ARDX - NASDAQ

Good day, everyone, and welcome to the Ardelyx First Quarter 2025 Earnings Call. [Operator Instructions] Now I'd like to turn the conference over to Caitlin Lowie, Vice President of Corporate Communications and Investor Relations. Caitlin, you may begin.

Thank you. Good afternoon, and welcome to our second quarter 2025 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 this call, we will be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ significantly from those described. We encourage you to review the risk factors in our most recently -- our most recent quarterly report on Form 10-Q that will be filed today and 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 second quarter of 2025. Next, Chief Commercial Officer, Eric Foster, will provide an update on the performance of IBSRELA and XPHO

Good afternoon. It's a pleasure to be with you today to share our second quarter 2025 results, a quarter that reflects the strength of our strategy, the momentum behind our products and exceptional execution by our team. We're proud to report a standout quarter for both IBSRELA and XPHO

Thank you, Mike. It's great to be with you today, and I'm excited to share insights into the performance we delivered during the second quarter and how we plan to maintain that momentum for the remainder of the year. Let me start with IBSRELA. IBSRELA recorded an impressive $65 million in net sales revenue for Q2, demonstrating 84% year- over-year growth and 46% quarter-over-quarter growth. we saw a clear acceleration in demand, delivering our strongest quarter since launch, supported by growth across all key demand indicators compared to the first quarter of this year. This performance was driven by focused commercial execution, which generated growth in both breadth and depth of prescribing and an improvement in prescription pull-through. Let me dive into it a bit more, starting with commercial execution. During the quarter, the team drove significant increases in new and total prescriptions through increased field activities to targeted HCPs. We also deployed highly effective marketing activities, including peer-to-peer HCP education programs and digital HCP and consumer engagement. By focusing on increasing the breadth of writers, we generated growth in new writers, new prescriptions and new patient starts. In addition, existing writers expanded their view of patients they consider candidates for IBSRELA and in turn, increased their depth of prescribing. We were also pleased to see that refills made up a greater proportion of prescriptions in Q2, which means new prescriptions are spinning off more refills. Both new and refill prescriptions reached all-time highs. We also saw early evidence that the investment in the field access manager team is having a positive impact on our prescription pull- through. The team focused on educating offices to ensure that providers can navigate the access landscape, if needed. We are seeing early indicators that approval rates and resubmission rates are improving. It is still early for the field access manager team, but we are pleased with the progress and results to date. It has been 3 full quarters since we completed our sales force expansion and the field team is hitting their stride. In the second half, they will continue their focus on target HCPs and reinforce IBSRELA's unique and differentiated position as the next choice therapy after trial with a secretagogue. We know that only 1/4 of patients on the secretagogue are satisfied, and there remains significant opportunity in the market. We will continue the sales and marketing activities that drove increased demand during the first half of 2025 with the aim of continuing to expand both depth and breadth of the prescribing base. Additionally, our expanded field access team will maintain their focus on improving prescription pull-through to help ensure that all appropriate patients prescribed IBSRELA get on treatment. Working with ArdelyxAssist, our team is focused on supporting HCPs to understand the channels that are best equipped to handle prescriptions. The field access manager team also works closely with HCPs to provide prior authorization support to improve patient pull-through. Coming off a strong Q2 performance, I have full confidence in our team. IBSRELA is an important medicine that delivers meaningful benefits to patients, and our commercial strategy is working. As we look to the second half of the year, we remain focused on executing at a high level and expect our strong momentum to continue. We are raising our guidance for this year. We are confident in our ability to deliver peak sales of more than $1 billion. Now on to XPHO

Thanks, Eric. Before jumping into the financials from the quarter, I want to take a moment to share my thoughts on leaving Ardelyx later this year. I have had the privilege of seeing the evolution of Ardelyx over the past 5 years. As many of you who have followed us for a long time know, there have been some challenges, but there have been many more successes. During my time at Ardelyx, I've had the opportunity to help launch 2 drugs, build the supply chain and support systems designed to ensure the product was always available for patients, navigate challenging financial markets and what I'm most proud of, build a team capable and equipped to support the future operations for this company. After establishing the infrastructure required to be a successful commercial company, Ardelyx is in a strong position, and it seems like the right time for me to make a transition. I look forward to staying on to help with the smooth transition of the finance leadership for the company. Ardelyx is a great company with an exciting future, and I look forward to continuing to follow the company's future successes after my departure. Now on to the strong financial performance we delivered during the second quarter ended June 30, 2025. As Mike and Eric both shared, we generated significant patient demand during the second quarter. We have continued to thoughtfully invest in our business to support that growth and finished Q2 with an improvement in net loss on a quarter-over-quarter basis. This performance reinforces our confidence in our ability to continue to generate significant revenue and carefully structure and manage our cost base. We shared our full financials in the press release and 8-K issued earlier today. I will not go into all the individual items, but instead focus on the key drivers during the quarter, starting with revenue. For the period ended June 30, 2025, we reported total revenue of $97.7 million, an increase of 33% compared to the $73.2 million we reported in Q2 of last year. The growth was driven by significant increases in revenue by IBSRELA and product supply sales to our collaboration partners. During the second quarter of 2025, we recorded IBSRELA net product sales revenue of $65 million, an increase of 84% over the same period last year. IBSRELA has demonstrated consistent growth since launch, and our strong performance in the second quarter was a reflection of the continued patient demand. We also saw an improvement in our gross to net deductions during Q2 compared to the first quarter due to decreased costs associated with our commercial co-pay program. We finished the second quarter with a gross to net deduction of approximately 32.2%. We expect IBSRELA to continue its strong performance for the remainder of 2025. And as such, we are raising our guidance and currently expect to finish the year with between $250 million and $260 million in net product sales revenue. We expect this growth to be driven by patient demand and improved prescription pull-through as well as modest improvements in our gross to net deduction. XPHO

Thanks, Eric, and thank you, Justin. I hope that what you have taken away from our call today is that the performance is an indication of what you can expect from us, a focus on execution, continued momentum and delivering on our priorities. I'd like to say a note of thanks to everyone on team Ardelyx for your hard work and commitment to bring our important medicines to patients. Thank you also to our shareholders for your continued trust and support. I will now open the call to questions. Elvis.

[Operator Instructions] Our first question comes from Louise Chen from Scotiabank.

Congratulations on the quarter. I had 2 for you. Number one, I wanted to ask you if there is any update on a potential EU partner? And then secondly, I wanted to ask you how you're thinking about getting to cash flow positive? Is it a near-term or medium-term goal for you?

Listen, the second part of your questions first is, obviously, we always look at cash flow breakeven and free cash flow in order to reinvest in the business. That's clearly an important thing. I think you can do the math with the guidance that we've given and see that it's not that far off on the horizon. In terms of EU, we're going to continue to evaluate opportunities. If you look at both of these businesses as it relates to Europe and that's not even think about the halo -- negative halo of MFN over making those decisions, there's nothing really substantive to talk about in terms of those opportunities at this stage.

Our next question comes from Dennis Ding from Jefferies & Company.

I have 2, if I may. One is on IBSRELA. So talk about the new guidance and what's factored into that. It seems a little bit conservative given the demand and scripts that we're seeing and also the fact that $8 million of that $10 million raise came from the Q2 beat. So I'm wondering if there's anything that we are not thinking about, but you are seeing on the ground? And then my second question is on XPHO

Sure. I'll have Justin address that. Sure. Thank you, Dennis, for the questions. I'll have Justin address the second in a minute. With the first, you should know us well enough by now that when we give numbers, we are thoughtful and deliberate about what we say. Nothing to read into this, except that, that $10 million increase in our guidance is a meaningful step in the right direction of what this opportunity is. And I think should put little doubt in people's minds about our long-term projections, the opportunity for this business. So I would focus on that. And with opportunity to give you more perspective on how we believe this year will play out, we certainly will provide that. Justin, do you want to provide some perspective on Q2 gross to net?

Thanks, Dennis. So you're correct. In Q1, when one excludes that onetime returns reserve release we did, our gross to net would have been approximately 31%. And for Q2, it was approximately 29%. It does pertain to product mix, right, patient mix and who the payer is. So those are pretty close to each other. There's really mild differences. We did have an improvement in commercial co-pay. That was the primary driver. Again, co-pay for both of our products typically improves over the course of the year. Many of our patients are on what I'll call calendar year health care plans. So if they're commercial patients, they may have a higher deduct in the beginning part of the year, and it improves for them as a patient over time. So the primary difference between Q1 and Q2 is on the amount of commercial co-pay that we need to, again, help the patient and patient assistance. I would look for it to be in that 30% range in general for the rest of this year. Again, 29% to 31% is a reasonable range. And we're still learning in the new environment, there might be minor changes here and there, but I expect it to be in that general range.

Next, we have Ryan Deschner from Raymond James.

Congrats on the quarter. I'm curious how much of this quarter's IBSRELA sales growth be attributed to expanded sales team now that it's firing on all cylinders and you've got 3 full quarters in. Do you expect continued meaningful script pull-through acceleration into 2026 due to this expanded field team? Or will that start to taper off around that time?

Thanks for the question, Ryan. Let me ask Eric to address that. And certainly, it's not only on the sales side with the APDs, but the field access managers that Eric has spoken to that you can address that, too.

Yes. Thanks, Ryan, for the question. As I said in my earlier comments, we're 3 full quarters post completion of the expansion. So obviously, with increased call activity, we're seeing significant increase in terms of number of writers leading to increase in new and refill prescriptions. We expect that to continue. Just to remind you, I mean, there's significant opportunity in this market. Only 1/4 of patients we know are satisfied in this large market with being on therapy with the secretagogue. So we feel very confident in the opportunity that's in front of us. With this increased activity, we certainly expect it to continue for the remainder of the year.

And as a quick follow-up, just wanted to see how you're thinking about 1 quarter sort of seasonality going forward, how we should think about that over the next few years?

Sure. I'll ask Eric to provide some more perspective on it. But I think as we spoke about in the first quarter, it's the first time we saw it in the way that we did. And as this business grows and the magnitude of that impact is there, I think it's something that's prudent to have in there. Eric?

Yes. Like I said, we're very confident in our results at this point. We want to make sure we're mindful of the summer months, and we don't get ahead of ourselves. So really confident about our performance at this point in the year and certainly look forward to being able to move into back half of this year. We know that primarily, we do see that seasonality in Q1. I think for us, as we move into the back half of this year, it's more just being -- making sure that we're recognizing what's going on during the summer months where you have more vacations, physicians are taking vacations, patients are taking vacations. You've got return to school that happens in August and then really things start to pick back up towards the end of the quarter as they move into the fourth quarter. So for us, we're very confident of things at this point in time. We'll be mindful of those events as we go through this quarter and feel really confident about how we're going to be able to finish things up.

Our next question comes from Julian Harrison of BTIG.

Congrats on the quarter. On XPHO

Sure. Let me address the first part of your question on XPHO

Yes. Good question. Thank you for that, Julian. Yes. first-line therapy, certainly, we are aware of some of that. I think as you look at our positioning kind of post use with a secretagogue and having significant opportunity there, we feel very confident in our positioning there. I think as physicians continue to get confident in IBSRELA and the impact that it can have for patients, certainly, they may go to that earlier than what they're used to going to. And it is important to note, our indication is for first-line use. So it's more than appropriate for physicians to go to that first line. And for us, it's about making sure that we have patient access. So if they're able to get it first line and they have confidence in the product for the patient and it's the right choice, they should be able to get it. If it's post use with the secretagogue , again, we've got focus there on patient pull-through and very confident in the improvements that we're seeing there and expect that to continue for the remainder of the year.

Up next, we have Joseph Thome from TD Cowen.

Congrats on the progress and best wishes to Justin on his next steps. Maybe on the pull down of the $50 million, can you go into a little bit more detail as to what triggered that outside of the favorable interest rate dynamics? And maybe when you think about that remaining $100 million, what would be sort of the triggers to pull the rest down? Obviously, you instituted the new CMO. Should we be thinking about this as sort of opportunistic BD or kind of building out the pipeline at all? Or kind of what would you be using this cash for?

Just a quick comment, then I'll ask Justin to mention. SLR Solar has been a phenomenal partner of ours. And with the opportunity to get this, it's something that just made sense to strengthen the balance sheet, as I said in my opening comments. Justin, any other adds?

Yes. Thanks, Mike, and thanks, Joe. Again, hopefully, you've seen over time, we try to be very thoughtful and strategic with any of our fundraising initiatives, debt, equity and otherwise. So cost of capital is always important to us and be mindful of our shareholders. The debt presented itself at a very favorable interest rate. And so we thought it was a prudent opportunity for us to take advantage of that and give us some near-term flexibility. So looking ahead, again, it's always important for us to have optionality for our team. So we will never do anything just to do anything, but it's nice to have that flexibility and optionality going forward.

And maybe just one more, if I may. Do you think that both of the sales teams are now rightsized to meet your kind of peak guidance that you've set out for both XPHO

Yes. Just one quick comment for me and I'll ask Eric to step in is, we are always assessing how best to optimize our footprint and what we're doing. So that should never stop. I think we're pretty confident in terms of where we are and right size. But Eric, anything to add?

Yes. Thanks, Joe. Yes, pretty confident in terms of where we are with IBSRELA. Just a reminder, we're coming off our 3 highest quarters of demand. So we feel like the team is really hitting their stride in addition to the expansion of the field access manager. So focusing on improvements in the middle of the funnel to be able to improve access. So I think right now, as we look at the sizing of our teams, we feel very confident where it is. To Mike's point, we're always assessing to look for opportunities to be able to drive incremental demand. But we also have our marketing activities that are out there. As I mentioned earlier, highly impactful marketing activities that supplement the field force activity, right, that's out there. On the XPHO

Our next question comes from Yigal from Citigroup.

This is Jin-Wook Kim on for Yigal. Congrats on the quarter. Maybe just 2 quick ones from us. We were wondering if there's any color at all you could provide on the breakdown of new patients versus refill and prescriptions for IBSRELA?

Yes, we've not historically given a whole lot of detail around that. I think as you heard in Eric's comments, we have seen a good amount of increase in refill, which is exactly what we want to see. These patients be sticky and with the benefit that these medicines are providing. So we like to see that trend. I mean the specifics, we have not historically given those details. Anything to add?

No, nothing more to add there, just about making sure that the patient is going to the right channel to be able to get the product. And with that, we saw more refills this quarter than we have seen in the past, certainly versus new prescriptions. And that, again, is just another indicator that gives us confidence in terms of what we're able to achieve with IBSRELA.

Got you. Very encouraging. And if I may, just one more question. Is there any update -- or what is the latest update in terms of the ongoing CMS legal proceedings?

Yes. I mean, as you can imagine, we've gotten out of the business of trying to predict the administration, government, but we have -- our case will be -- arguments will be September 25. There's no statutory requirement for when we get a response back. And as soon as we know anything of substance, we certainly will provide that for all of you.

Our next question comes from Laura Chico from Wedbush Securities.

I've got to start out with a shoutout to Justin. Best of luck, Justin. Sorry to see you leaving. But congrats on the quarter. And I guess one on XPHO

Yes. Thanks for the question, Laura. And thank you for the shoutout to Justin. Clearly, that is well earned and appropriate. In terms of guidance for XPHO

That's helpful, Mike. And maybe just one last one. On IBSRELA, I don't know if you'll be able to answer this, but what is the average duration on treatment now for a patient there?

Sure I mean I think the average duration for IBS-C scripts is about 5, and we're trending the same, if not a little bit better. So I feel very good about the refill rates that we're seeing here just given this tends to be a disease of the experience the patients have is somewhat waxing remitting. And that has been historically the case, and we'll see if that is the case with us or if it's a tachyphylaxis you see with the GCC agonist, that's the sort of thing that we pay close attention to.

Next, we have Prakhar Agrawal from Cantor Fitzgerald.

Congrats on the quarter. So first on IBSRELA, you commented on typical summer seasonality, but it seems like the 3Q script trends are also looking good. So maybe just comment on how do you see IBSRELA trends for the rest of the year and just the market overall. If you look at some of the prior year trends, second half in aggregate tends to be much stronger than first half. So should this year be any different? And just had a quick follow-up.

Yes, Prakhar, thank you for the question. As I said at the start with the first question I got was what do we think about this $250 million to $260 million compared to performance and exactly what you just described. With an opportunity to provide you more perspective as we go through the rest of the year, we certainly will do that. This is a meaningful step for us to give a $10 million increase in our guidance. We haven't done that before in this way. So we are going to take mindful and thoughtful steps as we see the performance show itself. And the data that you look at historically that you just described, sure, I can't argue against that, and we will provide more perspective as we can going forward.

And I realize -- on XPHO

Yes. Nice question because you're going to -- you corner me into giving you guidance. But I won't bite on all of it. What I will bite on is we just scored a $25 million quarter that we've said is based upon true real demand on the non-Medicare population. And do the math if it was flat and not much gets us to exactly the kind of modest growth that you would need. So I feel very good about the trajectory that we're on. And I feel confident that we will, in the not-too-distant future, be able to provide you some guidance. With growth since March, I am going to be thoughtful about doing that because I don't want to get ahead of myself or any of us ahead of our skis and what we're trying to do. So that's why we're sticking to our guns and not providing guidance yet, but we will.

Next, we have Aydin Huseynov from Ladenburg Thalmann.

Congratulations for the strong quarter, actually a record quarter for IBSRELA, I think. So let me ask a general question first. So you're now like almost on track to generate $400 million a year and you only traded at $1 billion valuation. So one can imagine that you might be approached by larger players. And if you do, where do you see the potential acquirers interest more in GI space or in the renal space? And this is obviously a very hypothetical question, but do you think you're valid more on GI or on the renal side?

You guys are the sell side, you tell me. I clearly think we're undervalued on both sides of the equation, whether it's $750 million peak for XPHO

Our next question comes from Allison Bratzel from Piper Sandler.

This is Ashley on for Allison. Congrats on the great quarter, guys. I just had 2 questions. One for XPHO

Sure. Justin will address the second question in a minute. For your first one, it's frankly more of the same, right? If you look at what we've done, Q1 with all the peculiarities we saw there and uncertainties that people had, I think what we've shown everyone in Q2 is they trust us. Our strategy is right, and we're serving these patients who really need better phosphorus control. So I think that's unequivocal. I'm thoughtful. We are conservative and mindful of the way we give guidance. And I think it's seeing more of the same, honestly, as we navigate this quarter and into next to gain the confidence to provide you some guidance. Justin?

Yes. Thank you. So we do generate product supply revenue from our 3 international collaborative partners. We did have a good second quarter, as you noted, just over $6 million. So our partners order from us quasiregularly, but not quarterly. So we do expect some additional revenue from our partners in the fourth quarter of this year and be relatively comparable to the quarter we just had. So I would model limited in Q3. And then 2026, we haven't gotten to yet because they haven't placed their orders yet. And then on the -- our partners continue to do well, Kyowa Kirin is doing well in Japan with their sales for hyperphosphatemia. We did monetize that royalty stream with our partners and health care royalty partners. And so I do expect that to grow throughout the every quarter, hopefully, as Kyowa Kirin does well in penetrating their space. They've had a very good launch. But that money is primarily passed through in full to health care royalty partners. So any modest increase you see in noncash royalty revenue is offset by a corresponding debit, if you will, into our P&L.

Next, we have Roanna Ruiz from Leerink Partners.

This is Mazi on for Roanna. Just one from us. Sorry if it's been asked already, but can you provide more granular detail on the current prescription mix between Medicare PAP and revenue-generating non-Medicare patients for XPHO

Great question. So we don't talk about the number of scripts that are non-revenue as we've not done that historically. But for Medicaid and commercial for XPHO

That concludes our question-and-answer session. Mike, I'll turn things back over to you for any additional or closing comments.

Excellent. Thank you all for joining us this afternoon. We are, as ever, focused on our vision of a healthier tomorrow for patients and to maximizing shareholder value. With that, we can close the call. Thank you, Elvis.