ChemoCentryx, Inc.
Q3 2021 Earnings Call Transcript

Published: 9 Nov 2021

[Operator:]

Good afternoon, and welcome to the ChemoCentryx's Third Quarter 2021 Financial Results Conference Call. . As a reminder, this conference call will be recorded. I'll now turn the call over to Lee Roth of Burns McClellan. Mr. Roth, please go ahead.

[Lee Roth:]

Thanks, Jesse. Good afternoon, and welcome to the ChemoCentryx Third Quarter 2021 Financial Results Conference Call. Earlier this afternoon the company issued a press release providing an overview of its financial results for the quarter ended September 30, 2021. This release, along with a few slides that you may find helpful while you listen to the call are available on the Investor Relations section of the company's website at chemocentryx.com. Joining us on the call today is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will review the company's recent business and clinical progress. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer of ChemoCentryx will provide an overview of the company's financial highlights for the quarter before turning the call back to Tom for closing remarks. During today's call we'll be making certain forward-looking statements. As explained on Slide 2, these forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause our actual results to differ materially from those contained in the forward-looking statements. These risks are described in the company's filings made with the Securities and Exchange Commission, including our annual report on Form 10-K filed on March 1, 2021, and our quarterly report on Form 10-Q for the quarter ended September 30, 2021. You are cautioned not to place any undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements. In addition, this call contains time-sensitive information accurate only as of the date of this live broadcast, November 9, 2021. ChemoCentryx undertakes no obligation to revise or otherwise update any forward-looking statements to reflect events or circumstances after the date of this live call. With that said, it's my pleasure to turn the call over to Tom Schall. Tom?

[Thomas Schall:]

Thank you, Lee, and good afternoon to everyone listening. Thank you for joining us on our third quarter 2021 conference call. Please let's move to Slide 3 in our presentation. I have talked in the past of our corporate journey as a voyage into uncharted waters, full of uncertainty, sometimes on tempestuous storms and occasionally pushed by fair strong winds of progress. Now for the first time in our history, we have arrived at the shore of a new world, a new era for the company, and I believe for the patients whom we've always have aimed to serve. Following the FDA approval in ANCA vasculitis on October 7, our innovative medicine Tavneos, the brand name for avacopan, our small molecule selective inhibitor of the complement C5a receptor is now available across the United States. In retrospect, the Tavneos odyssey seems hard to imagine, from concept to compounds to clinical development to commercial launch over the past 16 long years. But the voyage was worth it. Tavneos is the first FDA approval of ANCA vasculitis in a decade. And with the approval of Tavneos, we achieve our vision of helping to improve patients' lives and becoming an integrated biopharmaceutical company with discovery, development and U.S. commercial capabilities, a remarkable journey indeed. Today I will share a little bit more about the launch of Tavneos, which I and others hope may represent part of a new era for ANCA vasculitis patients. We also aspire to make last month's FDA approval just the beginning of more contributions that Tavneos may make to patients with rare diseases and who have currently inadequate treatment options. I'll update you today on what comes next, where we stand with some of our development programs. And it bares repeating that all of this is based on our unique proprietary discovery platform, capitalizing on our core scientific expertise in targeting specific chemo-attractive receptors to block inflammatory responses that lie at the heart of so many diseases and recently also applied to the activation of the immune system in cancer therapy using a true orally active, small molecule inhibitor of the major immune checkpoint pathway. Let's begin by turning to Slide 4, where you will see the indication very recently approved by the FDA. Tavneos is indicated as an adjunctive treatment for adult patients with severe, active anti-neutrophil cytoplasmic autoantibody associated vasculitis, also known as ANCA vasculitis or ANCA-associated vasculitis, specifically granulomatosis with polyangiitis or TPA and microscopic polyangiitis or MPA, the 2 main forms of ANCA vasculitis. It is given in combination with other standard therapies and dosed at 30 mix 310 big capsules twice dating with food. This is a strong label, and we are pleased with it. As you can see from Slide 5, we estimate that in the United States, approximately 9,500 patients squarely fit the profile outlined in the label. These patients being quite similar to the ADVOCATE clinical trial populations. Observers have also noted that with Tavneos there is no so-called infusion confusion. Patients simply take their pills with food. Following approval on October 7, our commercial and medical affairs teams sprang into action and executed on their many careful preparations, finalizing package inserts, training and certifying the field force and so on. We received the FDA approval on a Thursday, took approximately 1 week to get everything in place and then launched on Monday, October '18. And while we are gauging to the stars in our aspirations and our expectations for what we believe can be a blockbuster drug in this indication of ANCA vasculitis alone, we also have our feet firmly on the ground as we look upward and forward. We all know that too many launches during this pandemic have not quite lived up to their expectations. COVID has complicated many plans for launches across the industry. To add to the complexity in the case of Tavneos is the fact that it is a specialty medication. So turning to Slide 6. We are not naive as to the facts. We are launching into a world in which there is considerable uncertainty and in which face-to-face interactions, whether they take place between patients and their clinicians or between our field force and physicians are constrained by a pandemic. Against this pandemic-generated new world disorder, we have endeavored to arm ourselves with a comprehensive plan and the right tools to execute on that plan. We are emphasizing quality and everything associated with our commercial execution, knowing that a firm foundation is essential to build a structure that brings this new medicine to as many appropriate ANCA vasculitis patients and as quickly as we possibly can. You can see 3 major channels of action as we deploy what is now a fully trained field force with deep experience in nephrology and rheumatology and in rare diseases. Our field sales force is now educating and detailing physicians following their unbranded disease education interactions and appropriate scientific exchanges that our medical science liaisons have with their clinicians. Our field force, including the MSLs, will focus on approximately 3,400 physicians, comprising key opinion leaders, top prescribers and community specialists who are responsible for roughly 80% of all prescriptions in ANCA-associated vasculitis. In the middle box on Slide 6, Tavneos Connect is a tool custom-built by us to focus on helping the appropriate patients receive Tavneos with as little effort and as little consternation as possible as we provide practical and if necessary financial support to help patients initiate their treatment with Tavneos. We know that it takes 1 or 2 months to go through the prior authorization process when a new medication is not yet covered by medical policy. Tavneos Connect allows us to partner with patients as they work with payers to obtain the necessary approval. We will also work with payers on patient access with the goal of securing appropriate coverage of Tavneos in their medical policies. Following the pre-approval clinical information exchanges that our national account team held with payers, which created a lot of interest, we are now engaged in post-approval clinical presentations and supporting information with the goal of securing appropriate coverage in medical policies. To be clear, our rollout in the early quarters will be focused on patient access. It is obviously far too soon after launch to provide much detail on how it is going. You can expect more on our Q4 call. But so far, we are pleased with the rollout of our plan, the functioning of our customized tools and the interactions to date across key stakeholders. Turning to Slide 7. The most meaningful way to measure our progress for these first few quarters is not the revenue line, but instead by tracking three key metrics

[Susan Kanaya:]

Thank you, Tom. Our third quarter 2021 financial results were included in our press release today and are summarized on Slide 15. Revenue was $17.7 million for the third quarter of 2021 compared to $5.1 million for the same period last year. The increase in revenue from 2020 to 2021 was attributable to the $20 million milestone from Vifor Pharma for the September 2021 Japanese NDA approval for Tavneos in the treatment of patients with microscopic polyangiitis or MPA and granulomatosis with polyangiitis, or GPA. Research and development expenses were $20 million for the third quarter of 2021 compared to $18.6 million in the same period in 2020. This increase was primarily attributable to the manufacture of commercial drug supply in anticipation of the launch of Tavneos in the treatment of ANCA vasculitis and higher Phase I related expenses associated with the development of CCX559, our orally available small molecule checkpoint inhibitor. These increases were partially offset by lower Phase II related expenses due to the completion of the Tavneos AURORA Phase IIb clinical trial in patients with HS. General and administrative expenses were $19.6 million for the third quarter of 2021 compared to $10.4 million for the same period of last year. This increase was driven by higher employee-related expenses, including those associated with our Tavneos launch readiness efforts and higher professional fees. Net loss for the third quarter of 2021 was $22.3 million compared to $24.1 million for the same period last year. Total shares outstanding at September 30, 2021, were approximately 69.9 million shares. Lastly, we closed the third quarter of 2021 with approximately $372 million in cash, cash-equivalents and investments. We expect to close the year with cash and investments in excess of $360 million. Tom?

[Thomas Schall:]

Thank you, Susan. To summarize where we stand, as you can see from Slide 16, Tavneos is available in the United States as an adjunctive treatment in ANCA-associated vasculitis, and our initial focus is firmly on getting this drug to patients via focused patient access program. Tavneos is also approved in Japan. And a decision on Tavneos is expected soon in Europe. Beyond ANCA, we plan to make Tavneos a pipeline and a drug with potential additional indications in hidradenitis suppurativa, C3 glomerulopathy and lupus nephritis. And perhaps most important of all, we have just begun to realize the potential of our unique discovery platform, symbolized by the entry into clinical development in Q3 of our first small molecule immune checkpoint inhibitor as a novel cancer therapeutics. I will now turn the call over to the operator for your questions. Operator?

[Operator:]

. Speakers, our first question is from Steve Seedhouse of Raymond James.

[Steven Seedhouse:]

I was hoping you could just share the number of patient start forms that have been received in the U.S. And also curious if you could comment on the launch in Japan. And then, if I may, I was hoping you could just clarify how the economics are divided given your agreement with Vifor in C3G, HS and even lupus nephritis, which territories are yours and which indications are yours versus Vifor?

[Thomas Schall:]

Too early to share numbers on start forms, I'm afraid. As you know, it's been literally days since we launched the drug. So if you'll excuse me for deferring that to our next call. But I think we're reasonably pleased with how things are going. People are on drug. Things are rolling along nicely and executing according to plan. In Japan, as far as I can tell, there are still pricing negotiations going on. Japan is a calendar for that. So it's not entirely clear to me when that will be concluded, but sometime early in 2022, I presume, and we'll keep you posted on that. As to the alliance, our arrangement with Vifor is essentially a kidney health alliance. The alliance has in it 3 kidney indications defined in the contract, one of which is ANCA vasculitis, one of which is C3 glomerulopathy. And the third one is still yet to be declared, although it could very well become lupus nephritis. Hidradenitis suppurativa is its own beast, and should we be successful in our Phase III clinical studies, which we intend to perform as a global study, we will have to work out how that will be marketed abroad, and there may well be discussions with Vifor on that aspect. But there would be special economics that they would have to invest in order to get into that program and share in the marketing. So again, more on that as we get closer to the eventual marketing of that drug. But it is a kidney-focused alliance with 3 indications in that alliance with Vifor. And in those indications, the economics are all that we -- as I mentioned, in ANCA vasculitis, we have 1 top-line aggregate sales number for all of the territories that Vifor or indeed any of their sublicenses market. From that 1 aggregate ex-U.S. sales number, we pulled down our royalty rate which ranges from the teens to the mid-20s based on peers. And that's how the deal is set up. For the other 2 indications, we have similar economics that are prenegotiated that we haven't yet discussed, but they're also very good economics.

[Operator:]

Next question is from Dae Gon Ha of Stifel.

[Dae Gon Ha:]

I'll stick with 1 question. So when we think about the blockbuster opportunity that you mentioned, Tom, is that within the first approval indication, the 9,500 or the broader patient population? And I guess, if you can kind of go into the strategies, I know some physicians' responses have been more towards as long as they get some real-world experience, they feel comfortable broadening their use in their respective practices. But are there studies that you have planned that you plan on initiating, addressing those patient populations? Or what would be your strategic alternative?

[Thomas Schall:]

Yes. Well, thank you. That's a great question. So as I said, in the label, and we showed you the label, it talks about severe active disease in ANCA vasculitis for use as adjunctive therapy in adult patients. And that 9,500 number fits very squarely into that subscription based on our market analysis, that really is severe incidence in major relapsing population. The additional -- there's additionally 10,000 patients that have active disease and the severity is actually evaluated and determined at sort of physician discretion. So as we do research with those physicians, you get various descriptions of severe disease. Of course, there are some guidelines. The ACR and guidelines talk about organ or life-threatening trending disease. But again, how physicians define organ-threatening is frequently characteristic of that individual patient and then natural history of their disease. But even if one limits themselves just to the 9,500 patient population. And if one gets a reasonable penetration of that patient population. Just that core group, as you know at our normal orphan price that we determined for the drug, one gets quite close to the blockbuster level in the United States alone at peak. So I think any way we look at it, we feel very optimistic that the drug has blockbuster potential in the U.S. alone in ANCA vasculitis alone. And if we add in the revenue opportunities that we'll take down from our rest-of-the-world royalties. I think we have very little doubt about its blockbuster potential. We will have other studies -- and we'll talk about those other studies at some point in the future about how we expand appropriately the use of Tavneos in other folks with ANCA-associated vasculitis and under what circumstances.

[Operator:]

Next question is from Michelle Gilson of Canaccord.

[Michelle Gilson:]

And congratulations on getting the drug launched. Now you have MSLs and sales reps out in the field. What are the common questions that they're getting from physicians? And what, I guess, education efforts or barriers, do you think you need to sort of help with on the education side to get physicians to write that first script? And then just -- I know -- I think Steve asked earlier about start forms, but can you just confirm if you're -- if you've seen any start forms come in and if any of them have been converted yet?

[Thomas Schall:]

Yes. I can say -- let's start with the back part of the questions. We have had start forms come in, yes. We have had conversions, yes. We have patients on drug, yes. And yes, we have all those good things happening. But literally, we're days out. I don't want to -- but I don't want to overextend too much what we know so far. But the answer is a resounding yes to all of those. So that's a good thing, I think, for all of us. What are we seeing in the field with MSLs and tech sales reps from physicians. We're, again COVID hampering so many things because we have -- we know there are many physicians that have told us, and there are patients that have told us that upon approval of the drug they want to explore, how quickly can they get on it, how quickly can they get access. And yet, there's the pragmatic restraint of meeting face-to-face either the clinic outside their scheduled visit, getting another visit that's not scheduled. There's certainly a COVID influence. And we're not unique in that obviously. So that's -- physicians have asked is there any other way that they might accelerate access to the drug. But of course, at the same time, they say, well, I've got folks scheduled coming in a month, 2 months, 3 months, I'm going to wait to see them. So that's one thing we hear a lot of. We are -- patient identification has been a theme. They like to know -- tell us a little bit more about glucocorticoids. And really it actually is not very complicated. When they see the label, they say, well, I didn't expect glucocorticoids to be eliminated, of course not. I have to use glucocorticoids, if I'm giving rituximab as background therapy, for example. So we understand from your trial design at ChemoCentryx that you did not eliminate the glucocorticoids. We also understand that people sometimes get worked up with the bolus of IV glucocorticoids when they come in, in crisis. And in fact, maybe they haven't yet been definitively diagnosed. So we totally get that. But remind us how you tapered those sources in your clinical study. So we're doing a lot of education around that. We get questions about, I've got subjects or a patient that's been on 20 mgs of prednisone for 3 years. And your study, what did you do with those patients? Did you have examples of those? So we're going through that. And again, reminding them that in our trial, yes, we did taper those incidental sources of glucocorticoid exposure, the so-called spillover glucocorticoid from pre-randomization exposure, and they had to be tapered down to 20 mg at the time of the start of the trial and get down from those spillover prednisone to 0 by week 4. We remind them that we eliminated in the trial the need for the scheduled daily oral prednisone, and we remind the physicians in so doing we got rid of about 2.5 grams of prednisone, which is about 86% of the median overall exposure from glucocorticoids from sources in the therapy of these patients over the course of that, essentially the first 6 months first year of the trial. So those are the kinds of questions we're getting. We're getting questions about access to the hub system and so on, all of those sort of logistics questions that you would expect to get. We do get questions about severe active, that's more a discussion point with most of the physicians that we've talked to, they say to us, look, this is a very severe disease, if I'm seeing these patients regularly, they have active disease, they have severe disease, if they're showing detriment to kidney function, by definition that kidney is under threat. So they're not -- really they don't have too much question about severe active, which is interesting. They do talk about duration of dosing. And what we tell them is we've studied the drug for 12 months. And so we have really good control data at 12 months, and that's what we're talking about in terms of the largest data set. They ask about longer-term dosing and if anything has been published, yes, there are case studies that have been published. And those can be referenced if they wish to. So yes, those are the kind of questions we're getting. And so overall, it's been a very productive exchange and kind of questions that we predicted we would get from the health care practitioners.

[Michelle Gilson:]

Okay. And if I can just squeeze in a follow-up here. You mentioned that you are seeing start forms. You have patients on drugs -- on drug. And are there any patterns in either patient characteristics? Or is it that target prescriber population that you've talked about in the past. Is there any color you can give us about either the patients or the prescribers that would help us to get a sense of who the early adopters are?

[Thomas Schall:]

Yes. It's a great question. Obviously it's still really early, Michelle. And you know, you're a very good scientist, scientifically trained. I hesitate to make too many trend determinations from fairly small-end and early data. Overall, we're seeing about 50-50 rooms right now. And so that's interesting, but that's not really a surprise to us. So that's -- I think that that's pretty much how far I'll go with that one for the moment, but we hope to have a lot richer dataset for you to comb through in the not-too-distant future.

[Operator:]

Next question is from Joseph Schwartz of SVB Leerink.

[Joseph Schwartz:]

I was wondering if you could walk us through what you plan to propose to the FDA for C3G. And do you have a meeting date scheduled yet that you can share with us?

[Thomas Schall:]

Yes. I won't share a meeting date yet, Joseph. Thank you. But here's what we would love to talk with them about. We ran what has been and I think still is the largest randomized blinded control trial in C3G ever. Now I know there's other Phase III trials that are enrolling out that aspire to have, I think, upwards of 90 people. We ultimately enrolled, I think, 53. Took quite some years to get that data, as you know. Importantly, we have a very rich and deep data set. It has renal histology with renal biopsies at baseline at month 6 and at month 12, in most cases, not in all cases, but we have a very rich data set. We have proteinuria and we have eGFR. Now at the time that we set up this trial, there had never been an example of an agent that changed eGFR and differentiated it from background medication, placebo medication over the course of 6 or even 12 months. So we -- although we prespecified eGFR as one of our secondary endpoints, the -- certainly the law at the time and maybe still is it takes a long time for eGFR to change. During the course of the ACCOLADE study, we got the ANCA-associated vasculitis result with Tavneos that shows that eGFR improved and separated by month 6 from the background med arm, the prednisone arm in the case of ANCA vasculitis. And that difference was significant or at least the lower end of the confidence interval did not cross 0. So it was really a good example that with this mechanism of action in another kidney disease, with some similarities to lupus nephritis that eGFR could improve and separate in fact from the other medication in a controlled study. That happened as well in C3G, even though the numbers at the end was much smaller, we had a significant difference at month 6 between the Tavneos-taking group and the control group. And that was a really important finding, I think, because after all, what are we striving to do in C3G is we're trying to at minimum stabilize kidney function. The eGFR improvements just were actually increasing filtration efficiency. So something really important is happening there potentially. It was preceded by an overall reduction in proteinuria, another important sign of kidney function at the biomarker level. Many nephrologists will say that a rapid decline in proteinuria is the biggest beneficial prognosticator of eventual eGFR stabilization or at least slowing of decline. So that hangs together in the study. And then we have this really important and interesting biopsy finding with the C3 glomerulopathy histology index, which has 2 different ways of looking at it, the so-called activity index of disease or disease activity index, which was developed more to look at acute and ongoing inflammation in and around the glomerulus. And the C3G histology index of disease chronicity, which is a way of looking more at fibrotic indices, the progression of scaring in and around the glomeruli. The activity index didn't show a significant difference. Numerically, it was lower with Tavneos. There was a lot of variation in baseline in especially the placebo group. And so that foiled the statistics on that measure. And well, I would say, but the chronicity was significantly different. It was better with avacopan statistically during that first 6-month period. And as I described in the slides today, even when we crossed over the placebo group and took their sequential read at week 52, all of those REITs were done blinded as treatment condition, by the way. They seem to slow considerably as the fibrotic progression. So something -- it looks like there's some very interesting signal there. All those signals seem to hang together. So we would like to ask the FDA, what do you think of these data? And this is a large data set for this quite rare condition. Some would call it an ultra-rare disorder. There are no approved therapies. Is there a path to using this drug on some basis, short of doing another 6-, 7-, 8-year trial which I'm not sure we would have the stomach to do at this point absent some sort of maybe conditional approval. But we really want to get their impression more than anything else. We want to discuss the data with the agency and ask them, what do you think about how all these signals seem to trend together, sometimes in a significantly significant way, even though it's a fairly small end. And is that interesting to the agency and what might we do with this in terms of supporting registration of this drug in C3G. So that will be the general nature of the discussion.

[Operator:]

Next question is from Ted Tenthoff of Piper Sandler.

[Ted Tenthoff:]

I just have to -- I said this when you got the approval and just your fortitude and steadfastness in getting this approved is so remarkable. And I always appreciate all the thoroughness of your answers. My question has to do with lupus nephritis. And just trying to get a sense with all of the supporting data, acknowledging and appreciating that it's a new indication, how quickly do you think you could enroll that and actually start to generate data?

[Thomas Schall:]

Yes, that's -- thank you, Ted. Thank you for your kind words and a very good question. The -- I hesitate to put marks on the timeline at this point. I first want to make sure learning as we did from our experience in ANCA-associated vasculitis, that we have a very clear understanding with what regulators are most interested in right now. There have been recent approvals, as you know, in that space. Those are good drugs. There's certainly advances. But there's still a long way to go, right? As you know, these remission rates as defined in these trials still are in the -- maybe at best the 40% -- mid-40% in lupus nephritis even with the best and newest regimens of care. Again, that's a great advance over where we were several years ago, but it means that still the majority of people are not experiencing either these complete or partial remissions as defined in the trial protocols. So we have a long way to go. And we're still using things that are quite immunosuppressive and now without other consequences. Nevertheless, they're part of the landscape now. The endpoint have been refined to some degree and the degree to which glucocorticoids are still used and they are. And at what levels has changed somewhat, although certainly the daily scheduled prednisone doses are far from being eliminated even in the most modern lupus nephritis practice. So all that's by way of saying that we really want to partner with FDA, very carefully, use all of their best inputs to understand the correct trial design and what the goals could be with an agent like Tavneos, where we have shown in other indications that affect the kidney, that, yes, we can do things with things like scheduled can do things with the increase in eGFR, not just trying to a restorative decline. And that, yes, we have evidence for rapid reductions in proteinuria. So we have in our -- on our drawing board some really important and we think innovative ways to think about innovative and rapid clinical development in that space. But I'm going to hesitate to say anything more definitive until we have the really the definitive feedback from regulators. And then I can put probably some greater metrics and milestones on times and numbers of patients.

[Ted Tenthoff:]

Understand. And maybe one other quick question that your answer sparked, is what kind of patient stratification or even biomarker work do you envision doing in this somewhat heterogeneous disease? Again, the goal would be, obviously, sticking with kidney function, and that's pretty clear endpoint and pretty clear classification. But will you be looking at different ways to either stratify patients or potential markers?

[Thomas Schall:]

Short answer is yes. And we're working with some of the very top experts in the world on this right now. So rather than -- I'm going to play those cards a little bit close to vest for this next little while. But the -- we're very keen on understanding how we might appropriately look at the different patient populations and also maybe look separately at effects across these various criteria. But we're looking very, very carefully at that.

[Operator:]

Next question is from Ed White of H.C. Wainwright.

[Edward White:]

Tom, you mentioned the patient support program. And I was just wondering if you can give us some more details on that. Any projections that you have for free drug? How should we be thinking about initial revenues and the impact of the financial support program on that? And then also, if you can just give us a little bit more color on what you're hearing from payers, where you expect to see coverage levels at?

[Thomas Schall:]

Yes. Thanks, Ed. In terms of free drug, I have noted very, very much and accurately what we really are going to hyper focus on is patient access in the first few quarters. Because from that everything will flow and the conversion to get patients on drug and then increasing proportion of patients on paid drug again will occur over time. We very carefully modeled this. We've modeled many kind of scenarios, if you will. We think we know how that will work. I won't speak to the specifics at this point other than to say, again, I think revenue will be a somewhat trailing indicator. So everyone should be aware of that. But investments that we make now in both time and money will pay, I think, handsome dividends as we go forward. And I think we will do the greatest service to the patient population in the most expeditious fashion. So all of those goals are to the good. In terms of what payers are saying, I have a great pleasure of having our Chief Operating Officer, Tosh Butt here in the room. Tosh oversees that part of the business. He's had a lot of direct discussions, and his team have, with payers. Tosh, can you give us a little bit of a general idea or flavor without going into too much detail.

[Tausif Butt:]

I'm so happy to do that, Tom. Yes. So in terms of what are the payers are saying about Tavneos so far, I think it's fair to say that payers do recognize the unmet needs associated with this debilitating disease. They're particularly aware of the high rate of mortality, the organ damage and the relapse rate for the disease area, encouraging patients -- payers to also recognize the side effects of using immunosuppressive drugs and the clinical and economical benefits they can reap if they're able to avoid steroid toxicity. And finally, I would add is that payers certainly do appreciate the design and the scale and the intent of the ADVOCATE study. The results of that study, especially the superior sustained remission at 12 months as well as the exploratory diagnosis supporting the potential for renal improvement, a lower risk of long-term organ damage of relapses, all associated with our targeted mechanism of action, and they seem to be particularly impressed with that. But so far our payers have provided positive feedback on Tavneos' clinical benefit and safety profile and if more work can be done in this area, as Tomas stated earlier, generating patient demand and importantly opening up patient access to launch critical factors that we are hyperfocused on at this day at this point in time.

[Operator:]

Next question is from Yanan Zhu of Wells Fargo.

[Yanan Zhu:]

Thanks for taking my 2-part question. So what might be the types of access restriction payers may implement beyond the most obvious one, which is the prior authorization. And then based on historical orphan drug launches, when payers embrace a drug and is fully onboard, what does the conversion rate look like? The patient start form to patient on drug conversion rate look like.

[Tausif Butt:]

Okay. So what I can share with you is that, so far the feedback from payers on Tavneos with clinical benefits and its safety profile, we're given positive feedback. We believe payers will reimburse Tavneos with restrictions that are typical in prior authorizations as they do for most rare disease products. But given this, self-coverage will be challenging at launch, but it is absolutely expected to improve as payers begin to conduct their clinical and business reviews and these factors give us confidence that on top of the payer discussions we're having, that they will see the benefit. So to answer your question, we don't expect any specific or different payer restrictions. It will be the standard prior authorization restrictions that you would expect with a rare disease drug. And in terms of your question around the conversion rate, look, I'd rather not get drawn into what conversion rates you see from other specialty disease areas or rare disease areas because those conversion rates really depend on the technical value that drug is bringing, the adverse event profile and baggage that drug comes along, the disease area and how much value the payers see that particular drug is bringing. Suffice to say, the conversion rate will be low at first and then it will dramatically improve in 2022. And we confidently can achieve a respectable and healthy conversion rate, but it will take some time.

[Operator:]

Next question is from Anupam Rama of JPMorgan.

[Anupam Rama:]

I just have a quick logistical question here. If we might get some of the early look at sales for Tavneos in and around the JPMorgan conference in January? Or will we really have to understand the patient metrics, the sales metrics around the 4Q report, which I think gives you enough timeframe.

[Thomas Schall:]

Hard to say, Anupam. I like to be -- you know me, I'm more conservative than anything else. So I would say that I would tend to steer us more towards the Q4 report and beyond. But it's not impossible, not impossible, but I would say Q4 report and beyond is what we're thinking.

[Operator:]

Thank you, participants. I'll now turn it back over to Dr. Schall for closing remarks.

[Thomas Schall:]

Well, thank you. It's been, as always, a very stimulating discussion session. I appreciate your comments and questions. I thank you all for joining our call today, and you may now disconnect. I look forward to speaking to you next quarter. Bye-bye now.

[Susan Kanaya:]

Goodbye.

[Operator:]

That concludes today's conference call. Thank you all for your participation. You may now disconnect.