ARDX - NASDAQ

Welcome to the Ardelyx Fourth Quarter and Full Year 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. 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 afternoon and welcome to our fourth quarter and full year 2023 financial results call. During this call, we will refer to the press release issued earlier today, which is available on the investor section of the company's website at ardelyx.com. During this call, we will 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 annual report on Form 10-K that was filed today. It can be found on our website at ardelyx.com. While we may 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 fourth quarter of 2023 and the full year 2023. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the performance of IBSRELA and XPHO

Good afternoon, everyone, and thank you for joining us on the call. I feel like I've said this every quarter, but we are really excited to be here to discuss our progress and performance. The fourth quarter was significant, as was all of 2023, as we continue our evolution as an integrated biotech company, bringing two first-in-class products to patients. IBSRELA and XPHO

Thank you, Mike. It is great to be here today to share a commercial update on both IBSRELA and XPHO

Thank you, Susan. I'm really pleased to join you today. In addition to all the great work that Susan shared with you in support of IBSRELA and XPHO

Thank you, Laura. Earlier in January, we pre-announced our product revenue, so I'll use this as an opportunity to review that material and highlight additional key financials from the fourth quarter and full year 2023. What I believe you will hear from the information we have provided today is, we find ourselves in a strong financial position. We are well-resourced, we have multiple revenue streams and we are thoughtfully investing in continued growth. We have total revenues of $34.4 million in the fourth quarter of 2023, driven by growth in net product sales revenue. On a full-year basis, we reported total revenues of $124.5 million in 2023 compared to $52.2 million in 2022. Our significant year-over-year growth was driven primarily by the strong performance of IBSRELA. I will now take a moment to walk through the relevant contributions of our revenue components during the fourth quarter and full year. First, we had U.S. net product sales revenue of IBSRELA in the quarter ended December 31, 2023 of $28.1 million, a 26% quarter-over-quarter increase from the $22.3 million we reported in the third quarter. On an annual basis, we recorded $80.1 million of IBSRELA, U.S. net product sales revenue in 2023 compared to $15.6 million in 2022 as a result of consistent and persistent growth in all key metrics. We also recorded $2.5 million in U.S. net product sales revenue of XPHO

Thanks, Justin. We accomplished a lot in 2023, and we're not yet done, and we're not looking back. 2024 is going to be yet another important and exciting year for our delegates. We are looking ahead, and our team is more aligned than ever on the company's path forward. I will now open the call to questions. Danielle?

[Operator Instructions]. The first question comes from Dennis Ding from Jefferies. Please go ahead.

Hi. Thanks for taking our questions, and congratulations on all the progress. So, two questions for me. For XPHO

Sure, Dennis. Let me address the second question first, and then I'll pass it off to Justin for some discussion on growth to net. You hit the nail on the head. We can't predict what's going to happen in Washington. We're very confident with the approach that we're taking in the business with XPHO

Thanks, Mike. Hi, Dennis. So for the fourth quarter, our growth to net deduction was in line with our expectations at approximately 21%. Generally speaking, at this stage, it's too early to tell what we can expect with any high level of specificity or detail. What we can say is generally speaking, we expect that we may see a higher percentage of XPHO

Got it. Thank you.

The next question comes from Chris Raymond of Piper Sandler. Please go ahead.

Hey, thanks, and congrats from us too on the progress. Maybe two questions, and they're both XPHO

Yeah, and let me just quickly address that, and then I'll pass on to Laura for any other comments. No regulatory commitment for this. This is, as Laura said in her comments, our continued commitment to understanding the clinical utility and where and how a product like XPHO

Yeah, Mike, I think the only other piece to add is, you know, again, this, as you said, no regulatory commitment. This really reflects our desire to better understand the impact that a drug like XPHO

Okay, great. Thanks. And maybe a follow-up, please. Yeah, Susan, in your comments, you mentioned, out of the gate working through prior ops, expecting that out of the gate. But again, back to the SPRIX data that it looks like about 20% or so of patients do not involve prior ops. Can you give a little bit of color, I guess, on maybe the dynamic going forward? Is it the goal to reduce the number of patients requiring prior ops, reduce the sort of lead time or the turnaround time for those or both, or, you know, any sort of comment on the dynamic and what your, focus items are as you try to streamline the process for access?

Yeah, thanks, Chris. Yeah, we have been engaged with payers really months in advance of the approval, post-approval now with the final label. And they're defining their coverage policies really exactly as we anticipated, very consistent with our labels, providing a path to access via a prior authorization, requiring the patient to have been treated on binders previously inadequately responding or intolerant of binders. So that is really our go-to-market strategy because we at this time do not intend to engage in contracting with the payers. You know, XPHO

Thanks so much.

The next question comes from Laura Chico from Wedbush. Please go ahead.

Hey, good afternoon. Thanks very much for taking my question. One on XPHO

Yeah, so Laura, I think we're still trying to determine that as well. Obviously, if we go into depth, but we've got to go through getting the proper codes and doing that. So I think as we get closer to that and get more clarity, we'll provide that commentary.

Okay. And then back to IBSRELA, I think Susan made the comment that you had kind of a changing view on who might be a good patient for this drug as you're getting more experience and exposure. Could you just expand on that a little bit further? And I guess specifically, I'm trying to understand a little bit more about how you're thinking about utilization earlier in the disease process. Are you seeing signs of earlier utilization with IBSRELA? Thanks.

Yeah, actually, it's really an expanding view. So what we're finding is that now that the HCPs who treat IBS-C have a novel mechanism option, they're increasingly identifying and aware of the patients that they had treated with GCC agonists, but are having persistent symptoms and really could benefit from a novel approach. So it's really the patients they treat every day, particularly these high-riding HCPs that we're focused on, every patient that they see has likely been tried on a GCC agonist or is on a GCC agonist. And what we're finding, so those patients implicitly meet the prior authorization criteria. And what we're finding is that physicians are increasingly identifying them, engaging them in dialogue and saying, hey, there is a new therapy option available now that I really think you could benefit from. So they're just expanding their view on patients now that actually could benefit from a novel approach since they've seen the good results for IBSRELA in the patients they initially tried it on.

Thank you.

Thank you. The next question comes from Louise Chen from Cantor Fitzgerald. Please go ahead.

Hi, congratulations on all the progress and thanks for taking my questions. So I wanted to ask you, including the drawdown that you expect in March, what do you estimate your cash runway to be? And then also on tenapanor, I saw that you have a potential regulatory action coming in China. So just curious, how big that opportunity could potentially be for you? And then same question for Japan with the launch, how should we think about revenues in Japan in first quarter '24 and beyond? Thank you.

Sure. Let me address a couple of those things and then I'll pass it off to Justin. Recall that what we did with our relationship with KKC in Japan is we monetized those royalties, right? So you shouldn't expect anything more coming from our partnership in Japan. And it's up to KKC to speak to what kind of revenues they would expect out of their market. With our relationship in China, certainly there's some regulatory actions that can happen there. We've not really spoken a whole lot about what the opportunity is. And I think we'll hold off on that as well. In terms of the drawdown in March, we're probably not going to give you any specific numbers in terms of runway and what that provides. But if you can address that, Justin.

Sure. Thank you, Louise. And thank you, Mike. We are overall starting to move towards what we'll call steady state spending. So this drawdown, of course, we're very mindful of how we bring in additional capital and we try to be thoughtful and measured in how we approach our spending and our planning. And so on top of the 184.3 billion we had at the end of the year, this really does put us in good shape. And we are obviously always trying to balance need or fund our operations with other considerations. So for us, we're taking it thoughtfully and measured. And we mentioned the increased activities we look to add to the commercial team this year. And once we get to the steady state, as I mentioned, we'll be able to give you a more precise number. We're not really consistent to give you an exact date now, other than we're in really good shape in the near term.

Okay. Thank you.

The next question comes from Yigal Nochomovitz from Citi. Please go ahead.

Hi, Mike and team. Thank you. On the observational trial that you talked about, can you just talk a little bit more, is there a fixed number of patients that can enroll or is it more open-ended? Will the patients that go into that trial be getting free drug or are they still considered commercial patients? And also just, you obviously had approval back in October. Just curious as to why the study is starting now versus right after when the drug was approved. Thanks.

Sure, Laura.

Yeah, sure. I mean, thanks, Yigal. I mean, the first question in terms of the number of patients, it is more open. I mean, obviously it's a real-world study where, again, we're looking at patients who are being prescribed the drug in a real-world clinical setting. And so it's not free drug. It's basically patients who, again, are either intolerant to phosphate binders or have not gotten to their treatment goal on binders alone. And so it's more of an open sort of enrollment piece. But again, the investigators that are looking to enroll patients will make that decision based on the normal shared decision-making between patients and physicians.

And Yigal, to address your question about its commencement, it takes time to get these things going and figuring out which investigators we'll work with. So nothing about that timeframe doesn't make it relevant.

Right. Okay. And then I was doing some math on the guidance. So 140 to 150 works out to 9% to 12% quarter-on-quarter growth. So just curious about how you arrived at that. And then actually, if you carry that out into the future, and then you look at what happened with Linzess. Linzess, it launched December 2012. It got to a billion in 2021. It took nine years. If you take the low end of your guidance on quarterly, quarter-on-quarter, you will get to 1 billion in, I guess, somewhere around 2029, 2030. So just curious what you think about that timetable.

Well, I think your math is very good. But what we've said is that we see this as $1 billion opportunity. We haven't given the timeframe within which we will accomplish that. I think, I hope what you've learned about us, we're very measured in the way that we do this. And certainly, if we see opportunity to give you more specificity around the timeframe of hitting those numbers, we will. But we're very confident with what we've guided for this year between 140, 150, certainly gets us on the kind of trajectory you just described.

Okay. Great. Thank you.

The next question comes from Ryan Deschner of Raymond James. Please go ahead.

Hi there. My question is, you know, from our recent discussions with nephrologists over the last few weeks, we're hearing a heavy interest actually in the perceived compliance benefit associated with XPHO

Yeah. I mean, I'll let, ask Susan to address some of this too, but that second population, you know, that falls potentially within a definition of intolerance, right? If you think about how these patients have had to take these handfuls of pills every day, multiple meals, every meal and snack, that's a tolerance issue, not necessarily an efficacy issue. So we think that the indication that we were ultimately able to get from the FDA allows a physician to attest to either one of those two. Susan, anything to add?

Yeah, I would just add that it's really important to note that consistently we see approximately 70% of patients, despite treatment with binders, are unable to achieve or maintain the, you know, global guideline target levels within a six-month period. So, and what we're finding now on the market in front of nephrologists is that they believe that the majority of their patients are unable to achieve or maintain target levels with binder therapy. So the population that, you know, aligned with our indication is really quite large. And I think, you know, it's, and that's why we're seeing the enthusiasm on the part of the nephrology community to now finally have another option for those patients. And with the novel mechanism of XPHO

Thanks so much. Appreciate it.

The next question comes from Joseph Thome from TD Cowen. Please go ahead.

Hi there. Good afternoon. Congrats on the progress. And thank you for taking my questions, everyone, on XPHO

Hey, Joe. Thanks for the question. Obviously, understandable question given some of the data that you're accustomed to isn't available. But we're not going to be in a position to count physicians and do that. I think as we begin, as we did with IBSRELA, getting the comfort of a number of quarters underneath our belt, ultimately, the revenue guidance that we are going to give is going to be the most important thing for all of you to follow. And presumably, there will be some resolution as to how you can access script data, whether it's through outlets like you have in the past or acquiring those data as well. And what's your question on IBSRELA?

And then on IBSRELA, I had a question on our ally study, the phase three in pediatric patients with IBS-C. I guess how important are data from this study? How is this progressing? And when you think about that expanded $1 billion market opportunity, does that include patients or a meaningful number of patients at all under age 18? Or would this be an expansion to that number if you're able to get that on the label? Thanks.

Yeah, I think very basically, it'd be an expansion. But Laura, if you want to address the question about the trial.

Yeah, in terms of the pediatric study, I mean, again, we've got an ongoing study in patients who are age 12 to 18. And that study is progressing nicely. And we have another study that is planned in pediatric patients' age 6 to 11. So in terms of those studies, we see them progressing as planned. In terms of, Mike, maybe you want to address the other part of the question in relationship to how that, pertains to additional revenue.

Yeah, there's obviously a population there that we would, that would benefit from a product like IBSRELA. I think quantifying that is going to, it's not something that we've done, but it's potentially something that we would think is an expansion.

Great. Thank you very much.

The next question comes from Ed Arce from H.C. Wainwright. Please go ahead.

Hi, good afternoon. This is Thomas Yip asking a couple questions. Thank you for the kind of questions. So first on IBSRELA, can you provide some details on a plan that was previously announced to expand US sales force both in terms of scale and timing of the increase? Should we expect an incremental increase throughout the year or is it contingent on certain criteria for expansion?

Yeah, I think as you heard in our opening comments, we're taking the IBSRELA dedicated team from 64 to 124. And as Justin said in his commentary, steady state spend on that we expect would be in evidenced by the third quarter of this year.

Got it. Thank you. And then perhaps one more question on exposure. When should we expect the first time to provide revenue guidance? Should we expect something along the line of IBSRELA? In other words, about 12 months of sales before we see a guidance?

Yeah, I mean, I think that's prudent. When we see in some of the questions on this call, what the impact is of seasonality, the first quarter, all those things with IBSRELA was four and a half, five quarters underneath our belt before we came out with any guidance.

Sounds good. Thank you again for your questions.

Of course. Thank you.

The next question comes from Matt Kaplan from Ladenburg Thalmann. Please go ahead.

Hey, guys. Thanks for taking the questions. Just wanted to stick on IBSRELA for a minute. What are you seeing, I guess, for IBSRELA with respect to its use in terms of duration on therapy and are patients using it in a cyclical fashion, kind of come on and come off the drug?

Yes, Susan, you want to address that?

Sure. Yes, Matt. So the feedback that we're getting from the physicians treating patients with IBSRELA is really highly favorable in terms of the patient response to therapy and satisfaction with therapy. Overall, we're finding that, as you have noted, IBS-C patients overall, when they're feeling better, tend to want to maybe stop taking the drug, knowing that if the symptoms come back, they would reinitiate therapy. So at this point, we're finding that that overall behavior is probably consistent regardless of the treatments that are prescribed. But the good news from the marketplace is that physicians are keeping them on the drug and really believe that the drug is working.

Okay, that's helpful. And then with respect to XPHO

I'm not sure we have exact visibility into other prescriptions, right? So this is a, we have a closed system with our ArdelyxAssist program that helps the prior authorization process. Susan, do we have perspective on that?

Yeah, actually, it's a great question, Matt. So I think that there isn't a quantitative answer. But what we could say is based on our experience now in the offices, that we're seeing physicians adding XPHO

And Matt, I think that's why we refer, while we're referring to this as an XPHO

Great. Well, congrats on the progress and thanks for taking the questions.

Thanks, Matt.

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