 clinical study of roxadustat for treatment of anemia in patients with transfusion-dependent lower-risk myelodysplastic syndromes. The study did not meet its primary efficacy endpoint. Also in May, we announced positive top line data from our Phase 3 clinical study of roxadustat for the treatment of anemia in patients receiving concurrent chemotherapy treatment for non-myeloid malignancies in China. Roxadustat demonstrated non-inferiority compared to recombinant erythropoietin alfa on the primary endpoint of change in hemoglobin level from baseline to the average level during weeks 9 through 12.
I am pleased to announce that we have filed a supplemental new drug application with a China Health Authority for roxadustat in patients with chemotherapy-induced anemia and expect approval in mid-2024. We believe this indication could represent a meaningful incremental net revenue opportunity, providing roxadustat a potential pathway to achieving over $500 million in annual net sales in China.
Moving now to Slide 19. 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 was $76.4 million compared to $53.1 million in the second quarter of 2022, an increase of 44%. This growth was driven by an increase in volume of over 40%. FibroGen's portion of roxadustat net product revenue in China was $23.9 million for the second quarter on a U.S. GAAP basis.
Moving to Slide 20. Roxadustat remains the category leader in brand share in China rising to 39% in the second quarter of 2023. I would like to briefly touch on roxadustat in Europe. In addition to the continued outstanding performance of roxadustat in China, the roxadustat launch in Europe is accelerating, showing robust quarter-over-quarter growth. We expect this growth to continue to accelerate given the strong competitive position of roxadustat. Roxadustat is the only HIF-PHI indicated in the EU for the treatment of anemia of CKD in both non-dialysis and dialysis patients. And with GSK's recent decision to withdraw the MAA for daprodustat combined with market exclusivity for roxadustat beyond 2030, roxadustat is well positioned to continue its growth throughout this decade.
Moving to Slide 22 and our early-stage oncology pipeline. On May 8, we announced that FibroGen entered into an exclusive license with Fortis Therapeutics for FG-3246, a potential first-in-class opportunity that our CFO, John Hunter, will describe in more detail on the next few slides. Under the terms of the agreement, there was no upfront cash consideration. FibroGen will conduct and fund future research, development and manufacturing of FG-3246 and an associated biomarker PET-46. We have the option to acquire Fortis during the 4-year evaluation period for $80 million. We anticipate the initiation of a Phase 2 trial in metastatic castration-resistant prostate cancer, or mCRPC, in the second half of 2024 with the potential for additional trials targeting other CD46 expressing cancers.
I will now hand the call off to John to cover our early stage pipeline.
John J. Hunter
Thank you, Thane. Moving to Slide 23. Our recently in-licensed clinical program, FG-3246 is an antibody-drug conjugate or ADC comprised of an anti-CD46 antibody YS-5, linked to the anti-mitotic agent, MMAE, which is a clinically and commercially validated ADC warhead. The CD46 epitope targeted by FG-3246 is expressed at high levels in the majority of metastatic castrate-resistant prostate cancerS and colorectal tumors and is also found at high levels in a subset of other solid tumors.
Moving to Slide 24. FG-3246 has demonstrated monotherapy clinical efficacy in multiple myeloma and metastatic castration-resistant prostate cancer. Shown here are interim data from the ongoing Phase 1 trial in prostate cancer, where 4 out of 21 evaluable patients had a partial response based on RECIST criteria and where a PSA 50 response rate of 45% was observed. The patients in this Phase 1 study were heavily pretreated with a median of 5 prior therapies. The safety profile for FG-3246 was consistent with other MMAE-based ADC therapeutics with neutropenia being the most common adverse event. Additional data from the trial will be reported upon study completion.
Moving to Slide 25. We show ongoing and planned clinical trials for FG-3246. In addition to the Phase 1 dose escalation and expansion study referenced on the previous slide, there is also a combination study with enzalutamide that is currently being run at UCSF. The rationale for this combination is based on preclinical data, demonstrating up regulation of CD46 in tumor cells following enzalutamide treatment, therefore, potentially making them more responsive to treatment with FG-3246. Initial data from this trial is expected in the second half of 2024. There is currently a PET biomarker study trial in progress for the program also being run at UCSF. The PET imaging agent is comprised of the CD46 targeting antibody, YS5 coupled to zirconium-89. The goal is to develop the screening assay that select patients with high CD46 expression who are most likely to benefit from treatment with FG-3246. This biomarker will be part of a Phase 2 study run by FibroGen in which up to 100 patients will be enrolled following a PET scan with PET46. Patients will not be stratified at the start of the study, but the correlation between PET positivity and FG-3246 efficacy will be assessed at the end of the study with the potential to use the PET biomarker to stratify patients in a pivotal Phase 3 trial. We anticipate the initiation of the Phase 2 trial in metastatic castration-resistant prostate cancer in the second half of 2024.
Moving to Slide 26. I would like to spend some time on our preclinical oncology program. The first program I'd like to discuss is FG-3165, an anti-galectin-9 antibody developed to reverse immune resistance in solid tumors. Galectin-9 or Gal9 is a soluble immunosuppressive molecule that is overexpressed in many tumor indications and that has been implicated in maintaining an immune suppressed tumor microenvironment. FG-3165 has been shown preclinically to reverse multiple Gal9 mediated mechanisms of immune seppression, including the prevention of Gal9 mediated effector T-cell apoptosis and TIM-3 dimerization, we will present preclinical data for this program at a cancer immunotherapy conference later this year and are working towards a first quarter 2024 IND filing.
Moving to Slide 27, anti-CCR8 program, CCR8 is a receptor that is highly expressed on tumor infiltrating T regulatory cells known as Tregs with very limited expression outside of the tumor microenvironment. FG-3175 is an anti-CCR8 antibody designed to selectively disrupt and deplete Tregs in the tumor microenvironment without affecting peripheral T regulatory cells. Given the highly competitive clinical landscape for antibodies targeting CCR8, we have developed optimized versions of our previously FG-3163 during its development, while FG-3163 has been shown to have acceptable potency and monotherapy efficacy in a preclinical model of colorectal cancer, we decided to advance FG-3175 as our clinical candidate as we feel it has a marked competitive advantage based on relative potency and projected clinical dosing. Given its highly specific targeting of Tregs in the tumor microenvironment, we see FG-3175 as having broad therapeutic potential in solid tumors.
I will now turn the call over to Juan to discuss the company's financials. Juan?
Juan Graham
Thank you, John. Good afternoon, everyone.
I will jump straight into the quarter's financial results. For the second quarter of 2023, total revenue was $44.3 million compared to $29.8 million for the same period in 2022, a robust increase of 49% year-over-year.
I will now provide further detail on our revenue. As of Q2 2023, we recorded $23.9 million of net product revenue for roxadustat net sales in China compared to $23.3 million in the second quarter of 2022, representing an increase of 3% year-over-year. During the quarter, we also recorded $14.3 million in drug product revenue for roxadustat bulk drug product or active pharmaceutical ingredient sold to Astellas. Comparatively, drug product revenue was $1.1 million during the second quarter of 2022. We recorded development revenue of $4.1 million associated with co-development efforts for roxadustat with our partners as compared to $5.2 million during the second quarter of 2022. As I have previously stated, due to the stage of development of roxadustat with our partners, we expect co-development revenue to be in the range of USD3 million to USD5 million per quarter for the remainder of 2023. Finally, we recorded license revenue of $1 million associated with a milestone payment from our Biosynthetic cornea program with Eluminex.
Given the strong performance of our business in China, I will provide further context on our financials and performance. As previously mentioned by Thane, total roxadustat net sales from the joint distribution entity jointly owned by AstraZeneca and FibroGen or JDE, was $76.4 million this quarter compared to $53.1 million in the second quarter of 2022, a substantial increase of 44% year-over-year, highlighting the continued strong performance of the EVRENZO franchise in China, achieving our highest market share since launch at 39% of the ESA and HIF categories combined. From total roxadustat net sales in China, FibroGen's net transfer price from sales to the JDE was $23.8 million for the second quarter compared to $18.2 million in the second quarter of 2022, an increase of 31% year-over-year. Net transfer price is the best reflection of FibroGen's portion of the cash received by roxadustat in China.
During this quarter, we deferred $3.3 million in revenue due to the change in our future estimates as per U.S. 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 $20.5 million in net revenue for the quarter from roxadustat sales to the JDE and $3.4 million of direct to distributor sales from FibroGen China totaling $23.9 million on a U.S. GAAP basis.
Now moving down the income statement. Our operating costs and expenses for the second quarter of 2023 were $132.4 million compared to $108 million for the second quarter of 2022. The variance of $24.3 million year-over-year is primarily driven by a onetime charge of acquired in-process R&D of $24.6 million, resulting from the recent noncash asset acquisition of Fortis Therapeutics as per U.S. GAAP. Excluding such onetime noncash charge, our operating expenses would be essentially flat year-over-year. R&D expenses for the second quarter of 2023 were $95.5 million compared to $71 million in the second quarter of 2022. As I just mentioned, R&D expenses for the quarter include a onetime charge of acquired in process R&D expenses of $24.6 million, resulting from the recent noncash asset acquisitions of Fortis Therapeutics. Excluding such onetime charge, R&D expenses were $70.9 million for the quarter, again, essentially flat year-over-year. Of the $70.9 million of R&D expenses that I just mentioned, approximately 59% was dedicated to pamrevlumab development and CMC activities. 29% allocated to support our early-stage pipeline and the remaining 12% directed towards roxadustat development activities in the United States and China.
Given the outcome of the IPF trial, ZEPHYRUS-1, with subsequent impact on the termination of ZEPHYRUS-2, we will see a significant reduction in R&D expenses related to pamrevlumab in the coming quarters. SG&A expenses for the second quarter of 2023 were $31.2 million compared to $30.3 million in the second quarter of 2022, remaining relatively flat year-over-year. During the second quarter of 2023, we recorded a net loss of $87.7 million or $0.90 net loss per both basic and diluted share as compared to a net loss of $72.6 million or $0.78 per basic and diluted share for the second quarter of 2022. The impact of the above-mentioned onetime charge of $24.6 million related to the noncash asset acquisition of Fortis, represents approximately $0.25 net loss per basic and diluted share.
On July 14, 2023, as part of a broader cost reduction effort, we announced a restructuring plan to lower our operating expenses. The plan includes an expected reduction to FibroGen's U.S. workforce of approximately 32% or 104 employees. We estimate that the related nonrecurring restructuring payments to be in the range of USD13 million to USD15 million, the majority of which will be incurred in the third quarter of 2023. In addition to headcount-related reduction, we are also expecting reductions in other expenses associated with our recently announced termination of our IPF trials and general reduction in infrastructure costs.
On Slide 29, I lay out our expected future GAAP savings associated with the reductions I just mentioned. In the first half of 2023, our average GAAP operating expenses and onetime charges were approximately $105 million per quarter. Excluding onetime expenses and charges, we anticipate expected savings of approximately USD100 million to USD120 million in total annualized GAAP expenses or USD25 million to USD30 million per quarter. We expect to achieve up to 20% of these quarterly savings in the third quarter of 2023, 60% to 80% of expected quarterly savings in the fourth quarter of 2023 and and achieve our quarterly expected run rate savings in the first quarter of 2024.
Now shifting towards cash. As of June 30, we reported $361.3 million in cash, cash equivalents, investments and accounts receivable. Our cash balance includes $71.3 million of net proceeds raised through our debt facility with Morgan Stanley Tactical Value and additional use of our ATM facility during the quarter. With the reduction of operating expenses and maintaining a disciplined capital allocation approach, we expect our cash, cash equivalents, investments and accounts receivable to be sufficient to fund our operating plans into 2026. Thank you. And now I would like to turn the call back over to Thane.
Thane Wettig
Thanks, Juan. In closing, we are committed to advancing pamrevlumab as a potential first-in-class medicine in 3 indications with significant unmet medical need. And as noted, we expect top line data from the following 3 late-stage studies. Phase 3 LELANTOS-2 in ambulatory DMD this quarter, Phase 3 LAPIS in LAPC in the first quarter of 2024, Phase 2/3 Pancreatic Cancer Action Network or PanCAN Precision Promise trial in metastatic pancreatic cancer in the first half of 2024.
Roxadustat continues to perform very well in China, where we recently filed our sNDA for the CIA indication, and our partner, Astellas, continues with the commercialization of roxadustat in Europe and Japan. In our early-stage pipeline, we anticipate filing an IND for FG-3165, the anti-Gal9 antibody in the first quarter of 2024 and filing an IND for FG-3175, our anti-CCR8 antibody in the second half of 2024 and the initiation of a Phase 2 trial of FG-3246 for metastatic castration-resistant prostate cancer in the second half of 2024.
We have completed incremental financing transactions to further strengthen our balance sheet and expect our current cash position to fund operations into 2026. 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 back over to the operator for Q&A.
Question and Answer Session
Operator
Thank you. At this time, we will conduct a question-and-answer session. (Operator Instructions) Our first question comes from the line of Michael Yee with Jefferies.
Unidentified Analyst
This is (inaudible) on the line for Michael Yee. I think I have 2 questions, if I may. First for roxadustat, could you help us understand the patent and exclusivity situation for roxa in China? And what is your base case for the timing of a potential generic entry and what are the ways to extend the exclusivity? And then for FOR46, why are you excited about this ADC program? And I also noticed you have a Phase 1, well, there was a Phase 1 in multiple myeloma. So are you also pursuing the opportunity in this indication? Or are there any other indications that you are thinking about?
Thane Wettig
Well, thank you for your question. The first part of it related to roxadustat, China, patent term exclusivity, generic entry, I'd like for Chris Chung to address that question. Chris?
Christine L. Chung
Thank you, Thane. Can you hear me?
Thane Wettig
Yes.
Christine L. Chung
Okay. So thank you for the question. We confirm that the health authority in China has accepted a number of generic applications for roxadustat in CKD of course. Just to clarify, an acceptance is an administrative reception of a filing, it just means that technical review is about to commence. It does not represent an approval in any shape or form. Our composition matter patent expires in mid-2024. Given the patent linkage system in China, we are not expecting any generics of roxadustat to be marketed until at least after that exclusive date. Now of course, the composition matter patent represents only (inaudible) we were to get. Thane, back to you.
Thane Wettig
Thank you, Chris. And then related to the question about FOR46 about why we're excited. I'd like for John Hunter to address that question, and then if Mark has any comments after that to add on to that. John?
John J. Hunter
Sure. Thanks, Thane. I think one of the biggest points of excitement was really seeing (inaudible) a very good PSA-50 response rate. So that was quite exciting relative to other assets that we are looking at, but also the mechanism is very well validated. As I had mentioned, there are, I think, now 5 approved ADCs that use MMAE as the payload. Additionally, when we really did a deep dive in the CD46 expression, we saw that it was quite restricted to tumors for the most part with only a couple of normal tissues, showing any considerable expression. So we have an entire package that we felt looked very good, and we were very excited to bring it in.
I'll talk about potential other indications. And then I think I'll turn it over to Mark to address the multiple myeloma question. We are, in fact, looking at indications to expand into. We have an ongoing translational medicine effort to identify IHC antibodies that we may use to be able to run a basket trial in patients from other solid tumor indications where the prevalence of CD46 expression might not be as high but where we can select patients who do have that high expression to enter into a trial. These are very early efforts. So we will hope to update you as they progress. And now, Mark, I'll hand it over to you for any additional comments.
Mark Eisner
Thanks, John. I mean, I'm also very excited about the ADC because it has several potential ways to help patients and to really add value to FibroGen. One is, as you said, in metastatic castrate-resistant prostate cancer and monotherapy. The other one is an [Enzacombo] therapy, which is a current ongoing study at UCSF, as you mentioned. The other one is either solid tumors and/or multiple myeloma. So multiple diseases seem to be driven by CD46. This is a very novel ADC. We have a parallel PET imaging biomarker strategy that we're pursuing. So I think there's a novelty and a deep biology underlying this program that's very exciting.
Thane Wettig
And I think maybe just to conclude, related to the excitement for the Fortis asset is the favorable deal terms with no upfront cash consideration, success-based milestones and the opportunity over a 4-year period of evaluation to potentially acquire the company for $80 million in addition to obviously what John and Mark just spoke about, we're really excited about the opportunity.
Unidentified Analyst
Can I follow up on the first one? Is there any way to extend your exclusivity for roxa when after your CIA indication gets approved?
Christine L. Chung
So how should we be thinking about it? So there is a fourth amended intellectual property law in China. The law itself was activated June 1, 2021. At this point in time, the regulations have not yet been implemented. So we are looking at those opportunities with a patent. I think the decision would come down to what the Chinese company eventually decides to implement.
Operator
Our next question comes from the line of Yaron Werber of TD Cohen.
Unidentified Analyst
This is [Joyce] on for Yaron. Maybe just a couple from us. First, on CIA, can you tell us about your latest thinking around whether this is ultimately going to be a China-only strategy? Or if you're thinking that this is going to come to the U.S. as well? And then for the LAPIS study, could you just quickly remind us about the potential use of event-free survival as a surrogate for accelerated approval?
Thane Wettig
Yes. Thanks, Joyce. Related to CIA, as of right now, is a China-only opportunity. And Mark, would you like to touch on the question on that LAPIS?
Mark Eisner
Yes. So the question had to do with the primary endpoint of the study, which is overall survival. As we've mentioned in an earlier call, we did do an interim analysis for event-free survival as a potential surrogate marker. It was a very high bar analysis that did not meet that analysis. So we're continuing the trial for overall survival as the primary endpoint, and we expect that to read out in the first half of next year.
Operator
Our next question comes from the line of Jason Gerberry of Bank of America.
Jason Matthew Gerberry
Just coming back to the patent topic in China, is the process with the generic challengers entirely an issue of patent validity and if the patent is found valid, then there's a barrier until the expiry of the crystalline form IP? Or is there a potential avenue of those generic challengers have differed noninfringing crystalline from molecules, they could potentially have an avenue to be found non-infringing. Just wanted to understand that dynamic a little bit better.
And then on pamrev for ambulatory DMD, wondering if you could highlight any important mechanistic differences why pamrev might be more effective here than, say, the nonambulatory setting?
Thane Wettig
Thanks, Jason. Chris, if you could take the first question?
Christine L. Chung
Absolutely. So with respect to generic challengers, so first and foremost, of competition matter patent is valid and all generic applicants on the patent linkage system in China have declared that they respect those patents. So that is a fact, and this is why we're very confident that there will be no generic on the market until after that expiry. With respect to the crystalline patents, crystalline patents are not considered part of the patent linkage system, which means they're not enforceable by the health authority. They are enforceable by the court of law, and that is what we will have to pursue. As to whether a generic applicant could potentially have a crystalline form, an alternative polymorph patent that could get around us? That, unfortunately, I think it's a question we have to defer to the patent attorneys to answer. I hope that's helpful.
John J. Hunter
So the other question was around the ambulatory versus non-ambulatory DMD. And I think we've always said that we expected non-ambulatory DMD to be the most challenging because the patients have already lost so much function, they're wheelchair-bound and the signal-to-noise ratio of the end point, the performance of the upper limb, we expect it to be a challenge and turned out to be a challenge. We also didn't see any clinically meaningful efficacy in terms of the other secondary endpoints, including FVC percent predicted ejection fraction by cardiac MRI, unfortunately. And it's very sad for all of us at FibroGen because we're really hoping to be able to deliver a therapy for these patients with non-ambulatory DMD which is so desperately needed. So now we turn our attention to ambulatory DMD where because these are younger patients, they still have much more function. I think the North Star Ambulatory assessment is a more holistic type of endpoint. We do feel like we still have a possibility of showing a benefit in this patient population, and we're really looking forward to those top line results in the near future.
Operator
Our next question comes from the line of Annabel Samimy of Stifel.
Annabel Eva Samimy
Just while we're on the DMD topic. I guess, one of the things we're wondering is if in the ambulatory DMD trial, you don't necessarily see function, but you see benefit on some of these other markers such as the ejection fraction or FVC. Do you see an avenue for filing on that? And in the nonambulatory, understanding that said nonambulatory is more challenging. But with FVC and ection fraction, is it also more challenging on those measures as well? Or was it strictly on the functional endpoints that you were referring to?
John J. Hunter
Yes. So I'll try to address both of your questions. So the second part first, yes, I think that all end points are going to be more challenging in the nonambulatory population than the ambulatory. I will say that the cardiac MRI is not really the same relevance for the younger patients who are aged 6 to 12 because cardiac manifestations are relatively later manifestation in the disease. So for ambulatory, it's the North Star, it's stair climb, it's 10-meter walk, other endpoints like that are the primary and secondary endpoints. So ultimately, the North Star, I think, has been quite well looked out in the setting of other studies. And we expect that it's a validated endpoint, and we're looking forward to those results.
Annabel Eva Samimy
Okay. Sorry. And is there any avenue for you to file if you're seeing secondary benefits as opposed to the North Star?
John J. Hunter
Right. So I think your question is, for example, if the North Star is kind of a near miss and your secondary endpoints that are positive. So in that case, potentially. I mean, any positive data that we see in the ambulatory trial, I think, would be the basis for us to want to really explore regulatory pathways with the FDA. So it will be a data-driven decision. But we, of course, will look at all the endpoints and really look for any signs of efficacy in that trial that's coming up.
Annabel Eva Samimy
Okay. And then if I can ask one more question with regard to pamrevlumab as an anti-fibrotic agent. Are there any other markers that you looked at from the LELANTOS-1 trial to give you an idea that there is actually anti-fibrotic activity and that couldn't help but sense the confidence about just going into this trial. And so I'm just wondering if you saw anything else that gave you some hope?
Thane Wettig
Unfortunately, the LELANTOS-1 trial, there was no endpoint that really showed any signs of efficacy. It may be due to the nonambulatory population and how advanced it is. I think the ambulatory LELANTOS-2 trial data will really help us to answer what clinical benefit and otherwise can be shown in DMD. So I think the studies will together tell the full story. So we have half the answer, and we're eagerly awaiting the rest of the information from LELANTOS-2.
Operator
Our next question comes from the line of Alexandra Ramsey from William Blair.
Alexandra V. Ramsey
This is Alex Ramsey on for [Andy Shay] at William Blair. So a couple of questions from us, if you don't mind. So the first question is about the term loan with Morgan Stanley Tactical Value. We're just curious about the status of the $75 million initial term loan. And are there any plans to pay back that loan earlier than the May 2026 maturation date or if that's dictated by the terms of the loan?
And then second, Mark, we were curious to hear if you have any insights on the ZEPHYRUS data? And if you have any hypothesis in terms of why it underperformed for Pamrevlumab. And we definitely understand that you're probably early in analysis, we're just wondering if anything popped out during the initial knowledge.
Thane Wettig
Yes. Thanks, Alex. I'll have Juan address the MSTV question and then turn it over to Mark.
Juan Graham
Alex. Yes, on the term loan, as you pointed out, we have an initial draw of $75 million. That has actually occurred as of the beginning of May, May 8, I believe it was. We received the $75 million. So that's what we would expect to hold until term maturity at this point in time, there's no plan for early repayment.
Thane Wettig
Thanks, Juan. Mark?
Mark Eisner
Right. So in terms of the ZEPHYRUS-1 study, yes, disappointing results in terms of the primary endpoint and the secondary endpoints, most of which showed kind of numerically better results for PAM versus placebo, but none of which were statistically significant. There were 3 major issues going into the trial that I think we and everyone was focused on. Number one, was would the placebo decline at 48 weeks in ZEPHYRUS-1 be adequate to show a treatment part? And it was. It was 330 mL decline, which compared very similarly to PRAISE at 308 mL.
The second point was the influence of prior history of standard of care. And about half the patients were treatment experienced, about half were treatment naive, and that really made no real meaningful difference on the results. And then the last point that I think was a lot of focus are, what about those patients who started standard of care on that turned out to be about 14%, started [OFAB or SBRT] on study. And again, that did not make any meaningful difference in the study results. So the top 3 things we were really focused on, and I think the analyst and investor community was focused on really turned out to be within what we would have predicted. So at this time, we don't have any clear reason why the ZEPHYRUS results were less significant than the PRAISE results, except to say that the Phase 2 to Phase 3 translation in this disease, IPF is very, very challenging. If you look at the Galapagos Gilead or you look at the Roche data, they've run into similar challenges. And I don't think these challenges are completely understood at this time.
Operator
Our next question comes from the line of Paul Choi with Goldman Sachs.
Paul Choi
Maybe returning to the subject of DMD for a minute and LELANTOS-2. Is there any component of the North Star assessment that you think where pamrevlumab might show particular benefit? Any gleanings there in the ambulatory population would be helpful.
Thane Wettig
Right. Well, the short answer, Paul, is we really don't know. I mean the total score is designed for the total score, and we'll also be looking at the 10-meter walk, the stair climb, other components. But at this point in time, it's difficult to answer that question, and I think we'll have to await the data.
Paul Choi
Okay. Fair enough. And then turning to your oncology pipeline and FG-3246, you'll have the combination study with XTANDI next year. Just curious if you can maybe sort of frame expectations for what responses might look like, whether it's on PSA or how you're thinking about comping the results versus either monotherapy studies or other XTANDI studies with chemo? Any framework or context there would be appreciated.
Thane Wettig
Thanks, Paul. I'll have John address that second question.
John J. Hunter
Sure. Although I think Mark might have better insight into it. But just with regards to how we're viewing it, we kind of have a baseline now with the monotherapy results, and we know what to expect with FG-3246 alone. So really, I think with the XTANDI combination, we'll be looking to see if there is additional benefit and we'd be looking both at the PSA-50 and that overall response rate, given that we did see those in the earlier Phase 1 trial. Mark, you might want to add...
Mark Eisner
Sorry, John, I was just going to have the exact same perspective. If it does increase CD46 expression with enzalutamide, that is that we could expect to see a greater degree of clinical efficacy. That's the hypothesis that's being tested.
Operator
I'm showing no further questions at this time. I would now like to turn the conference back over to Thane Wettig for closing remarks.
Thane Wettig
Thank you. So we really appreciate your participation in today's investor call and your interest in FibroGen. We believe we have a really exciting future ahead of us with the pamrevlumab readouts with a robust growing roxadustat business with an exciting early-stage pipeline and a really strong balance sheet. And so we look forward to maintaining the engagement and keeping you abreast of our accomplishments going forward. Thank you.
Operator
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
