Akebia Therapeutics, Inc. (AKBA) Q2 2019 Earnings Call Transcript

Akebia Therapeutics, Inc. (AKBA 0.75%)
Q2 2019 Earnings Call
Aug. 8, 2017, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Akebia Therapeutics Second Quarter Fiscal Year 2019 Financial Results and Business Highlights Conference Call. As a reminder, this call is being recorded. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press * then 0 on your touchtone telephone.

I would now like to introduce your host for today's conference, Kristen Sheppard.

Kristen Sheppard -- Vice President of Investor Relations

Thank you, and good morning. My name is Kristen Sheppard, Vice President of Investor Relations with Akebia. Thank you for joining us to discuss Akebia's second quarter 2019 financial results and our recent business highlights. The press release containing the company's financial results for the second quarter was issued earlier this morning and is also available on our investor relations website. For your convenience, an audio replay of today's call will also be available on our website shortly after we conclude today's webcast. Joining our call today are John Butler, President and Chief Executive Officer; and Jason Amello, Chief Financial Officer.

Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Additional information regarding these factors is described in the Risk Factors in management's Discussion and Analysis sections of our most recently quarterly and annual financial reports filed with the FCC. The forward-looking statements on this call speak only as of the original date of this call, and we do not undertake any obligation to update or revise any of these statements.

With that, I'd like to turn the call over to our CEO, John Butler.

John Butler -- Chief Executive Officer

Thanks, Kristen, and good morning, everyone. We believe we had a great story to share with you this morning. Throughout the first half of this year, we continued to make good progress against our strategic initiatives, and the headline continues to be solid execution. The commercial team delivered $29 million in Auryxia revenue in the second quarter, the highest quarter since launch; 21% year-over-year growth, and 26% growth versus the first quarter of 2019.

We reached a settlement with Par for Auryxia that reinforces the strength of our Auryxia IP. And with respect to vadadustat, the clinical team continued to knock it out of the park with the first regulatory submission for marketing approval of vadadustat, which was filed by our collaboration partner, Mitsubishi Tanabe, or MPPC in Japan. This JNDA submission is a significant milestone for both companies. We believe this is just the beginning of an exciting lineup of announcements expected in 2020 and beyond.

While there's still much work ahead of us, I believe we have tremendous opportunities to advance our mission to better the lives of people living with kidney disease and deliver significant value to all our stakeholders. We've been very purposeful in developing our strategy to achieve this mission, and it's great to see the benefits of our work coming to light as the team continues to systematically execute on our priorities.

I'll start with the progress in our Phase 3 clinical program for vadadustat. Vadadustat is our investigational oral HIF- PHI that's designed to stimulate endogenous Epo production to a more physiologic level for adult patients with anemia due to chronic kidney disease, or CKD. Our JNDA filing is particularly impressive, not only because it's the first regulatory submission for marketing approval of vadadustat, but also because we believe it may establish vadadustat as the first oral HIF-PHI to file for approval for the treatment of anemia due to CKD in both dialysis-dependent and non-dialysis-dependent patient populations in a major market. Importantly, this submission was supported by positive top line data from two Phase 3 active control pivotal studies in Japan that we announced together with MTBC in the first quarter.

Turning to our global Phase 3 clinical program, in April, we completed enrollment in INNOVATE, our global clinical studies designed to enable regulatory filings for vadadustat for the treatment of anemia due to CKD in dialysis-dependent patients. We enrolled a total of nearly 4,000 patients across the two INNOVATE studies, and we continue to expect top line data readouts in Q2 of next year, subject to the approval of MACE.

With respect to PROTECT, our global clinical studies designed to enable regulatory filings for vadadustat for the treatment of anemia due to CKD in patients not on dialysis, patient enrollment has continued to be strong, and I'm pleased to announce that as we expect to complete enrollment shortly, we're no longer accepting new patients into screening. We continue to expect top line data readouts in mid-2020, subject to the approval of MACE.

We have a tremendous amount of confidence in the program that we've designed for vadadustat and believe we are well-positioned for clinical, regulatory, and commercial success. For example, both INNOVATE and PROTECT are designed to assess non-inferiority for efficacy and cardiovascular safety for vadadustat using an active control, epoetin alpha, an injectable ESA which is the current standard of care. We believe this structure will enable a straightforward collection and analysis of MACE across the relevant studies and ultimately, a clear data readout.

Importantly, our program includes multiple secondary efficacy and safety endpoints to assess other clinically and hence commercially important areas of differentiation to ESAs, including the incidence of thromboembolic events, hospitalization for heart failure, and effects on blood pressure; and in non-dialysis-dependent CKD subjects, the progression of kidney disease. If successful with these studies, we expect vadadustat to be the first HIF-PHI in the U.S. and EU markets with data directly comparing its outcomes to the current standard of care in both dialysis and non-dialysis patients. We believe this data will be extremely relevant for physicians, patients, and payers as they make important decisions about patient care.

I think it's important to note here that because our non-dialysis study was designed with an active control, patients in this population that progress to dialysis during the study will be able to stay on study drug. As a result, we expect to be able to compare how these new to dialysis patients on either the control drug or vadadustat do as they transition to dialysis and move forward. We will have data across that continuum of care for a large number of patients. We believe that this will be very valuable data from a regulatory and commercial standpoint, especially when paired with our incident patient study in INNOVATE as the new to dialysis patient population is of particular interest, because the event rate in the first year of dialysis is generally much higher. It also makes our MACE analysis much more straightforward.

We believe another key advantage of our program is that it was designed with the basic philosophy that not every patient's needs are the same. As a result, we designed our clinical program with the potential for dosing flexibility, with once daily dosing for non-dialysis-dependent CKD patients and daily or three times a week dosing for dialysis-dependent CKD patients.

Lastly, we designed these studies after extensive study with the FDA and European regulators. We have prospectively defined and agreed to non-inferiority margins with the FDA and the MA, and we also agreed with the FDA on the key components of our statistical analysis plan.

Turning to our commercial product, Auryxia, the only oral iron tablet approved in the U.S. to treat both dialysis-dependent CKD patients for hyperphosphatemia and non-dialysis-dependent CKD patients for iron deficiency anemia, or IDA. For Q2, Auryxia revenue increased 21% to $29 million, and total Auryxia prescriptions increased 22% to 49,200.

The team is doing a great job executing on our near-term growth initiatives. We continue to see solid demand for Auryxia within our hyperphosphatemia indication, which we believe represents most of our product revenue. In fact, the prescription demand we've seen in the first four weeks of the third quarter is the highest of any quarter since Auryxia was launched, affirming our confidence that Auryxia is on a growth trajectory. We believe continued execution on our growth initiatives and underlying market demand will drive increased revenue for Auryxia across the second half of the year.

A favorable outcome from our continuing work with CMS to restore coverage for Auryxia's IDA indication would represent the opportunity for upside. We look forward to providing more specific revenue guidance for Auryxia early next year, after we get a few more quarters of solid execution under our belt.

In looking further ahead, what I'm most excited about with respect to Auryxia is how we're continuing to advance its long-term growth story and impact the lives of people living with CKD. We've always believed that Auryxia could have a valuable role in treating patients beyond our current indications. We're encouraged with recent data published in the journal of the American Society of Nephrology that we believe supports this potential. We've mentioned this study previously. It was an investigator-initiated study funded by Keryx prior to the merger and conducted by Colorado Care with Dr. Geoff Bloch as the principal investigator and lead author of the publication.

In a single site 203 patient trial that compared a fixed dose of ferric citrate, or Auryxia, to standard of care in patients with advanced CKD, the authors concluded that ferric citrate effectively managed multiple biochemical parameters and was associated with significant improvement in hemoglobin, TSAT, and ferritin, and significant decreases in serum phosphorus and FGF23 compared to the standard of care. The encouraging finding was that in this small study, the investigator was able to show a statistically significantly lower incidence of progression to dialysis, transplant, or death; fewer hospital admissions; and fewer days in the hospital in those patients who received ferric citrate. No related serious adverse events occurred, and the most common related adverse event in ferric citrate-treated patients were gastrointestinal. These findings are very encouraging, and we agree with the author's conclusion that this pilot study warrants further investigation, which we're now exploring with a number of our KOL advisors, who are also excited about the data and about Auryxia's potential.

It's great to see the new policy initiatives, like the Advancing American Kidney Health Initiative, aligning with this vision and placing a priority on these outcomes, while at the same time seeking to reduce the more than $100 billion expense annually in the U.S. to treat chronic and end stage renal disease. Although it's early, we believe this environment creates opportunities not only to improve patient care, but also enhance the value of Auryxia with both prescribers and payers.

As you know, we've been intensely focused on protecting the value of Auryxia. We believe the ANDA settlement we announced earlier this week reinforces the strength of our Auryxia intellectual property and does not allow Par to have a generic entry until March 20th of 2025. This was another great example solid execution in the quarter that's well worth noting, and we're very pleased with the outcome.

Lastly, we're also pleased to see our collaboration partner, Japan Tobacco, and its subsidiary Torii, who markets ferric citrate in Japan under the trade name Riona, investing with the goal of adding a second approved indication for Riona. Earlier in July, we announced that they reported positive top line results from a pivotal Phase 3 comparative study evaluating Riona for the treatment of IDA in adult patients in Japan. They also stated that they expect to file for this additional indication upon successful completion of their Phase 3 program.

Wrapping up, we feel good about the opportunities we have today, and the team is thrilled with the prospect of continuing to advance vadadustat and enhancing Auryxia's potential.

And with that, I'll turn the call over the Jason.

Jason Amello -- Chief Financial Officer

Thank you, John, and good morning. As John discussed, we delivered a solid quarter while making significant progress on our commercialization and development efforts. When looking at the components of the P&L, our product revenue continues to grow nicely. Net product revenue for the sales of Auryxia for the second quarter of 2019 increased 20.7% to $29.1 million, compared to $24.1 million as reported by Keryx pre-merger during the same period in 2018. And this also represents a 26% increase over Q1 of 2019.

Cost of goods sold associated with the manufacture of Auryxia was $9.6 million for the second quarter of 2019. To that, we add about $28.1 million for the non-cash purchase accounting effects of the Keryx merger, including an inventory step-up charge of $19 million and $9.1 million of the amortization of intangibles, bringing our total reported GAAP cost of sales to $37.7 million.

As you know, our collaboration agreements are both highly strategic and important elements of our financial strategy. Collaboration and license revenue continues to be a significant source of revenue for us, reflecting the value we are creating as we continue to execute and advance our programs. For the second quarter, we recognized $71.7 million of collaboration and license revenue, compared with $48.8 million in the second quarter of 2018, of which the majority for both periods relates to our Otsuka agreements. Historically, Otsuka has funded 52.5% of our Phase 3 development cost of vadadustat, and starting in Tier 2, 2019, Otsuka began funding 80% of those costs. Also, in connection with our MTPC agreement, the JNDA submission in July triggered a $10 million milestone payment from MPPC to Akebia, which we recorded as revenue in the second quarter, as it was considered probable at that time. With continued progress, future collaboration revenue would also come in the form of additional regulatory and commercial milestones and royalties.

Moving to our research and development expenses, R&D expenses were $85.7 million for the second quarter of 2019, compared to $71.9 million for the second quarter of 2018. The increase was primarily attributable to an increase in external costs related to the continued advancement of the PROTECT and INNOVATE Phase 3 studies of vadadustat, including supporting clinical and preclinical activities, as well as regulatory activities and ongoing enrollment. R&D expenses were also impacted by increases in head count and consulting costs to support our expanding R&D programs. It is important to keep in mind that 80% of our Phase 3 costs are reimbursed by Otsuka, which gets recorded as collaboration revenue, as I mentioned earlier.

Selling general and administrative expenses were at $36.1 million for the second quarter of 2019, compared to $12.5 million for the second quarter of 2018. The increase was primarily attributable to commercialization costs associated with Auryxia, as there was no comparable commercialization cost in the pre-merger second quarter of 2018. As a result of the foregoing operating results, the company reported a net loss for the second quarter of 2019 of $58.2 million, as compared to a net loss of $34.1 million for the second quarter of 2018. Again, I want to point out that the net loss of the second quarter of 2019 includes the impact of non-cash charges of $28.1 million related to the application of purchase accounting for the merger with Keryx that I mentioned earlier.

Turning to our capital position, we ended the second quarter with cash, cash equivalence, and available for sale securities of $136.8 million. Importantly, as we continue to effectively manage and leverage our operations together with our partners' resources, we continue to fund and advance our development efforts. We expect our cash resources, including the committed research and development funding from collaborators, to fund our current operating plan beyond the next 12 months into the third quarter of 2020. And lastly, we ended the quarter with approximately 118.8 million shares outstanding.

With that, we'll open the line for questions. Operator?

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * then the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the # key. Again, that's * then 1 to ask a question. To prevent any background noise, we ask that you please place your line on mute once your question has been stated.

Our first question comes from Eric Joseph with JPMorgan. Your line is now open.

Eric Joseph -- JPMorgan -- Analyst

Hey, guys. Thanks for taking the questions. Just a couple from us. John, I guess regarding your comments on the outcome study from Dr. Bloch's group, I'm wondering if you could elaborate on the type of additional studies you're contemplating with KOLs, and specifically whether 're seeking opportunities to expand label claims with Auryxia for later-stage CKD? And then I have a follow-up.

John Butler -- Chief Executive Officer

Sure, Eric. Thanks very much for the question. That's exactly the way we're thinking about this. The FDA has a lot more interest in real world kind of outcome studies. And when you look at the way that Dr. Bloch's study was designed, it really was a very straightforward outcome study with very clear results. So, what we've been discussing is taking a very similar kind of design and just expanding that to ultimately expand the label for Auryxia. And of course, when you think about having that kind of study ongoing and the kind of confidence that demonstrates, we think that actually can impact the way physicians think about the project on a day to day basis, even before you see the data. So, this is just data that's just too exciting not to try to take advantage of. And this is very much in line with the long-term growth strategy that we've been thinking about since the merger.

Eric Joseph -- JPMorgan -- Analyst

Got it. And maybe just one on the product side, product commercial side. I guess there seems to be a little bit of variability in COGS with a bit of a sequential step-up this quarter on Auryxia. Can you just talk about some of the drivers behind the fluctuations in COGS and just sort of how to think about how they would smooth out over time? Thanks.

Jason Amello -- Chief Financial Officer

Sure. This is Jason. So when you look at the COGS, if you look at the base level of COGS, which is $9.6 million, that's really related to the manufacturer of Auryxia. And that's up from Q1, primarily due to the increase in sales. So that representatively is the same. When you look at the margin, it's around 67% at that level. So that's just a volume-driven increase. The other two items that get added to that are purchasing accounting related. So there's the step-up on inventory that is part of the valuation that you do when you do the acquisition from the date of closing. Data gets brought into the P&L as we sell units of Auryxia. So that's a $19 million charge. We expect that will continue into the second half of next year.

The way to think about that is, generally speaking, if you look at that $9.6 million of cost of sales, and if you projected what that would be in the future, that step-up portion is generally twice that per period. So that's a reasonable benchmark to use in terms of what to expect for that. Then there's the amortization of the license that we valued on Auryxia. And that's $9.1 million. And that's the same number every quarter. That's gonna be getting amortized over nine years.

Eric Joseph -- JPMorgan -- Analyst

Great, that's helpful. Thanks for taking the questions.

Operator

Thank you. And our next question comes from Chris Raymond with Piper Jaffray. Your line is now open.

Nicole Gabreski -- Piper Jaffray -- Analyst

Good morning. This is Nicole Gabreski on for Chris this morning. So, just on Auryxia, on CMS's IDA coverage decision, you mentioned if the rule is overturned, that it would be opportunity upside. But without the rule being reversed, how should we think about this going forward? And then, you guys have also talked just about working hard to sort of reverse that decision. Can you talk about any progress made here?

John Butler -- Chief Executive Officer

Sure. Thanks, Nicole, for the questions. So, on the second question first, I mean, we continue to have very good dialogue everywhere in Washington. I think even at the Part D level, there's a clear understanding of the value that Auryxia brings. And I remain very confident in our ability to change that non-coverage determination. On the other side of that, of course, this is the federal government we're working on. So from a timing perspective, they're not on my calendar, unfortunately. So, but as I said, every single meeting we've had has been positive. And when you pair that with -- I was down in Washington a few weeks ago when the president launched this initiative from the administration on improving kidney care and delaying progression, etc. And when you pair Auryxia's IDA indication and the Dr. Bloch data that we just talked about, we're proving that we can delay progression. And that's in line. And to not be covering the drug I think is inconsistent with what the administration's goals are.

So, these are the things that give me great confidence that we're gonna get to a positive resolution. Now, before we get to that resolution, as we've said, most of the growth that we've been driving is coming out of the hyperphosphatemia indication. I mean, our market share in hyperphosphatemia is just over 7%. There's tremendous room for growth there. As you think about things like that KDGL guidelines moving people away from calcium, we continue to see that play through the way physicians think about prescribing drugs here. And so, we have great confidence that we can continue to grow in the hyperphosphatemia space. And even as you think about iron deficiency anemia, fully half of the patients, the CKD patients, have commercial coverage or Medicaid, where they still have access to Auryxia. So there's still significant opportunity to grow within that space. We won't be able to maximize that without the CMS coverage, but we can certainly have very robust growth from where we are. And we're seeing that in the prescriptions to date.

Nicole Gabreski -- Piper Jaffray -- Analyst

Great. And then sorry if I missed this, but for vadadustat and the JNDA submission, I guess I just wanted to clarify, has that submission been accepted for review? And if not, will that decision be communicated in some way?

John Butler -- Chief Executive Officer

So, Japan doesn't have a process like the FDA does where they formally notify you of acceptance. It's generally -- they'll send questions that would indicate they're not accepting it within a few weeks of the filing. We're well past that point now. So I think Mitsubishi -- and we believe that we're on the way to a full review.

Nicole Gabreski -- Piper Jaffray -- Analyst

Okay, great. Thanks so much.

John Butler -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from David Lebowitz with Morgan Stanley. Your line is now open.

David Lebowitz -- Morgan Stanley -- Analyst

Thank you very much for taking my question. I guess since competitive data came out earlier this year, I guess what positive takeaways can you -- do you have from what you read out from their data that might extrapolate to your upcoming studies, and what differences can you also extrapolate that you would want to highlight to us regarding your studies and how we should think about things when we compare and contrast?

John Butler -- Chief Executive Officer

David, thanks for the question. So, there are a number of things in the release on roxadustat that gives us greater confidence in vadadustat. I mean, certainly the fact there didn't seem to be, certainly in the report, any overt safety issues at all which would or could be categorized as class-related. So, that gives me confidence. On top of that, when you look at the press release from Astra Zeneca, it talks about confirming cardiovascular safety. I think that's a very important comment. I mean, we haven't seen any data, of course, so it makes it hard to draw too many conclusions. But it certainly suggests that there was no negatives that were seen from a cardiovascular standpoint. And I think that, again, from a class perspective, is quite encouraging.

And then when I think about our program vis-a-vis their program, I really feel like our program is very much set up for success. Success both from a clinical perspective, from a regulatory perspective, and ultimately from a commercial perspective. From a clinical perspective, again, we've got an active control comparator in both our non-dialysis study as well as our dialysis study, and with a non-inferiority endpoint, we think this gives us a very strong opportunity for a very positive result from that perspective. It also allows us to do multiple comparisons versus the standard of care, which is an ESA. And that from a commercial perspective gives us opportunities to compare. Remember, the $7 billion of revenue that's being generated today in this market is being generated by ESAs.

To take that market, you have to be able to compare directly to the drug that physicians are used to using. We'll have much more of an opportunity to do that, particularly in the non-dialysis segment, which we all recognize has the opportunity to grow more than in the dialysis segment. But of course, you've got to get to the market first. And that, you want to have the right regulatory strategy. And I sat across from the FDA, and they said in the non-dialysis segment, they wanted to see an active control. That's what we're going to give them. We think that gives us a significant advantage from that perspective.

And beyond that, we have an agreed to non-inferiority margin for MACE. And we sat with them -- I guess it was just over a year ago now -- and agreed on the key elements of our statistical analysis plan. So, we think we're very, very well set up as we -- as our data comes in less than a year from now, and set up for success, not only from a regulatory perspective, but from a commercial perspective as well.

David Lebowitz -- Morgan Stanley -- Analyst

Thank you for that. And just jumping over to Auryxia and following up on a prior question, I know that certainly, Medicare was not going to reimburse for IDA. And there was some form that was imposed that was also going to affect the hyperphosphatemia, at least for a temporary period of time. Has that more or less worked its way through?

John Butler -- Chief Executive Officer

So, yeah. It was a very unusual situation at the beginning of the year, where every patient on the drug had to go through a prior authorization process. And that's why you saw the pressure on prescriptions in Q1. The team has done a great job of working through that. Incredibly solid execution by the folks in the field. We've put some tactics in place around our hub, etc., to help physicians and patients get through the prior authorization process. It's not as if physicians aren't used to that process. They are very much used to having to go through prior authorizations. It was simply the volume of patients who had to go through it in Q1. So we've really worked through that. We're now seeing clear growth. As I said, we see that certainly in the Q2 number, and we're continuing to see growth in Q3. So, I think working through it is the right way to say it. And while we're confident in resolving the CMS issue, we're also working very hard so that at the beginning of the year next year, we'll be very prepared not to see the same kind of pressure on prescriptions. And I'm very confident that we're set up to do that.

David Lebowitz -- Morgan Stanley -- Analyst

Thanks for taking my questions.

Operator

Thank you. And our next question comes from Bert Hazlett with BTIG. Your line is now open.

Bert Hazlett -- BTIG -- Analyst

Thank you. David just asked my questions, and you were very clear in answering them. I'll just ask one on cash needs and expectations going forward. Could you just repeat the guidance with regard to the cash runway, and thoughts on capital structure going forward, broadly? Thanks.

Jason Amello -- Chief Financial Officer

Sure. So, as we disclosed, we have cash beyond 12 months. And we're into Q3 2020 with that. So, we're affirming our previous guidance. Going forward, we look at where we are on the horizon of our Phase 3 program. We're one year away from that reading out. So, those costs will start to wind down. And at the same time, we believe the commercial business on Auryxia will be increasing and contributing more cash. So, our needs going forward are much more manageable in the next near-term horizon versus what we've had done historically, where we had the large Phase 3 program going on all cylinders while we're enrolling. So, we think that we're now in a very good position from a capital position, and also having flexibility with the commercial product to look at other non-dilute effects of sources as well.

John Butler -- Chief Executive Officer

Yeah. Bert, let me just kind of put an exclamation point on Jason's points there. I mean, we have more than 12 months of cash today, so there's no urgent need. But we're always looking for opportunities to enhance our capital structure. And, as Jason said, post the merger, when we were working through the merger, we talked about the fact that having a commercial product gave us so many more options versus simply selling equity. And we're exploring all of those. And we have a commercial product that's moving toward profitability. And that's an important component of the long-term opportunity to put capital on the balance sheet. But there are multiple non-dilutive options as well, and we're exploring all of those. And we have time to do that, given the cash position that we have today.

So, we feel very good about where we are vis-a-vis cash. And as Jason said, as important as what our balance sheets say is what do you need. And when we look at the revenue growth we're seeing from Auryxia and we expect to continue to see from Auryxia, that has a significant impact on what our ultimate need is. And Jason used the right word -- it's very manageable compared to what we have to raise to fund this clinical program over the last few years.

Bert Hazlett -- BTIG -- Analyst

Thank you for the color and thank you for taking the questions. Thanks.

Operator

Thank you. And our next question comes from Difei Yang with Mizuho. Your line is now open.

Alex Bouilloux -- Mizuho -- Analyst

Hey, good morning, guys. This is Alex on for Difei. Thank you for taking the questions. I have one on vadadustat. When you think about commercialization of vadadustat initially in the dialysis setting, how long do you think it would take for physicians to become comfortable with vadadustat in the non-dialysis setting? How much physician education do you think will be required there? Thank you.

John Butler -- Chief Executive Officer

Alex, thanks for the question. So, in the dialysis setting, of course, you've got -- they're two very different markets, right? And one of the reasons that we completed the transaction with Vifor was the opportunity to accelerate the adoption of the product within the dialysis market. And I mean, if you use Mircera from Vifor as a comp, in nine months, they had 90% of patients at Fresenius on Mircera. Now, the way it works basically is they do pilot studies. They understand what the protocol is, and then they push that through. And we're already in conversations with Vifor about the strategy to make that happen. So, we do believe that you can have a very quick adoption of vadadustat within the dialysis population.

The non-dialysis market, of course, does take more education on the product and more time to move adoption. And that's one of the reasons why ironically, it's nice that another company might be out there talking about the benefits of HIF for a year before, and we bring out what we think is a superior product. We'll see what the data says, but that's our belief. And that allows us to take advantage of the work that they've done.

Operator

Thank you. And our next question comes from Chad Messer with Needham & Company. Your line is now open.

Chad Messer -- Needham & Company -- Analyst

Great. Good morning, and thanks for taking my questions. This March 2025 date on the settlement with Par, that's good. That's actually a year or so out from what we'd been modeling based on patents. What do you think the odds are you'll have other people you'll have to defend your patents against, and if so, would the 2025 kind of stick? I know this is a settlement, not a judgment.

John Butler -- Chief Executive Officer

Right, Chad. Thanks for the question. We were very, very pleased with that settlement with Par. There are five other ANDA filers. And given that we are in litigation with them, we won't comment specifically on it, but we believe that Par was the first filer. Par believes they're the first filer. We don't know that for a fact until the FDA publishes the list. But we think that has some potential to positively influence where this lands. And as you said, quite rightly, in our modeling, we had been looking at 2024. We're very pleased with a March of 2025 date.

Chad Messer -- Needham & Company -- Analyst

Yeah. No, that's great. And then, I know the Japanese have a less defined process regulatorily than the FDA, but what's typical review time or range of typical review times?

John Butler -- Chief Executive Officer

Yeah. Actually, it's just a little bit of a different process. It's pretty well-described. It's about a year. And I think that's the right way to think about it. They do approvals in batches, which is a little bit different. But you're talking about a year for the review.

Chad Messer -- Needham & Company -- Analyst

All right, great. And then just wanted to ask a little bit about the three time per week dosing that you got into, into PROTECT, sort of trying to park it back to when you added that. Is that flexibility -- is the benefit of that mainly just to give a different dose, or is it supposed to be a complementary adherence benefit as well? Normally, you think of less than daily as sometimes problematic for adherence.

John Butler -- Chief Executive Officer

Yeah. So, just to clarify, the 402 study has three times weekly dosing after daily dosing, and it was an ongoing study. Of course, we had the Phase 2 dialysis study that we published a few years ago that had a three times weekly arm in it as well. And then we're planning for a registration study with three times weekly dosing also. And the rationale there is really around the dialysis segment and the fact that patients dialyze three times a week, and the fact that vadadustat would be part of the bundle. It would certainly be purchased by the dialysis providers, even with the TDAPA rule that allows for payment outside the bundle. And the dialysis providers want to ensure their patients are compliant. And so, they can deliver the drug to the patient in the chair, and ensure 100% compliance, and that's their preference.

So, from our perspective, you look at the initiatives that the government has to move people out of the dialysis center onto home dialysis, peritoneal dialysis. Having a once a day option for those patients is ideal. There will be patients that will still be in the dialysis center, many thousands of them, and having the three times weekly option for them is ideal as well. And so, thinking about it from a commercial perspective, the idea is to have physicians and patients have choice in how drug is delivered.

Chad Messer -- Needham & Company -- Analyst

Okay. And I appreciate you taking me through that. And then -- my apologies to Jason, because I know you went through this with an earlier question, just on cost of goods. I get that there's a flat line at 9,100. But how long is that accounting -- how long are we affected by that other non-cash item on the COGS?

Jason Amello -- Chief Financial Officer

Sure. No problem, Chad. So again, the key thing to remember, both of these are non-cash. So the amortization is nine years from the date of the acquisition. So that's the same number, $9.1 million per quarter. So if you factor it from December of 2018, nine years on a quarterly basis for that number. On the step-up, the fair value step-up for the inventory, we expect that, we say, by the second half of next year, probably around this time, Q3 or so, we think that will be fully depleted. And the way to think about that is if you just project a normal margin without these charges. So in this quarter, $9.6 million, or 67% margin. If you're forecasting that, that fair value step-up charge would be twice, two times that number on a quarterly basis, generally speaking, give and take. And again, we think that will be finished by this time, Q3, second half next year.

Chad Messer -- Needham & Company -- Analyst

All right, great. Thanks.

Operator

Thank you. And our next question comes from Kennen MacKay with RBC Capital Markets. Your line is now open.

Justin Burns -- RBC Capital Markets -- Analyst

This is Justin on for Kennan. Thanks for taking my question and congrats on all the progress this quarter. Question from us on event rate expectations for the Phase 3 program. Just wondering where that guidance was coming from and how it changes the hemoglobin goals in the initial RNS publications. Does it affect the massive N-rate predictions? So essentially, with the new hemoglobin goals, have there been any changes to your expectations for event accrual? Thank you.

John Butler -- Chief Executive Officer

Yeah. So, when you're projecting event rates when you're designing a study, I mean, you look at all of the available literature and project based on that. If you think about studies like TREAT, I mean really, what you're using -- you're not really using the RNS free -- you're really thinking about the placebo rate. And that's kind of informed kind of the way we think about it. Obviously, we are deeply into the trial now. INNOVATE's fully on a role. PROTECT will be very shortly. And so, we have a very good sense of how events are coming in. And I think we have a lot of confidence in the timing now of when data's gonna be available.

Justin Burns -- RBC Capital Markets -- Analyst

Great. Thank you very much.

Operator

Thank you. As a reminder, ladies and gentlemen, that's * then 1 to ask a question. Our next question comes from Ed Arce with H.C. Wainwright. Your line is now open.

Ed Arce -- H.C. Wainwright -- Analyst

Hi, everyone. Thanks for taking my questions. Most have been asked and answered already pretty thoroughly. But I did want to ask about one around this new policy, Advancing American Kidney Health, and the goals of reducing the risk of kidney failure and improving access to quality care, in particular, around the sort of payment incentive plans that they have. Could you share with us sort of your thoughts and perspectives going forward as that's being unrolled, and how in particular, you think that could ultimately benefit HIFS and vadadustat in particular? Thanks.

John Butler -- Chief Executive Officer

Yeah. Thanks for that question. It is an initiative that obviously is positive for everyone in the kidney care industry, frankly. And I recently was elected chair of the Kidney Care Partners, which is the lobbying organization for the community. And that really does give Akebia a unique opportunity to be kind of at the head of the table as we work with the government on some of these policy initiatives going forward. So, I think people are still trying to understand the different payment schemes that they are proposing, both the ones that are mandatory and optional. I think very importantly, of course, is the TDAPA rule. And when you think about Akebia and vadadustat, TDAPA is that traditional drug add-on payment adjuster that allows for payment of vadadustat out of the bundle for two years and really does encourage innovation.

And there are still certainly improvements we'd like to see made to TDAPA. And again, being part of KCP helps us to drive our agenda forward with the rest of the community. But I think TDAPA's the one that really has the biggest impact on us today on vadadustat. When you think about Auryxia, we've kind of had that near-term opportunity to grow -- it's really that focus on outcomes that's key for us. And a lot of the payment schemes that they put out there are really around dialysis, whereas it's these initiatives on keeping people off of dialysis that are much more interesting when you think about Auryxia, particularly given the Bloch data that we referenced earlier. So, we are absolutely kind of right in the middle of finding every opportunity to take advantage of that and help that drive our strategic initiative for Auryxia and vadadustat in the future.

Ed Arce -- H.C. Wainwright -- Analyst

That's great color. Thanks, John, and congrats on the continued progress.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to John Butler for any closing remarks.

John Butler -- Chief Executive Officer

Thanks, Joelle. We're very pleased with the progress that the team has made in both driving Auryxia revenue and executing on the vadadustat program. And we really do look forward to updating you on our future progress. Thanks very much for joining the call today. Have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.

Duration: 47 minutes

Call participants:

Kristen Sheppard -- Vice President of Investor Relations

John Butler -- Chief Executive Officer

Jason Amello -- Chief Financial Officer

Eric Joseph -- JPMorgan -- Analyst

Nicole Gabreski -- Piper Jaffray -- Analyst

David Lebowitz -- Morgan Stanley -- Analyst

Bert Hazlett -- BTIG -- Analyst

Alex Bouilloux -- Mizuho -- Analyst

Chad Messer -- Needham & Company -- Analyst

Justin Burns -- RBC Capital Markets -- Analyst

Ed Arce -- H.C. Wainwright -- Analyst

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