Alicia Davis - IR Mike Raab - President and CEO.

Good afternoon and welcome to Ardelyx's conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session after the prepared remarks. As a reminder, today's call is being recorded. I would now like to turn the call over to Alicia Davis of Thrust Strategic Communications. You may begin..

Thank you, Sandra and Good afternoon everyone. Earlier today, we issued a press release outlining Ardelyx's second quarter 2018 operating results. The press release and our current corporate presentation are available in the Investors section of the company's Web site at ardelyx.com. On the call with me is Mike Raab, President and CEO.

Additional members of the team will join us for the Q&A session. During this call, we will make forward-looking statements related to the company's current expectations and plans.

These statements are subject to risks and uncertainties, and our actual results may differ materially due to various important risk factors including those described in the risk factors section of our Form 10-Q filed with the SEC.

These statements represent our views as of this call, and should not be relied upon as representing our views as of any date in the future. We undertake no obligation to update any forward-looking statements. With that, let me pass the call over to Mike..

Thanks, Alicia, and good afternoon everyone. The first-half of 2018 has been about execution and evolution for Ardelyx. As a company, we are focused on developing and brining to market first-in-class for renal diseases. This is an area of development that has seen little innovation by our industry despite the numbers of people affected.

The significant cost of these disorders to our healthcare system and a clear need for new treatment, we owe these underserved patients and our physicians treatment options with unique mechanisms of action that are effective, powerful, and suitable for long-term use.

This is precisely the role we see for tenapanor, and why we are confident in its future. The strength of our expertise in the renal space, combined with our knowledge of the physician leaders, community center, and peer landscape makes me confident in our ability to build an effective, specialized U.S. commercial organization targeting nephrologists.

Our plan is to bring tenapanor to market for hyperphosphatemia ourselves, along with potential new treatments for hyperkalemia and other renal disorders. For our GI programs we are pursuing strategic agreements that would bring them to market in all geographies worldwide.

We are well underway with our partnering efforts with several established agreements.

We have an agreement with Fosun Pharma to bring tenapanor to patients in China for both IBS-C and cardiorenal diseases, an agreement with Kyowa Hakko Kirin to bring tenapanor for cardiorenal diseases, including hyperphosphatemia to patients in Japan, and an agreement with Knight Therapeutics to bring tenapanor to patients with IBS-C and cardiorenal diseases in Canada.

Each of these played an important role in our future as we focus on near-term efforts on hyperphosphatemia and hyperkalemia. We see a significant opportunity to bring a better treatment option for hyperphosphatemia to end-state renal disease patients on dialysis.

ESRD, the last stage of chronic kidney disease, is a major problem in the United States, which currently requires dialysis or a quick kidney transplant in order for a patient to stay alive. Of the more then 400,000 people in the United States with ESRD who are on dialysis, nearly all require phosphate management.

And we know that hyperphosphatemia is an independent predictor of morbidity and mortality in this patient population. We believe tenapanor has the potential to change the care of patients with hyperphosphatemia with just two pills taken each day, that's 14 tiny pills a week as compared to the up to 64 large pills required by today's market leader.

With a completely novel mechanism of action that limits the amount of dietary phosphate that can pass through the GI tract and enter the blood, tenapanor has demonstrated the ability to reduce serum phosphorous with favorable safety in studies to date.

This includes positive results from the first Phase 3 study of tenapanor in hyperphosphatemia, which we reported last year. Earlier this year, we began our second Phase 3 study for tenapanor for hyperphosphatemia, the 52-week Freedom trial.

Basic recruitment into this study is ongoing, and we continue to expect data next year, followed by an NDA submission soon thereafter.

If approved, tenapanor could be the first small-molecule drug on the market for hyperphosphatemia for dialysis patients, brining in new innovative mechanism and convenient dosing, which we believe could lead to enhanced compliance and adherence over the conventional phosphate binders.

As noted earlier, our intention is to commercialize tenapanor for hyperphosphatemia in the U.S. on our own. There are only about 10,000 nephrologists in the United States, which are led by a concentrated group of key opinionators and less than 7,000 in-center dialysis facilities.

Based on our experience, we believe we can reach these targets by building a highly efficient specialized commercial organization. Using conservative estimates, we believe that tenapanor has a U.S. market opportunity of between $500 million to $700 million.

Our renal portfolio also includes our RDX013 program, which represents the potential first small-molecule treatment for elevated serum potassium or hyperkalemia. RDX013 works by a completely different mechanism whereby it may have the potential to lower serum potassium whether or not potassium is present in the diet.

Our preclinical data demonstrate that RDX013 can have a significant potassium [indiscernible] impact, at one-one-thousandth of a dose as compared to the potassium binders. Like tenapanor for hyperphosphatemia, RDX013 has also been designed to lower pill burden allowing for better compliance in long-term use.

We estimate that over two million people in the U.S. have hyperkalemia. And according to the 2017 study conducted by an independent market research group, about half of nephrologists and cardiologists surveyed note that even with today's available binder treatment there remains a significant need for new treatments for hyperkalemia.

With the successful development of an effective potassium [indiscernible] and a small convenient pill format, we believe that our RDX013 approach may allow nephrologists and cardiologists an opportunity to treat hyperkalemia chronically without reducing the use of necessary concurrent medications.

If successful, we would be able to leverage the renal sales and marketing organization we plan to build to support tenapanor for for hyperphosphatemia to efficiently bring RDX13 to market in the U.S. while this program is early, we believe that RDX13 is a significant opportunity and we look forward to advancing this program.

In addition to our renal pipeline and based on the success for our Phase 3 TEMPO program for tenapanor and IBS-C, we are working towards submitting our first NDA application early in the fourth quarter of this year.

As stated earlier, we will not be commercializing our GI assets, instead we intend for those to be brought to market through strategic collaborations and like these agreements with companies that has significant GI experience and a proven track record of commercializing medicines.

Our agreement with Nice and for Sun Pharma are exemplary of the benefit we think with tenapanor can have for patients with IBS-C. Our plan is to continue pursuing such agreements to bring tenapanor to these patients globally.

In total, the three licensing deals have brought in $44.3 million in non-dilutive cash flow with the potential for significant development and commercial milestones as well as royalty spend for each upon commercialization.

That capital combined with the recent $100 million we've raised in the second quarter gives us extended revenue in the 2020 giving us through our NDA for tenapanor for IBS-C and potential approval next year as well as the data readout for tenapanor for hyperphosphatemia.

I'm highly confident in the future of tenapanor and Ardelyx as an organization, I look forward to sharing more details on our progress in the months ahead as we execute on a number of critical milestones. With that, we will open the call to answer your questions.

Sandra?.

Thank you. [Operator Instructions]Our first question comes from the line of Yigal Nochomovitz with Citi. Your line is now open..

Hi guys, this is Samantha on for Yigal. Thanks for taking our question. I was wondering if first, you could just provide a little bit more color on what specifically you're looking for in a partnership IBS-C in the U.S.

and if you could what discussions have you had so far with potential partners to-date?.

Sure. Thanks, Samantha. Let me start with the last part first. We have been in conversations throughout. We indicated quite a while ago that we would not be commercializing tenapanor for IBS-C and GI, and we focus our effort on cardiorenal diseases.

And as you can imagine, I think as people saw tenapanor once daily come out and the questions around CSPM, people began to demure and wait until TEMPO-2 came out.

Obviously the performance that we've seen with competitors that have recently launched, and ultimately the capital requirement that people believe is needed for commercialization of IBS-C, we've been thoughtful and careful as we've gone out now with the TEMPO-2 data, which is clearly best from our perspective in category results.

The dynamic that happens was clearly we needed to raise capital, we did get term sheets, but none of which anyone would have wanted me to access because certainly blood will smell than water as we need to rise capital. So we did not accept any of those term sheets. We believe all those parties are still going to be at the table.

And ultimately the strongest position that we will have that will eliminate any uncertainty is post approval with an approved label. And that doesn't mean there aren't ongoing conversations that we have and we will have, and if there is something that makes sense for us to do, we do recently would take advantage of it.

My interest here is to get a deal, where ultimately we get to participate on the back-end both in royalties and milestones as a way to offset equity financing that we may ultimately need to do in the future.

So the kinds of companies that we are interested in are you know, they range from folks that we've spoken to that are traditional companies that are in the GI space, who they all are, all the companies that you would expect we have spoken to, to companies that have gaps in your pipelines and with something that is approved is direct leverage going to commercial organizations that are going to have in the field.

Some optimistic that we'll get something done, and there will be something ultimately provides us the benefit that we would expect from that kind of relationship..

Great, thanks for that.

And may be you could also elaborate a little bit more when you say one or more strategic partnership in the U.S., what would it look like to have multiple deals in the same territory?.

Yes, so that we wouldn't do multiple deals in the same territory with same indication.

What we meant by that is what we will be doing is multiple deals across territories to get IDSC after all the patients, and you can imagine there may be parties that want just United States or United States and Europe and we just have to -- so much what we did with [indiscernible] and Unite, look at the best parties and into the territories and ultimately make those decisions.

So we wouldn't do two IDSC deals in the U.S..

Great, thank you.

And just one more, when do you anticipate enrollment for the second hyperphosphatemia study to complete?.

Yes. So what we've guided to right now is that we will read the data out next year and file the NDA. We're also on the relatively flat part of the enrollment curve that everyone goes through.

[Indiscernible] two weeks ago in New York about this that we hit the headwinds of the hyperphosphatemia studies when we started enrollment in January of this year. Those are coming to an end. So we expect things to continue to get a trajectory that we've expected.

And once we get to the beginning of that hockey stick that everyone experiences, we will begin to tighten guidance as to when we read out..

Great, thank you so much for taking the question..

Of course..

Thank you. [Operator Instructions] And I'm showing no further questions at this time. So I'd like to return the call to Mr. Mike Raab for any closing remarks..

Thanks, Sandra, and thank you all for joining us today. As you have heard, we're focused on the successful execution of a number of initiatives in the months ahead as we work to bring important medicines to patients who need them. We thank you for your questions, and look forward to keep you updated as we make additional progress. Thank you, Sandra..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day..