Ardelyx, Inc. (NASDAQ:ARDX) Q2 2023 Earnings Call Transcript

Ardelyx, Inc. (NASDAQ:ARDX) Q2 2023 Earnings Call Transcript August 2, 2023

Ardelyx, Inc. misses on earnings expectations. Reported EPS is $-0.19 EPS, expectations were $0.12.

Operator: Hello and welcome to the Ardelyx Second Quarter 2023 Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Caitlin Lowie. Please go ahead ma’am.

Caitlin Lowie: Thank you. Good afternoon, everyone, and welcome to our second 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 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 our risk factors in our most recent quarterly report on Form 10-Q that was filed today, which can also 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 2023. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the launch of IBSRELA. Justin Renz, Chief Financial and Operations Officer, will conclude today’s formal remarks with a review of the company’s financial performance during the second quarter ended June 30, 2023 before we open the call to questions. With that, let me pass the call over to Mike.

Mike Raab: Good morning everyone, and thank you for joining us on the call. I’m really pleased to be here today and along with Susan and Justin to share with you the progress we’ve made over the past quarter. At the midway point of 2023, we are excited about the critical milestones we’ve achieved, the continued execution of our priorities, and the important two quarters ahead of us. IBSRELA is making significant inroads in the IBS-C market as healthcare practitioners and patients recognized the benefits of its novel mechanism profile. Our growth rate accelerated with net sales revenue in the second quarter of $18.3 million reflecting a 61% increase in net sales revenue over Q1. This performance is the result of the incredible efforts of a team that is fully engaged in the field, calling on HCPs, and articulating the unique value proposition that IBS-C offers patients who are in need of a new treatment option.

At this stage of our commercialization of IBSRELA, we’re excited to provide revenue guidance for the very first time. We currently expect IBSRELA net sales revenue for 2023 to be in the range of $72 million to $77 million. Physician adoption, patient need, and positive treatment experiences, as well as a favorable access are the fundamentals driving our IBSRELA growth and we believe the strength of these forces continues to predict expanded use of IBSRELA. As we’ve said, physicians are finding IBSRELA to be an important treatment option for their patients with IBS-C. Patients are experiencing positive results and refilling their prescriptions. Access to the IBSRELA is favorable, enabled by our best in-class patient services program, our Ardelyx Assist.

We are confident in the future performance of the IBSRELA, and we hope that this guidance will offer better insight into our expectations for this product and the market. As it relates to XPHOZAH, meaningful project risk has been made since we spoke in May. First, as we announced mid-May, the FDA had set the review date for XPHOZAH of October 17, and we expect to launch XPHOZAH in the fourth quarter of this year as quickly as possible following approval. Market awareness, interest, and intent to adopt XPHOZAH is high. We will have comprehensive sales, medical affairs, patient services, and peer access support in place at launch. And as we get closer to launch, we will share more details on our expectations for XPHOZAH and our launch plan to drive uptake and long-term success.

Second, as you may have seen, a Bipartisan Bill was introduced last week in the House of Representatives by Buddy Carter, Carol Miller, Annie Kuster and Terri Sewell that would delay the implementation of the Oral Only Policy under the Medicare ESRD Prospected Payment System, or PPS, through January 1st of 2033. The introduction of this bill is an important first step in extending the exclusion of the Oral Only ESRD drugs from the PPS. Currently, Oral Only [Fosterous] Learning Treatments, which XPHOZAH would be considered upon approval, are scheduled to enter the PPS beginning in January of 2025, eliminating separate payment under Medicare Part D for the approximately 60% to 65% of CKD patients on dialysis who are covered by Medicare. We believe this important legislation is in the best interest of patients, and we join the entire kidney community, advocates, patients, nephrologists, and dialysis providers that support the efforts to advance it.

Congress, taking action to extend this exclusion, as it has done three previous occasions, will ensure that CKD patients on dialysis continue to have access to personalized care and innovation. Pending approval of XPHOZAH by the end of this year within two years Ardelyx will have launched two highly differentiated commercial products in markets for patients with significant unmet medical needs, twice delivering on the vision of Ardelyx, a feat few biotechnology companies have ever accomplished. Susan will now talk through the market dynamics and key performance metrics that are driving our success and accelerate the sales growth for IBSRELA. Susan?

Susan Rodriguez: Thank you, Mike. Fifteen months into the launch of IBSRELA, we are establishing a strong early market position disrupting the IBS-C market by addressing the need for a novel mechanism treatment option. With a strong field force of more than 60 reps having daily interactions with the top writing IBSD HCPs, we continue to focus on driving both breadth and depth of IBSRELA writing across HCPs for their patients who can benefit from a novel treatment approach. Our omnichannel digital tactics further amplify our commercial presence, enabling continuous engagement with existing writers, as well as expanding awareness to cultivate new writers. With new writers continuously being added and existing writers increasing their prescribing, IBSRELA is redefining the treatment landscape.

Our Q2 sales performance and revenue growth over Q1 reflects the growing uptake of IBSRELA and the opportunity we believe this drug offers for a meaningful subset of patients head up until the launch of IBSRELA had limited treatment options. This market is highly promotion sensitive, our market presence is strong, and the value proposition of IBSRELA is resonating with HCPs and patients. The May 2023 launch dynamics tracking report published in Q2 by SPHERIC, an independent market research firm provides a view of the market response to IBSRELA based on a monthly launch tracking survey across a sample of GIs. The May 2023 findings reported based on the 76 GIs survey that 91% rated IBSRELA as an advance over existing therapy. Additionally, of the subset of respondents who reported using IBSRELA, 98% reported satisfaction with treatment.

Pressmaster/Shutterstock.com

The May 2023 SPHERIC survey results also provide a view of the strength of our targeted commercial presence in high IVSC writing HCP offices with 74% of survey GIs reporting seeing an IBSRELA rep of which the majority reported seeing a rep within the last three months. These results align with the persistent growth that we are seeing in both new and refill prescriptions and the feedback we receive daily from HCPs. HCPs are interested in IBSRELA are engaging actively with our sales team, responding to our omnichannel communication adopting IBSRELA and continuously expanding their use across their practice based on their favorable treatment experience. Momentum is strong and the potential is high. We believe the opportunity for this drug to deliver sales for Ardelyx of $500 million or more at peak is very real.

Our commercial presence is strong and making an impact. The novel mechanism and clinical profile resonate with physicians, patients are gaining access to the drugs and seeing positive results. The need is clear, the opportunity is clear, the product is performing, and the team is executing at the highest level. Commercial capabilities at Ardelyx are strong, proven, and mobilizing to be prepared to launch XPHOZAH if approved in the fourth quarter of this year. Marketing, distribution, payer access, and patient services commercial ramp has been ongoing with the build out of the nephrology sales team now underway. Upon its approval, XPHOZAH, like IBSRELA, will be a novel mechanism therapy entering into an established therapeutic area with limited treatment options that is highly accessible via a targeted focus on a concentrated number of HCPPs. Our strategy centers on treating nephrologists with a product positioning directed at patients with unmet medical needs and a path to access to bring this first in class offsite absorption inhibitor, XPHOZAH to patients.

I look forward to continuing to report on our XPHOZAH performance as well as sharing more details on the XPHOZAH launch in the near future. With that, I will hand it to Justin.

Justin Renz: Thank you, Susan. Our second quarter of 2023 reflects positive momentum on a number of financial metrics. Accelerated sales growth, improvements to our growth to net margin as compared to last quarter. Careful monitoring of cash expenditures and strengthening of our balance sheet in the methodical manner we have taken over the past several quarters. I will walk through those metrics now and then discuss the guides we provided today for this role in net product sales in 2023. In the second quarter of 2023, we have total revenue of $22.3 million compared to $2.5 million in the second quarter of 2022. We have increases to both our net product sales of IBSRELA and our product supply and licensing related revenue. As previously mentioned, we have net product sales of IBSRELA in Q2 2022 of $18.3 million, which is a significant 61% quarter-over-quarter growth from the $11.4 million we reported in the first quarter.

As a reminder, in the second quarter of 2022, our first full quarter sales following launch, we reported net product sales of $1.6 million. We also reported $4 million in product supply and licensing related revenues in the second quarter this year, compared to $1 million in the second quarter of 2022. Research and development expenses were $8.3 million in the quarter ended June 30, 2023, which is a decrease of $1.4 million from the $9.7 million for the same quarter last year. Expenses in the prior year were quite higher to [natural manufacturing expenses], as well with costs associated with our appeal at the FDH UI 2021 complete response letter on the NDA’s first proposal. We saw our gross-to-net margin improved in the second quarter, when compared to the first quarter.

As we expected, as health care plans reset in a new calendar year, our gross to net was somewhat higher in the first quarter than it had been in the third and fourth quarter of 2022. We were pleased to see that our gross-to-net improved in the second quarter of 2023 to be approximately 28%. We anticipate the gross-to-net margin to continue to be in the high 20s, the remainder of 2023. Selling, general and administrative expenses were $27.2 million for the second quarter of 2023. An increase of $8.3 million compared to the $18.9 million for the same period of 2022. The increase was primarily due to the increased cost associated with continued commercialization and growth of IBSRELA. For the quarter ended June 30, 2023, we have net loss of approximately $17.1 million or $.08 per fully diluted share compared to a net loss of $26.9 million or $.019 per share in the second quarter of 2022.

The net loss for the quarter ended June 30, 2023 including $12.2 million in combined with non-cash expenses from share-based compensation and non-cash savings expense. As of June 30, 2023, we have total cash, cash equivalents, and short-term investment of $127.6 million as compared to $123.9 million at December 31, 2022. This reflects a $11.6 million re-wage during the quarter, through sales of approximately 3 million shares of common stock under our ATM program. We will continue to be patient and explore further opportunities to raise additional capital for the company. We’re now going to walk through some of the details of our financial expectations for the next 12 months. First, as you saw in our press release this morning and as you heard from Mike, for the first time, we shared full-year net sales revenue guidance for IBSRELA.

15 months following the launch, we continue to see sales trends moving in steady, positive directions. Patients are refilling their prescriptions, previously writing HCPs are finding new patients, and we have new HCPs writing every day. Our strategy to grow depth and breadth of writers is working. We are also gaining visibility into the patterns and dynamic response each day enabling us to make more firm projections. We currently expect net IBSRELA sales revenue for full-year 2023 between $72 million and $77 million. At the end of the second quarter, we reported year-to-date 2023 net sales revenue of $29.7 million. This full-year guidance range represents thoughtful consideration of continued growth, consistent with the volume of new prescriptions we’ve seen, a favorable growth trajectory for lethal prescriptions, and strong demand and interest for this novel treatment.

We have confidence in IBSRELA’s potential, and we continue to lead IBSRELA to generate $500 million or more in net sales revenue at peak. In addition, I wanted to address the question we’ve received related to Symphony script tracking data. As we sought to understand the differences between our recorded revenue and the Symphony script data, we’ve identified that the numbers reported by Symphony include prescriptions from the pharmacy that fulfills prescriptions for our patient assistance program. Our delta does not receive revenue from patient assistance program prescriptions, and for this reason, the Symphony data does not directly tie to our [support level]. In addition, as Susan shared, we will begin investing this quarter to prepare for the launch of XPHOZAH in the fourth quarter, having approval.

When we launch XPHOZAH, it’s approved, and as we ramp up, we expect incremental expenditures to be approximately $20 million per quarter. We hope to quickly drive uptake and establish a position for XPHOZAH in the Hygrophoscan [teaming and treatment landscape]. Finally, as we’ve discussed in previous quarters, we will continue to strengthen our cash position by looking at all options available to us, including non-equity solutions. As a reminder, we expect to recognize a $2 million milestone payment in the third quarter from our partner in China, Olson Pharma, following the acceptance of the NDA for [indiscernible], which we announced earlier in July. In addition, assuming the approval of [indiscernible] in Japan, we will earn another milestone payment later this year from our Japanese partner, Kyowa Kirin Co. [indiscernible], we are in excellent financial position as we prepare for the exposure launch.

We are confident in our ability to fund our operations, and we will continue to make thoughtful decisions to maximize shareholder value. With that, I’ll hand it over to Mike.

Mike Raab: Thanks, Justin. Q2 was another quarter where [adults] achieve important milestones, delivered on our priorities, and strengthened our business. We are excited with IBSRELA’s performance and are beginning to see upside for this product. The team behind IBSRELA is focused, dedicated, and driven to help the patients that we serve. They have set of standard for the type of success and innovative thinking that can be expected from your adults’ commercial organization. Demand for exposure is high, and we believe we have the potential for a strong launch after approval. We continue to support our partners’ regulatory submissions while engaging in discussions for further international expansion and looking at all the options available to us from a financing perspective.

Before closing, I would like to take a moment as I always do to thank the incredible team Ardelyx. Your talent, your passion, and commitment are the driving force behind the performance that we’ve shared today. I will now open the call to questions. Operator?

See also 25 Most Popular Whiskey Brands in the World and 12 Stocks with Biggest Upside Potential According to Analysts.

Q&A Session

Operator: Yes, thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Yigal Nochomovitz with Citi Group.

Yigal Nochomovitz: Hi, Mike and team. Thank you very much. Could you just spend a little bit more time talking about the assumptions behind the newly introduced guidance range. Obviously, it implies a quarterly growth over — quarter-over-quarter growth, essentially lower than what you saw 2Q over 1Q for the back after the year. So if you could just delve into that a little bit more and then on the on the legislation with the with the bundling, can you talk about the likelihood that that legislation will come to fruition and keep the world out of the bundle to 2033. Thanks.

Mike Raab: Sure. Let me start with the last part first is, I feel like starting to sing school house rock as to how the bill becomes a law. And so that I can’t give you any specific percentages on the probabilities. This is such an important first step, what we’re focused on is making sure that the team is ready to launch in the fourth quarter pending approval. And we’ll take it step by step. I think this is such a strong message of what Congress has previously done three other times that it gives me some hope and optimism, but I can’t give you specific numbers. As it relates to the guidance, as I said, and Justin, though, this is our first time giving guidance, we’re going to take a very measured approach. I think as we look at how we performed since launch, there’s different percentages growth quarter-to-quarter.

So we’re not going to just straight line things or take these in a stepwise fashion as we have with this. And I think this is a measured and appropriate first step for guidance. Justin, anything to add to that?

Justin Renz: No Mike, that’s excellent. Again, we’re really encouraged by Q2’s quarter-to-quarter growth. And [indiscernible] has done an amazing job and will keep you apprised of our progress.

Yigal Nochomovitz: Thanks. And then just one, one quick question on the, on the symphony. So the patient assistance program. Can you say what percent of the script volume coming out of Symphony was driven by the PAP for which you don’t book revenue?

Mike Raab: Yes, I mean, it’s, it’s going to vary depending upon all the scripts. Right. So there’s not a specific percentage that we can say is going to be true last quarter to the next one. But it’s just that it’s a Pat program that shows up in Symphony.

Yigal Nochomovitz: Okay. Thanks, Mike.

Mike Raab: Sure.

Operator: Thank you. And the next question comes from Dennis Ding with Jeffries.

Dennis Ding: Hi, good morning. Congratulations on the progress. And thanks for taking our questions. Two, if I may, for exposure, what are your expectations into the October PDUFA, including how the label could eventually shake out and how that would impact your positioning in the market. And then, , number two, ever since the resubmission and acceptance, how have engagement with the FDA been and what more needs to happen in the next two months [into particular]. Thank you.

Mike Raab: Sure. So I think as we shared when we said that we had refiled the NDA and as well with Dr. Stein’s letter and frankly all the discussions that occurred at the adcom. We believe the likelihood is that this is going to be an indication that says something along the lines when binders are insufficient or intolerable, which is the majority of patients as everyone knows. So I think that secures a very powerful second line spot where all the binder, it’s what almost 80% of patients are above range in any six month period of time. So feel strong and feel good about if that’s indication ultimately ends up being. There’s not really been any substantive communication. The agency didn’t anticipate any. Traditionally, you begin your negotiations on your package insert month or so prior to your PDUFA date.