ARDX - NASDAQ

Good day and welcome to the Ardelyx Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Caitlin Lowie vice President of Corporate Communications and Investor Relations at Ardelyx. Please go ahead.

Thank you. Good morning and welcome to our third quarter financial results call. During this call, we will refer to the press release issued earlier today which is available on the Investors section of the company's website at ardelyx.com. During the call, we'll be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ materially from those described. We encourage you to review the risk factors in our most recent quarterly report on Form 10-Q that was filed today and can be found on our website at ardelyx.com. Only elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our views change. Our President and CEO, Mike Raab, will begin today's call with opening remarks and an overview of the company's progress during the third quarter of 2023. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the performance of IBSRELA and the launch of XPHO

Good morning, everyone and thank you for joining us on the call. I'm very pleased to be here once again, just a short few weeks after we celebrated the approval of XPHO

Thank you, Mike. It is great to be back today, speaking about IBSRELA and now XPHO

Thank you, Susan. Ardelyx has delivered on a number of key milestones since August. Continued growth of IBSRELA across all key measures. The approval and the imminent commercial launch of XPHO

Thanks, Justin. This is an exciting time at Ardelyx. Within a couple of weeks, we will have XPHO

We will now begin the question and answer session. [Operator Instructions] The first question today comes from Louise Chen from Cantor.

Congratulations on a strong quarter. I wanted to ask you, how are you thinking about gross to net for XPHO

Yes. So let me ask Justin to address the first and last question first. And then Susan, please, about the uptake.

Great. Louise, regarding our gross to net for XPHO

Yes, Louise, regarding the uptake of XPHO

The next question comes from Dennis [ph] with Jefferies.

A few questions from me. Number one, maybe on the congressional action to delay moving orals into the bundle. Can you comment if you haven't met with the CBO and what can you disclose from those discussions as it relates to XPHO

Sure, Dennis. So with any congressional action and meeting with the CBO, we don't meet with them. I've never seen that companies actually meet with the Congressional Budget Office. Any build going through Congress needs to get scored best of standard fare. So that's our expectation that's going to be happening here. Whether or not our price has an impact on that, again, that is the process that CBO goes through and that's not something that we have transparency to. With IBSRELA, I think is in the guidance, as Justin said and I think as you've seen, we take a very measured approach in the way that we have certainly financed the company and the guidance that we give. We're very confident with this range and felt that raising it the way we did and narrowing it was giving you a perspective in terms of our confidence of where IBSRELA revenue and uptake is going.

The next question comes from Yigal with Citi.

On the pricing for XPHO

Sure, Yigal. I think, what you just described as the significant difference in the opportunity and the benefit that XPHO

And then maybe for Susan. Susan, if you could talk a little bit more about IBSRELA, [indiscernible] but could you tell us what the refill rate is and the number of scripts per writer so far, if that's data you have access to?

Yes. Yes, we track that closely. We have not specifically disclosed those growth rates. But what I can tell you is that the refill rates are growing at comparable or greater than the new Rx rate. So those are showing very healthy growth and that has been persistent. So reflecting that physicians are continuing to write new scripts for patients. And when those scripts are written, they're getting refilled. So it's very encouraging, looking at those rates. And in terms of the average script per writer, again, it's not a specific metric we have disclosed but we track that very closely. And what's really encouraging is that every single month, we see a new cohort of writers joining the IBSRELA writing group. So we're persistently accumulating writers. And when you track existing riders, monthly on a persistent level, they're increasing their prescription volume for IBSRELA. So all of those fundamental demand indicators continue to be very strong.

Okay. And then one quick one for Justin on the tax and the finances. Obviously, you highlighted a very strong cash position as of yesterday. I'm just curious, you also mentioned that you did report positive net income, although I know that these are driven by, perhaps, some onetime items. But nonetheless, I'm just curious, Justin, if you could kind of give us a sense as to the likelihood that you might need to take use the SLR credit line again? Or is that more of a backup plan and it's not really something where you're expecting to be done again?

I'm sorry, I trouble understanding the second part of your question. You asked about our cash runway because there was onetime items?

And then whether we'd be accessing the credit that we have or financing the company in the future, how's that?

Yes. So we're very pleased with our third quarter. We're clearly not in a point yet where we can share where breakeven is but we think a very measured approach to our funding, as you've seen. I do think with our internal projections, we can be very flexible and patient. We have until March 15 of next year to potentially draw the next tranche of debt. And so that's something that, as the team, we'll evaluate as we see how well XPHO

Yes. And Yigal, what I'd add to that is SLR has been a spectacular and unique partner in this whole process for us, right? I mean, you think about when we first established a relationship with them, the company was in a very different position. And the terms around this loan are really favorable to us and what we're able to accomplish with it which is why we drew down the 22.5%. The additional 50 at our discretion is nice to have. And we may, at some point in the future, take that down before the time frame that Justin just mentioned. But I think it's important that we have taken the approach that we have and have strong partners like SLR to grow the company to where we want it to be.

The next question comes from Ed [ph] with H.C. Wainright.

Congrats on the approval in the quarter. First, I wanted to ask about IBSRELA, given the guidance, the new guidance range. If you could discuss sort of what you're continuing to see as drivers of additional uptake, both with new and existing writers. And then, turning to XPHO

Sure. Let me make a couple of comments on all of those, Ed. And then I'll ask Susan to address all of them as well. So the IBSRELA uptake dynamic, it's because the drug works, right? It is something that people are getting the samples and then their first prescription and the drug is doing something that they've never experienced before with the products that they've previously been utilizing. So that's really what's driving us, it's the experience is positive. And ArdelyxAssistT program that facilitates access is extraordinarily important and a hallmark of what we do and the way that we help patients get access to the drugs that we develop. With XPHO

Yes, Mike. I think in terms of -- let me take the IBSRELA aspect of your question first and then touch on the XPHO

Very helpful. Look forward to seeing the team later this week in Philly.

We'll see you then.

Next question comes from Joseph Thome with TD Cowen.

Maybe the 2 on IBSRELA uptake. I guess, are you seeing physicians -- obviously, the drug is launching well. Are you seeing physicians want to use the drug earlier in the treatment line of their patients? Or obviously, we talked about the target, post market [ph]. But are you seeing them want to use it earlier? And then second, we did see the Phase III trial in adolescent patients. I guess, what is the current uptake in adolescent patients between 12 and, I guess, 17, 18 years of age? And what's sort of the eventual goal of this study? Would it be just to remove that line on the label that said safety and efficacy of the drug aren't available in pediatric patients as of 18? Or is there something else that can be done with out of the study readout?

Sure. And I'll ask Susan to speak to the IBSRELA uptake. But first, let me address the pediatric adolescent question. That was an interim look at some of the data that was presented. We are still indicated only for adults with IBS-C. So that hasn't changed. So any insights that we have, I can't think of any that say that we're treating adolescents because that's not indicated in our label nor is first-line therapy, right? I mean if you look at the way that we position this, it is a drug that's going to be used for patients that are no longer responding to the GCC agonist. Specific feedback as to whether or not people are using it earlier, Susan, do you want to address that?

Yes. Actually, it's interesting for -- if you recall, we have a very focused approach calling on the highest writing physicians for IBS-C indicated prescription. For those physicians, the patients they see in their office is daily have all been cycled -- have cycled through GCC agonist. So very important to think about the context on where we're focused with IBSRELA. So for those physicians, [indiscernible] typically have already been treated with these products. So it depends on how you define early. What we're finding is that, because the patients meet already the prior authorization criteria, it's really the physician's eagerness in identifying increasingly patients that they believe can benefit from a novel option. Remember that the overall label for IBSRELA does support [indiscernible] but in our case, focusing on these high writing physicians, it's really not an issue for the patients who walk into their office every day meet the prior of criteria.

The next question comes from Matt Kaplan with Ladenburg Thalmann.

Congrats on the strong quarter. Just focusing on IBSRELA a little bit. Maybe Susan, can you talk about how patients are using IBSRELA in a real-world setting now versus the use in the long-term clinical studies?

Yes, Matt. Actually, what we're finding, I mean our clinical data package really shows a rapid response to IBSRELA and a sustained response to IBSRELA which is really a piece of our overall product profile and clinical data profile that physicians respond very favorably to. And what we're finding in the real world is that that has been their experience that patients have responded to IBSRELA. And when they respond to IBSRELA, they continue to have a sustained effect. I mean obviously, you're not going -- it's not going to be the best -- the right drug for every single patient but where the physician feedback really has been quite favorable on their treatment experience, consistent with their expectations based on the clinical data package. And [indiscernible] tracking the launch over time and persistently they're reporting either moderate or high satisfaction with treatment with IBSRELA and reporting low discontinuation rate.

All right. And then I guess, given the similarities between the IBS-C market and hyperphosphatemia market, in terms of going into these 2 markets with a novel mechanism of action, combined with the unmet need. Can you talk a little bit about the learnings that you've had in the launch of IBSRELA that you're going to apply to XPHO

Sure, Matt. Susan, please.

Yes. So yes, you're spot on in terms of the parallels between the 2 markets. And a very important learning is the physician interest, because of the limited options that they have had and the recognized unmet need, their interest in the novel mechanism profile, understanding the way the drug works uniquely and its clinical data package. So we're very much science-based, clinical-based cells, patient-based cell. And also learn the criticality of emphasizing our commitment to patient access and affordability. So physicians, really, they prescribe based on patients needing a drug and it's important that we encourage them that they do not have to have a concern around the prior authorization process, that we can support that. We can remind them that they have familiarity with that administrative process with other drugs they write and this one is no different. And in this case, the patients that they're identifying, who are in need of our novel drug implicitly meet the prior authorization criteria. So all of that will be very critical in really supporting physician uptake, integrating novel mechanism XPHO

And Matt, what I would add to that is the power of ArdelyxAssistT and the comprehensiveness of that program, when physicians utilize it in a way that it's been designed, I think they find an extraordinarily seamless program where they get confidence that if they're going to write a script, that their patient is going to get it, irrespective of whether or not it's a co-pay paydown, it's an affordability issue, Medicaid, Medicare, Ardelyx is there to accomplish an awful lot. So it's really the -- that program and how physicians and ultimately the patients who are receiving, whether it's IBSRELA or XPHO

Okay, great. And then, last question. Can you provide a little bit more detail on the presence that you're going to have at the upcoming ASN meeting later this week?

Sure. Susan?

Yes. So we will have a very strong presence for XPHO

The next question comes from Laura Chico with Wedbush Securities.

This is [indiscernible] on for Laura Chico. How should we be thinking about gross to net dynamics for exposure pricing over time? And what your steady-state rate expectations for gross to net discount? And then just our last question is, could you perhaps review why IBSRELA, as a competitor, makes sense?

Let me start with the last one first. It's a great question, is why does IBSRELA as a competitor makes sense? I think Susan is the best one to address that, given what the experiences Ardelyx is that we're seeing in the field. And then, I'll ask Justin to address gross net for XPHO

Yes. So I think IBSRELA as a comparator, let's just take a step back and I think it's some of the parallels that Matt alluded to. So as a novel mechanism drug, a specialty drug, the gross to net components, take into account the distribution, the mandated government rebates and other considerations that [indiscernible] can touch on. Overall and the gross and [indiscernible] between the 2 products, we're going to need to wait and see because the mix of patients, the payer mix of patients also determines the extent to which the government mandated rebates become a part of your gross to net profile. But what is comparable between the two which is an important comparator, is that there will not be incremental rebates that we're providing payers for access to the drug. Access to the drug will be achieved by a prior authorization because for these patients, in both cases, they have limited options and physician prescribing our novel mechanism drug is because those options have not been adequate and they're in need of a new option. So that's how patients will access our drug. And therefore, there will not be the incremental payer rebate gross to net item which we get a lot of questions on that because I think for product launches, those are rebates that are negotiated over time, so they start to integrate themselves into your gross to net profile. That is one item that we can tell you today, it's not going to be something that's going to show up on the profile for either product.

Just to follow up on the question, were you asking about the financial comparator or the clinical comparison to other drugs in the market?

Financial comparator.

Great. Justin, do you want to address those net for XPHO

Sure. Susan briefly touched on it but just to elaborate. The most important thing for us is access and making sure the patients have access to it. And so our commercial strategy will be very similar to what we did with IBSRELA which means, as Susan mentioned, we don't do significant repaying the payers but we will have our same generous commercial co-pay, commercial buydown process, where if you have commercial coverage, we will take care of your co-pay 100%. And so as a result, we may expect to see the seasonality that we saw with IBSRELA, where in the first quarter of the year, when many patients plans reset, there may be deductibles where we will help the patient meet that need and then it may improve, if you will, over the course of the following subsequent quarters. So as a general premise, with IBSRELA, as you may have seen, our first quarter was just about 33% and it's come down into the high 20s over the course of this year. And I think it's fair to say, at least initially, we expect similar gross to net margins for XPHO

This concludes our question-and-answer session. I would like to turn the conference back over to President and CEO, Mike Raab, for any closing remarks.

Thank you, everyone, for joining us this morning. Before I close the call, I want to recognize a member of the kidney community who we recently lost, Derek Forfang. Derek was an incredible person and patient advocate who meant so much to so many people in the kidney community and beyond. For Ardelyx, Derek brought the patient voice to Ardelyx Scientific Advisory Board and was the driving force behind the creation of the Ardelyx Patient Advisory Council. Derek was a warrior, who, despite his many health challenges, always persevered, put others first and continued his mission to advocate for kidney patients with a smile. Derek's passing is a reminder to all of us that our job is not done. There are so many patients with CKD who need innovation. And we need to continue investing in and developing innovations with urgency for this community of patients. With that, we can close the call. Thank you, operator.