FibroGen, inc (FGEN) Q3 2021 Earnings Call Transcript

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FibroGen, inc (FGEN -7.87%)
Q3 2021 Earnings Call
Nov 9, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello. Thank you for standing by, and welcome to the FibroGen Third Quarter 2021 Financial Results Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Dr. Michael Tung. Please go ahead.

Michael Tung -- Investor Relations

Thank you, Josh. Good afternoon, everyone, and welcome to FibroGen's 2021 Third Quarter Conference Call. 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 will include prepared remarks from Enrique and Juan, after which, we will open up the call for Q&A. I would like to remind you that remarks made on today's call include forward-looking statements based on FibroGen's current expectations. Such statements may include statements regarding but not limited to our research and development activities, the initiation, enrollment, design, conduct, and results of clinical trials; our regulatory strategies and potential regulatory results, anticipated FDA interactions, commercialization and results of operations; risks, plans, market opportunity and strategy related to our business, our collaborations with AstraZeneca and Astellas, financial guidance, and certain other business matters.

Such forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from those anticipated in such statements. For a discussion of these and other material risks and factors that could affect our future financial results and business, please refer to the disclosure in today's press release reporting our fiscal 2021 third quarter financial results and business update, our most recent forms 10-K and 10-Q and reports that we may file on Form 8-K with the Securities and Exchange Commission.

All our statements are made as of today, November 9, 2021, based on information currently available to us, and FibroGen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Today's press release reporting our fiscal 2021 third quarter 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 wwwfibrogen.com.

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

Enrique Conterno -- Chief Executive Officer

Very good. Thank you, Mike, and good afternoon, everyone, and welcome to our third quarter 2021 earnings call. Today, I would like to provide a high-level summary of important accomplishments and developments in recent months. I would also like to welcome and introduce our newly appointed CFO, Juan Graham, who will review the financials. We will then open the call for your questions. I also want to thank Pat Cotroneo, who stepped down as CFO in September and who worked at FibroGen for 21 years.

Under his leadership, FibroGen transitioned from a private to public company and from a development stage to commercial-stage company. Pat will serve as Executive Adviser through March 2022 to ensure a smooth transition. Today's call will include an update of the regulatory status of roxadustat and our continued strong performance in China. So why don't we get started? Let's get started with roxadustat on slide three. In August, the European Commission approved EVRENZO for the treatment of symptomatic anemia associated with chronic kidney disease.

Astellas has launched in Germany, the United Kingdom, Netherlands, and Austria, and the early feedback from healthcare providers is positive. The anemia of CKD opportunity in Europe is significant, and EVRENZO has an important first-mover advantage relative to other HIF PHIs. The recent FDA completed response letter we received for roxadustat for the treatment of anemia of chronic kidney disease, however, represents a major setback. We and our partner, AstraZeneca, are in discussions on a potential path forward in anemia of CKD, and we have an additional meeting with the FDA scheduled. In China, we reported another strong quarter of roxadustat performance.

Finally, last week, we and our partners, Astellas and AstraZeneca presented 15 poster presentations related to roxadustat on CKD at the ASN Kidney Week 2021 Virtual Conference. Moving now to slide four and the recent reorganization. Given the uncertainty regarding roxadustat path forward in the U.S., we have developed and are beginning the implementation of a comprehensive plan, which includes a cost reduction effort that would enable us to focus on our strategic priorities of development of pamrevlumab, roxadustat, and advancing our pipeline. Our plan is to reduce projected expenses by approximately $100 million per year for each of the next three years. We are eliminating approximately 100 positions in the U.S., of which 70% are open positions and 30% are existing positions. We thank all the employees whose positions were eliminated for their meaningful contributions to FibroGen. Moving to slide five.

FibroGen continues to be positioned to create significant value for patients and shareholders by executing on our three areas of focus: #1, accelerating the development of pamrevlumab in three indications with significant unmet medical needs, idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer, and Duchenne muscular dystrophy. #2, ensuring commercial success of roxadustat in patients with chronic kidney disease outside the U.S. while exploring a path in the U.S. and with a potential for expansion into additional therapeutic indications.

#3, increasing our research productivity to advance novel programs that leverage internal expertise and accessing the external innovation for additional pipeline opportunities. As you can see on slide six, we're pleased to report total roxadustat net sales to distributors in China of $57.8 million for the third quarter and $154.1 million year-to-date for 2021. We continue to see increased roxadustat adoption. FibroGen reported $13.4 million in China roxadustat net product revenue for the third quarter of 2021 and $42.2 million year-to-date.

As you can see on slide seven, the ESA market growth has accelerated since the inclusion of roxadustat on the NRDL. In fact, ESA revenue over the last eight months has shown meaningful growth over the same period in the prior year. Moving to slide eight. Roxadustat has driven the expansion of the anemia of CKD category and is capturing share in an expanded market. Roxadustat captured 74% of the category growth for the eight months ended August 2021 over the same period in 2020.

Finally, as shown on slide nine, roxadustat is the #1 branded treatment for anemia of CKD in China for the past eight months, achieving a value share of 33% in the most recent month within the segment that includes all ESA products and roxadustat, currently the only HIF PHI on the market. By year-end, we expect to finalize the revised reimbursement price for roxadustat in China, which will be lower, and are prepared to ensure continued growth year-on-year.

We look forward to keeping you updated as we advance our long-term goal of making roxadustat the standard of care in treated China CKD anemia patients. Moving now to our clinical development programs on slide 10. Today, we are reiterating our time lines reported last quarter. And we continue to make progress on the license of HiFiBiO Therapeutic assets and to evaluate the other program opportunities available under the exclusive options agreement.

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, and appreciate the welcoming words as I join the team. Before jumping in, let me start by stating how excited I am to be joining FibroGen. I'm looking forward to supporting the organization and our vision of developing and commercializing innovative medicines in areas of significant unmet need in addition to delivering value to our shareholders. I also want to extend my thanks to Pat Cotroneo for his leadership and contributions to the organization for the last two decades. Now, getting into our results for the quarter.

As we announced today, total revenue was $156 million for the third quarter of 2021 as compared to $44 million for the same period in 2020. Before diving into our revenue performance and as a reminder, we record four sources of revenue. First, license revenue, which is allocated from license payments and milestones earned or deemed probable of being earned in the period; second, development and other revenue, which is revenue from development expense, reimbursement, and revenue from other development activities; third, net product revenue, which is revenue from direct sales to distributors and sales to our joint distribution entity or JDE in China from which we recognize a transfer price; and fourth, drug product revenue, which includes transfer price payments from our collaboration partners for our commercial-grade API for bulk drug product shipments made to them.

In the third quarter, revenue includes a total of $120 million in milestone payments from Astellas related to the European Commission approval of roxadustat or EVRENZO, for the treatment of adult patients with symptomatic anemia associated with CKD. This amount is allocated at 108.4 and $11.6 million between license revenue and development revenue, respectively. In the third quarter, we recorded $14.6 million in development and other revenue, in addition to $8 million as upfront payment related to Eluminex out-license transaction recorded as license revenue.

During the quarter, and as stated earlier by Enrique, we recorded $13.4 million net product revenue for roxadustat sales in China. This includes $10.3 million from our sales to the joint distribution entity, or JDE, and $3.1 million of direct sales FibroGen made to distributors. As we have previously disclosed, starting the first quarter of 2021, the distribution entity jointly owned by AstraZeneca and FibroGen, or JDE, began selling roxadustat to distributors and paying for AstraZeneca's commercialization efforts in China and AstraZeneca's portion of the profit share.

Previously, FibroGen was responsible for these items. For the third quarter of 2021, the JDE accounted for over 94% of the total China roxadustat sales volume, with the remaining 6% occurring through FibroGen's direct sales to distributors. To provide context for the operating results of our roxadustat business in China, total roxadustat net sales, including sales through the JDE to its distributors and FibroGen China's direct sales to our distributors, was $57.8 million for the third quarter of 2021, which represents 155% growth compared to $22.7 million for the third quarter in 2020.

We are encouraged by the growth of our China operations, and we expect continued growth -- continued strong market performance in the future. FibroGen's net transfer price from the sales to the JDE was $19.1 million for the third quarter, consistent with the 30% to 45% range of the JDE's roxadustat net sales to which we have previously guided. From this net transfer price, we defer a certain portion for revenue recognition purposes under U.S. GAAP. After this deferral, FibroGen recorded $10.3 million in net revenue for the quarter from roxadustat sales to the JDE.

Finally, for the third quarter, we did not record any revenue related to drug product revenue. Now, moving down to P&L. During the third quarter, operating costs and expenses were $105 million compared to $11.7 million a year ago. To put this in context, roughly around 80% or $74.8 million of the operating expense net increase during this quarter is related to the Q3 2020 comparator of China SG&A expenses. In the third quarter of 2020, driven by the China amendment between FibroGen China and AstraZeneca, a portion of the historical unpaid co-promotion expense was adjusted to reduce the amount owed by FibroGen China.

This onetime adjustment totaled $84.4 million, offset by charges for Q3 2020 under the amended agreement, hence driving the variance versus the third quarter of 2021. In addition, in the third quarter, R&D costs increased by $17.4 million or 30% compared to prior year, primarily driven by Phase three clinical trial expenses, including drug supply costs associated with our pamrevlumab programs. During the third quarter, net income and EPS was $49.8 million or $0.54 both per basic and diluted shares, respectively, as compared to net income of $33 million or $0.36 per basic and $0.35 per diluted shares for the third quarter last year, respectively.

At September 30, we accounted for $665 million in cash, cash equivalents, investments, and trade receivables. Looking forward, based on our latest forecast, we estimate our 2021 ending balance of cash, cash equivalents, investments, and trade receivables to be in the range of $580 million to $610 million. The increase in our 2021 ending cash range from our previous guidance of $480 million to $490 million is primarily attributable to the timing of certain onetime payments as well as net cost savings expected to be realized in the remainder of this year.

With that, I would now like to turn the call back over to Enrique.

Enrique Conterno -- Chief Executive Officer

In closing, we continue to look to maximize the value of our portfolio and reduce expenses, which will enable us to focus on our strategic priorities and development of pamrevlumab, roxadustat, and advancing our pipeline. Pamrevlumab is a potential first-in-class medicine in Phase three development in three indications with significant unmet medical needs, idiopathic pulmonary fibrosis, locally advanced unresectable pancreatic cancer, and Duchenne muscular dystrophy.

Roxadustat continues to perform very well in China, and commercialization has now commenced in Europe. As shown on slide 11, we continue to have a strong financial position with approximately $665 million in cash and expect to end the year with $580 million to $610 million in cash. We are well-capitalized to meet our goal of delivering innovation to areas of unmet clinical needs.

Now, I would like to turn the call back to the operator for questions. Josh?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Annabel Samimy with Stifel. You may proceed with your question.

Annabel Samimy -- Stifel -- Analyst

Hi, thanks for taking my question. I was just wondering if you've had discussions with AstraZeneca on what is OK and what is the nonstarter as far as additional clinical work for both of you for roxa in the U.S.? And could that drive a change in the U.S. agreement and would they be willing to continue investing given that that, I guess, altering competitive landscape, and I guess, the catch-up that competitors are having on you? And then secondly, since the CRL, have you noticed whether enrollment in any of the studies, namely the MATTERHORN study has slowed down and have any of the new therapies that are picking up in the space complicated that as well?

Enrique Conterno -- Chief Executive Officer

Very good. Thank you very much for your question. I think on AstraZeneca and the potential path forward, what I would say, and I'm going to ask Mark Eisner to complement me is we -- not only do we have to have an aligned plan with AstraZeneca but of course, we need to ensure that whatever path forward basically is, it's discussed and aligned with the FDA. So there is no question that we continue to believe in the product.

And the question is really, how can we ensure that we can conduct a trial that meets the complete response letter for us to be able to have commercial access in the U.S. in anemia of CKD. And at the same time, be able to do that in an expeditious manner. But I'm going to ask Mark to comment -- provide a bit more color, and then I'll answer your questions on the collaboration agreement.

Mark Eisner -- Chief Medical Officer

Thanks, Enrique. So as Enrique said, we are collaborating very closely with AstraZeneca to determine the best path forward. We are planning to jointly meet with the FDA to discuss this in the very near future. And we're highly aligned with AZ on doing that. You asked a question about the CRL and has it affected enrollment in the MATTERHORN study or other studies. We haven't noticed any slowdown after the CRL. I think the clinicians and the investigators seem to be still very interested in those studies and enrolling those studies. So back to you, Enrique.

Enrique Conterno -- Chief Executive Officer

Yes. And clearly, our discussion with the FDA will be key when it comes to how do we think about this potential path forward here in the U.S. And as far as the relationship with AstraZeneca, the relationship is healthy. Of course, we suffered a significant setback here in the U.S., but we're trying to have an aligned path forward and the teams are collaborating, I think, very closely.

Annabel Samimy -- Stifel -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Edwin Zhang with H.C. Wainwright. You may proceed with your question.

Edwin Zhang -- H.C. Wainwright -- Analyst

Seeing in your question. Hi, thanks for taking my questions. A question on roxa in China. We know last year, you amended your agreement with AstraZeneca on China operations. One of the major purpose of the amendment was for FibroGen to be profitable sooner in China. Can you talk about this business go a bit further? Given the current roxa sales and growth in China, when do you expect to achieve profitability there?

Enrique Conterno -- Chief Executive Officer

Yes. Very good. Clearly, we are very excited about our profitability -- our performance and overall progress when it comes to profitability in China. I think it's fair to say that the product has had significant success. And I think this is demonstrated this quarter again. Since the -- we've gotten reimbursement from the NRDL, we see continued increased adoptions. As we mentioned in the past, hospital listings used to be a major driver. We are now largely listed in about 80% of the universe or the opportunity for anemia of CKD in China.

The question is really now increasing the adoption within those listed hospitals. And I think it's fair to say things are going very well. We did amend the agreement with AstraZeneca. I think for FibroGen this, as you well point out, meant more predictable and a profitable business. So -- and I think we've made huge progress. At the end of the day, I think the overall performance of the product makes a very important difference in that regard. I'm going to ask now Juan to maybe make a few additional comments.

Juan Graham -- Chief Financial Officer

Sure, Enrique. I think, Edwin, apart from what Enrique has just mentioned, the other component around China is that we are in a good trajectory, as I mentioned earlier, around the growth of the product. We are, I think, well on our way for P&L profitability at this point in time in addition to -- in 2023, being able to start as well repatriating some of that cash that we have in China, which is tied to as well our profitability. So I think, overall, we are well on track to continue on that path and being able to continue to fund operations as well within the Chinese business.

Edwin Zhang -- H.C. Wainwright -- Analyst

Good. Also, I think, Enrique, you mentioned that roxa is becoming the standard of care for CKD patients in China. Can you provide some color on this? Is roxa officially included in the clinical guidance in China or is it recommended as the first-line treatment over ESA for anemic patients?

Enrique Conterno -- Chief Executive Officer

Yes. This is an excellent question. Indeed, roxa has been included in a number of the clinical guidelines in China. It is included together with ESAs and other treatments. But as you know, I think for new product, this inclusion becomes critical. I think how roxa is described, I -- we are very pleased with that. The mention that we made related to becoming standard of care relates to basically just looking at the share performance that we're having. When we look at the last few months, basically, now roxadustat is the largest brand by value in China.

It has about a 33%, 34% share by value and it's continually increasing. Clearly, our aspiration is still higher. And I think what's important, I think, is when we look at the market is -- not just that we're capturing share but since roxadustat was launched and reimbursed, we've seen an expansion of the market. In fact, an expansion are of -- even ESAs are growing at faster rates. So there is the increased promotion of roxadustat and anemia CKD. Clearly, there's a lot of unmet need, and we basically have seen that reflected in the marketplace in China. So we are very pleased in terms of where we are on the -- withstanding the progress today in China.

Edwin Zhang -- H.C. Wainwright -- Analyst

Very helpful, thank you.

Operator

Thank you. Our next question comes from Michael Yee with Jefferies. You may proceed with your question.

Michael Yee -- Jefferies -- Analyst

Hi guys, good afternoon. I had two questions. Following up on the scenario tree with the FDA and with AstraZeneca, can you maybe lay out some of the various scenarios that you see? And when you would be in a position, generally speaking, to update us on what happens? Presumably, the goal is to run another study with the FDA, so is that the base case and the alternatives would include not doing that and rejiggering the whole partnership? So maybe you could just make some comments on that and the timing of when you think this is reasonable to update the stream.

Enrique Conterno -- Chief Executive Officer

Yes. Thank you. Yes. The meeting with the -- scheduled with the FDA is coming up shortly. That meeting, of course, is critical. I think our basis, given the complete response letter is that -- and given the discussion we've with the FDA is that we will need to conduct a trial to be able to bring roxadustat in the -- to market in the U.S. for anemia of CKD.

Once we basically have an aligned path forward with the FDA. I think at that point in time, we'll be in a better position, I think, to provide an update to the market. I don't want to speculate on the different types of scenarios here in terms of how to think if that's not the case. Right now, I think that's -- I want to make sure that we have the meeting. We have, I think, a good proposal we'd like to make to discuss with the FDA and see where we go from there.

Michael Yee -- Jefferies -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from Geoffrey C. Porges with SVB Leerink. You may proceed with your question.

Geoffrey C. Porges -- SVB Leerink -- Analyst

Hi, thank you very much. A couple of questions, if I may. First, I just want to be clear on the expense guidance and the restructuring. You've highlighted the $100 million reduction in 2022 and then again in 2023. But is that -- I think you said it was against what you were planning to spend. Should we be modeling a $100 million reduction versus the $105 million expense run rate in Q3 or the $450 million to $500 million for the full year?

So should we literally be saying $350 million for next year or $300 million for next year and the $200 million for the year after or is it a reduction against a hypothetical increase that you would otherwise have incurred in support of the product launch? So it'd be helpful if you could be really clear about that. Second -- to the other question. Are you -- would you consider monetizing the JDE in China as a source of capital to fund your internal R&D investments? And then lastly, I'd be interested in your comments of having seen all the competitors' data for their HIF, do you believe the signals that the FDA identified in your studies were molecule effects or class effects?

Enrique Conterno -- Chief Executive Officer

Very good. Thank you. Let me first try to address your first question. I'm going to ask Juan to also comment, and then we'll go to the other two questions that you basically had around China monetization, and then whether some of the signals are product or marginal to the class. First, I think the -- what we basically provided in terms of guidance today, was guidance around cuts relative to projected expenses. Now having said that, we are eliminating positions. So our headcount is going to be lower and that, by definition, basically means that we are lowering expenses.

But yes, I think the $100 million is relative to projected expenses. Keep in mind that as we get pamrevlumab closer to the readouts and to a potential launch, we basically will have some additional expenses that we have to account for. Our aim today is to be able to launch pam in the U.S. as FibroGen and we want to make sure that we have the resources to be able to do that. Juan, do you want to make any additional comments on the first point? We're not providing guidance when it comes to operating expenses at this stage, but do you want to provide any more color on that?

Juan Graham -- Chief Financial Officer

I think you explained it well, Enrique. I think, Geoffrey, as Enrique mentioned, this is against our forecasted spend given of what we have planned prior to the CRL. So that's, I think, how to think through this in terms of our future expenses. And -- but as Enrique mentioned, there is also some element of reduction of costs versus our actual dollars, right, related to the number that he highlighted earlier around some job eliminations or terminations in the United States.

Geoffrey C. Porges -- SVB Leerink -- Analyst

Okay.

Enrique Conterno -- Chief Executive Officer

Just to give you a sense, I think we said we are eliminating 100 positions, right? 30 of those positions were currently filled. But clearly, over the last few months, we've been managing positions, not filling them, and we're not replacing positions. So all in all, I think we are expecting to -- vis-a-vis the expected position that we have, is basically a full elimination of 100 positions. You probably have also seen, Geoff, that we have -- our cash guidance for the year has increased. Some of it is timing, but about $15 million of increase in the cash guidance, it relates directly to expense reduction.

So -- and that's, of course, very recent. So that's already having an impact on -- for the rest of the year. When it comes to China, clearly, we always think about all of the options to -- we're continually thinking about how to maximize the value of our assets and what is it that we could do, whether it's China operations and that's something that we're always thinking about and exploring. When -- whether it's China or whether it's thinking about -- I know I get a lot of questions about pam partnering. Clearly, I think the aim for us is always how can we basically maximize the value of the asset.

And if partnering, for example, in the case of pam, provides more value to partnering, that's something that we would pursue. Of course, as I mentioned, our aim is to launch in the U.S. as FibroGen. But clearly, we are always thinking about what is it that we could do to ensure that the value of all of our assets is basically maximized. Finally, a quip on your question the -- on some of the additional data. I think it's always very difficult to say whether the signals were just a matter of -- signals are a matter of chance when events are low and you start seeing different signals in different products.

These are large trials but in any large trial, you are going to see basically some adverse events that basically go against you. Some are going to go for you. Clearly, the safety signals are the ones that are going against you. But my take right now, I think it's very difficult to say whether what we're seeing in some cases, some of those signals go across products or not. And I think at the end of the day, I think more data needs to be released and time would basically tell. I'm going to ask Mark also to provide some additional comments to the last question.

Mark Eisner -- Chief Medical Officer

Thanks, Enrique. I mean, I think the differences in trial designs, dosing strategies, choice of competitor, for example, roxadustat was compared to placebo in a non-dialysis population versus daprodustat are compared to an active comparator. It makes it very difficult to draw generalizable principles there about the class versus the molecules. And there's also a lot we don't know yet, just based on a very top line data we've seen in presentations and publications. So very interesting question, but I don't think we have a full answer for you.

Operator

And your next question comes from Jason Gerberry with Bank of America. You may proceed with your question.

Perry -- Bank of America. -- Analyst

Hi, This is Perry [Phonetic] on the line for Jason. First, I'd like to understand your impression of the roxa CRL. What were your main takeaways related to the details of the CRL? And I guess, how has that informed the potential path forward for roxa in CKD in the U.S. market? Could there be a potential for a trial focused on either dialysis-dependent or nondialysis-dependent patients focused on ESA hyporesponders? And then just have one follow-up question.

Mark Eisner -- Chief Medical Officer

Yes. So good question. As Enrique said, we're still working through the path forward and are going to be meeting with the FDA soon. As you'll recall from our advisory committee, we had proposed that a lower starting dose and a different dosing strategy could be a path forward for the molecule. So that's something we're clearly going to explore with the FDA. In terms of the specific populations that we need to study in order to achieve a broad label, I mean, we are still intending to achieve a label that includes both DD and NDD. That's still a point of discussion with the FDA about exactly how we can achieve that.

Perry -- Bank of America. -- Analyst

Okay. Thanks. And then just one other related to adoption trends for roxa in CKD in China is -- I guess, where is the growth coming from at the indication level? Is it around 50-50 between dialysis-dependent, nondialysis-dependent? Is it predominantly one over the other? Any color would be helpful.

Enrique Conterno -- Chief Executive Officer

Yes. We are seeing clearly, when -- if you are referring to market growth, all right, clearly, market growth is only coming from both, but clearly, we are seeing a lot more NDD market expansion. Most patients with DD are actually treated for with -- patients with anemia are being treated. So that's a point that we made at the market level. If you're asking about roxadustat specifically, most of our revenue, as we said before, is coming from DD.

Maybe about $65 million coming from DD and $35 million coming from NDD. At the revenue level, we do see NDD as a huge, significant opportunity longer term. And that's something that I think is going to be playing out. The opportunity for continued market expansion and for roxadustat to play a leading role in that, I think, is still very significant in China. My view is we are in the first innings of this -- the opportunity that we have with roxadustat in China.

Perry -- Bank of America. -- Analyst

Great, thanks.

Operator

Thank you. Your next question comes from Paul Choi with Goldman Sachs. You may proceed with your question.

Paul Choi -- Goldman Sachs -- Analyst

Hi, thank you. Good afternoon and thank you for taking our questions. You may proceed with your question. Hi, thank you. My first question is on Europe. And can you maybe just, Enrique, update us on how you and your partner Astellas are thinking about the cadence of establishing reimbursement into key geographies? And just how you're thinking about the launch trajectory over the next one to two years, given that, that's a potential gating factor there in Europe? And then I had a pipeline follow-up question.

Enrique Conterno -- Chief Executive Officer

Yes. I'll make a general comment. I think the specifics when it comes to Europe, I think those questions need to be asked of Astellas as we've agreed that they're going to be answering those questions directly. But as you know, in Europe, just generally, what you basically have is you are launching in markets that allow you to launch with what is called a temporary price like Germany and other markets. And then I think you are launching in markets once you get basically actual reimbursement.

So in Europe, the reimbursement is, of course, granted at the country level. And that basically tends to be staggered. And I know that Astellas is now launching in the four markets, the four countries that I just mentioned, Germany and the U.K., Netherlands, Austria, but in addition of that -- to that, of course, they are working diligently to ensure that they can have reimbursement across Europe.

Paul Choi -- Goldman Sachs -- Analyst

Okay. Thanks for that, Enrique. And then second, as a follow-up, just on the pipeline. Can you maybe just update us on where you are with the -- or how you're thinking about the development of roxadustat for CIA. I didn't see it mentioned here in your 3Q slides. And is that just something an indication that's been deprioritized?

Enrique Conterno -- Chief Executive Officer

No. It is -- thank you for your question. It's not a matter of the prioritization but I think we are looking forward to getting the insights from the discussion with the FDA and around anemia of CKD because that also informs how we think about CIA and that program. The data for CIA, it's positive data, but we want to ensure that we are on a solid footing as we think about that trial. Mark, anything else?

Mark Eisner -- Chief Medical Officer

Yes. Not much to add, Enrique. I mean, as you said, our main for us right now is establishing the path forward for CKD and then CIA is under discussion with AZ in parallel. And we're trying to find a path forward for that one as well.

Paul Choi -- Goldman Sachs -- Analyst

Okay, thank you very much.

Operator

Thank you. Your next question comes from Andy Hsieh with William Blair. You may proceed with your question.

Andy Hsieh -- William Blair -- Analyst

Great, thanks for taking my question. So one is, Enrique, or -- can you kind of highlight the strength of your internal R&D and how is that differentiating? We're just trying to understand or reconcile between the desire to obviously seek internal pipeline candidates or external collaborations and also the reorganization expense reduction plans that you have.

Enrique Conterno -- Chief Executive Officer

Yes. Very good. Very good question. I'll start, and then I'm going to ask John Hunter to complement that question. I think your focus is -- if the answer is that -- the focus of your question is more on the R than on the D. But clearly, I think as part of this exercise, we've taken a very close look at every single area in the company. And every line item by line item trying to think about how do we ensure that we can run more efficiently and of course, that is a hugely important process.

But as part of that, we also had to -- we've raised the hurdle when it comes to innovation, including on -- as we think about research and as we think about our preclinical program. So we've basically targeted a certain number of programs that we believe have the best chance to make it to the clinic within the next few years. And those are the ones that we're basically investing behind. There is a mix of products. There are products from our HiFiBiO collaboration, which, as you mentioned, is external. But then there are also internal programs that we are moving forward, and we're investing behind. I'm going to ask, John, if you'd like to make some additional comments.

John Hunter -- Chief Scientific Officer

Sure. I would only add that there are areas of expertise that have been developed over the years at FibroGen, and we're really looking to take full advantage of them with the existing preclinical programs. And with the HiFiBiO programs, clearly, that brought in a new set of projects that I think were initially outside of the expertise area of the company, but we have been building up around them as well. And we're really looking to move forward by kind of expanding out expertise where we need it, but also consolidating the programs around our therapeutic focus areas so that we have a coherent path forward with the new clinical programs.

Andy Hsieh -- William Blair -- Analyst

Great. Thank you. I have a follow-up question related to the price negotiation with the Chinese government coming up toward the year-end period. I'm just curious if you can educate us on how they are thinking. When it comes to renegotiation on price, do they look at real-world evidence, do they look at renewed value proposition? Just curious about how they think about this process and maybe things that you can prepare, heading into the process to really position FibroGen at the best potential leverage point.

Enrique Conterno -- Chief Executive Officer

Yes. Clearly, it is the case in China, and it is the case with any payer around the world when it comes to negotiating for pricing. I think the interest is to, of course, lower the price, the reimbursement price, the price that the government is paying for products. In China, this happened, as you know, across the board every two years, right? So every product, every two years has -- product in the NRDL has a reimbursement renegotiation and a new price basically is set.

There are a number of factors that basically are brought into the mix as part of this discussion. Everything from the clinical value of the product to the number of competitors, whether they are direct competitors in the same class or functional competitors, neighboring countries, prices. And then also, I think it's how successful the product is being, meaning products that have significant success just because of the impact on the budget than to also garner more attention.

So there's a combination of factors. I think it is extremely important, right, for products to be in the NRDL. And I think that's something that the industry is going to go across basically this month in terms of all the discussions, including us, right, to ensure that their products are basically reimbursed going forward. So that's maybe the frame that I would provide, and I'm not sure I can add much more to that. I don't know if that answer your question.

Andy Hsieh -- William Blair -- Analyst

Yes, that's helpful. Thank you very much.

Operator

Thank you. [Operator Instructions] Our next question comes from Yaron Werber with Cowen. And I would like to now turn the call back over to Enrique for any further remarks.

Enrique Conterno -- Chief Executive Officer

No, thank you for your questions. We very much appreciate your participation in today's investor call and your interest in FibroGen. Enjoy the rest of your day. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Michael Tung -- Investor Relations

Enrique Conterno -- Chief Executive Officer

Juan Graham -- Chief Financial Officer

Mark Eisner -- Chief Medical Officer

John Hunter -- Chief Scientific Officer

Annabel Samimy -- Stifel -- Analyst

Edwin Zhang -- H.C. Wainwright -- Analyst

Michael Yee -- Jefferies -- Analyst

Geoffrey C. Porges -- SVB Leerink -- Analyst

Perry -- Bank of America. -- Analyst

Paul Choi -- Goldman Sachs -- Analyst

Andy Hsieh -- William Blair -- Analyst

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