Ardelyx Q4 2023 Earnings Report

Ardelyx EPS Results

• Actual EPS: -$0.12
• Consensus EPS: -$0.09
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: $0.06

Ardelyx Revenue Results

• Actual Revenue: $34.36 million
• Expected Revenue: $34.26 million
• Beat/Miss: Beat by +$100.00 thousand
• YoY Revenue Growth: -22.20%

Ardelyx Announcement Details

• Quarter: Q4 2023
• Date: 2/22/2024
• Time: After Market Closes
• Conference Call Date: Thursday, February 22, 2024
• Conference Call Time: 4:30PM ET

Ardelyx (NASDAQ:ARDX) (NASDAQ: ARDX) is a clinical‐stage biopharmaceutical company focused on discovering, developing and commercializing targeted small molecule drugs for cardio‐renal and gastrointestinal diseases. The company’s lead marketed product, tenapanor (sold under the brand name XPHOZAH in the United States), is approved for the treatment of hyperphosphatemia in patients with chronic kidney disease on dialysis. Ardelyx’s proprietary approach targets epithelial transporters in the gastrointestinal tract, offering localized activity with limited systemic exposure.

Beyond tenapanor, Ardelyx’s development pipeline includes treatments designed to address other complications in kidney disease and related metabolic disorders. The company is advancing RDX8940, a non‐systemic, gut‐restricted TGR5 agonist intended for the treatment of nonalcoholic steatohepatitis (NASH) and other liver diseases. Additional programs focus on novel mechanisms to manage uremic toxins and intestinal sodium balance, reinforcing Ardelyx’s emphasis on gut‐targeted therapies that may improve patient outcomes without the safety risks of systemic drug exposure.

Founded in 2010 and headquartered in San Mateo, California, Ardelyx operates research and development facilities in the Bay Area, with a commercial infrastructure supporting product launch and patient access in the United States. The company has forged strategic collaborations—most notably with Mitsubishi Tanabe Pharma in Japan for the development and commercialization of tenapanor. Ardelyx’s leadership team, led by President and Chief Executive Officer Michael A. Raab, combines experience in drug discovery, regulatory affairs and commercial operations to drive its mission of bringing new treatment options to patients with high unmet medical needs.

Ardelyx Q4 2023 Earnings Call Transcript

Key Takeaways

• Ibsrela net product sales grew 26% quarter-over-quarter to $28.1 million in Q4 and reached $80.1 million for full-year 2023, up from $15.6 million in 2022.
• Exposa launch generated $2.5 million in Q4 revenue from mid-November, driven by high physician interest, positive patient feedback and rapid payer coverage via prior authorization.
• 2024 guidance calls for Ibsrela U.S. net product sales of $140 – 150 million, backed by expanding the sales force from 64 to 124 reps and increased investment in digital engagement and patient support.
• A prospective 3-year real-world evidence study for Exposa will track long-term effectiveness, treatment patterns, patient satisfaction and quality-of-life outcomes outside controlled trials.
• Ardelix closed 2023 with $184.3 million in cash, equivalents and short-term investments, added $22.4 million from an October loan draw and plans a $50 million drawdown in March despite a Q4 net loss of $28.8 million.

Presentation

[Operator]

Welcome to the Ardelyx fourth quarter and full-year 2023 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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.

[Caitlin Lowie, VP of Corporate Communications and Investor Relations at Ardelyx]

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 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.

[Caitlin Lowie, VP of Corporate Communications and Investor Relations at Ardelyx]

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 XPHOZAH. Our Chief Medical Officer, Dr. Laura Williams, will then discuss an XPHOZAH real-world evidence study announced today. Justin Renz, Chief Financial and Operations Officer, will conclude today's prepared remarks with a review of the company's financial performance during the fourth quarter and full-year ended December 31st, 2023, before we open the call to questions. With that, let me pass the call over to Mike.

[Mike Raab, President and CEO at Ardelyx]

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 XPHOZAH are demonstrating favorable market response with high healthcare practitioner interest and continuously expanding adoption. In November of last year, we launched XPHOZAH, and the market response, both in terms of treatment uptake and direct feedback we received from the field, has validated what has always been clear to us: that physicians and patients have been waiting for novel mechanism options to help control serum phosphorus. As you will hear from Susan, all the indicators we track early in launch point to a strong uptake.

[Mike Raab, President and CEO at Ardelyx]

Additionally, as we announced today, as part of our commitment to continually build our understanding of the clinical utility of our products, we are conducting a real-world evidence study designed to capture the impact that an XPHOZAH-based regimen can have on the treatment of hyperphosphatemia. Laura will review more details about the study during our call today. Turning to IBSRELA, in January, we shared our enthusiasm for our commercial progress we are making and that our expectations for IBSRELA are high. We shared that we believe IBSRELA has the potential to become a billion-dollar drug. The patients are there, they need relief, and many of them continue to experience symptoms despite treatment with incumbent therapies, clearly reinforcing the need for novel treatment options like IBSRELA.

[Mike Raab, President and CEO at Ardelyx]

IBSRELA's mechanism of action, solid clinical data, and a growing user base of positive experience is resonating, driving expanding consideration and adoption by more and more healthcare practitioners. With patients' positive experiences with IBSRELA, HCPs are beginning to change how they engage with and treat their IBS-C patients as they are expanding their use of the therapy. In addition, the path for access is established. These are the fundamentals of our commercial strategy, and they are working. As we noted in January, we will always look to expand the opportunity and to ensure our medicines get to those patients who need it. Thus, we are thoughtfully investing in expanding our commercial reach. We are also thinking about what the future of Ardelyx will look like, and we find ourselves in a unique and enviable position. We have options.

[Mike Raab, President and CEO at Ardelyx]

With both XPHOZAH and IBSRELA approved in the U.S. and doing well, we are engaging potential international partners to bring these products to patients in other global markets. In addition, with our established and proven commercial organization, we are emerging as a partner of choice for development stage assets in therapeutic areas where patients continue to have unmet needs. And with our successful track record of discovery, development, and regulatory approvals, we also have the opportunity to develop earlier stage assets ourselves. These activities are ongoing, and we look forward to sharing more information when appropriate. In the meantime, our top priority is to focus on sustaining the commercial momentum of IBSRELA and XPHOZAH. I will now hand the call to Susan to share an update on our commercial performance. Susan?

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

Thank you, Mike. It is great to be here today to share a commercial update on both IBSRELA and XPHOZAH. Let me start with IBSRELA. IBSRELA has established a unique position within the IBS-C treatment paradigm and is changing the way the HCP community treats patients with IBS-C. HCPs that we have reached with our messaging are responding favorably to the differentiated mechanism of action and clinical data profile, adopting IBSRELA, and continuously expanding their use based on the patient responses they are seeing. Significant opportunity exists to continue to expand awareness, knowledge, and uptake across our target market. Our research has demonstrated that when HCPs become aware of IBSRELA and its first-in-class mechanism, they begin prescribing. The more they see, hear, and learn about IBSRELA, the more they prescribe and expand their thinking of patients who are candidates for IBSRELA. The fundamentals driving IBSRELA's growth momentum are strong.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

IBS-C is a condition of multifactorial pathophysiology, and patients need multiple mechanism therapies to improve treatment outcomes and provide additional relief. Prior to the launch of IBSRELA, there was a single class of drugs available for patients with a large unmet need across patients whose symptoms persisted despite treatment with these therapies. IBS-C prescriptions are concentrated across an accessible group of HCPs who have demonstrated to be very responsive to both our field-based sales team as well as our omnichannel digital engagement programs. A favorable access profile is established. Interest is high. Response to the IBSRELA profile is driving adoption. Favorable treatment experiences are driving expanded use, which in turn is driving a continuously expanding view of patients who are candidates for IBSRELA therapy. We continue to see consistent, persistent growth of IBSRELA across all key performance metrics. New prescriptions are growing. Refill prescriptions are growing.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

New writers are growing, and use across the existing writer base is persistently growing. These foundational elements will be leveraged and built upon as we increase our investment in IBSRELA in 2024. You can expect to see continued steady growth throughout the year. Turning to XPHOZAH, at just three months since launch in November, we are very pleased to see the market responding as we anticipated. The high level of awareness, interest, and intent to adopt has translated into strong initial product uptake. The $2.5 million in revenue we reported during the fourth quarter, but really from mid-November through the end of December, validate that there were patients and physicians who were waiting for first-in-class phosphate absorption inhibitor XPHOZAH as a much-needed option for patients who were not able to achieve target serum phosphorus levels with phosphate binders alone or who were intolerant of phosphate binders.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

We are continually hearing from physicians who say that patients who are on an XPHOZAH-based regimen are experiencing positive results. Additionally, patients are responding favorably to the single tablet twice-daily dosing profile of XPHOZAH, both when it's being added to their binder regimen or when the HCP chooses to discontinue their binder therapy and initiate treatment with XPHOZAH. In addition to a positive therapeutic response and patient experience reported by physicians, we are rapidly establishing a favorable access landscape for XPHOZAH. Payers are establishing coverage policies which provide access to XPHOZAH via a prior authorization for patients who are not adequately responding to binder therapy or are intolerant of binder therapy.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

Nephrologists report to us that a large subset of their patients meet these criteria, and nephrologists are demonstrating a willingness to engage in the administrative PA process to secure access to therapy for these patients as they believe they are in need of a novel mechanism approach. At this point, we are seeing patients access XPHOZAH across all commercial and government payers. In addition, we are seeing patients take advantage of the resources available through our patient services programs, including our copay paydown program and patient assistance program for qualifying patients. Finally, we are also seeing strong market interest and responsiveness to our in-market messaging centered on the novel phosphate blocking mechanism and clinical profile of XPHOZAH. Our XPHOZAH dedicated sales force of 60 are finding nephrology offices across the country welcoming and eager to learn more.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

Our digital and in-person educational sessions are highly attended, and our various omnichannel digital communications are seeing high levels of engagement. These are all positive launch indicators that we believe will result in continued, consistent, and persistent uptake. The foundational elements of the Ardelyx commercial approach are all working together, and we are incredibly pleased with the performance thus far. What we see is consistent and persistent growth driven by the market need, favorable market access, and key demand creation fundamentals that are delivering on the mission of Ardelyx to bring a novel mechanism therapy to patients who, despite treatment with available therapies, are in great need of a new option. It is an exciting time for our team and for Ardelyx. The growth momentum we are seeing for both IBSRELA and XPHOZAH is exciting.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

The team is laser-focused on sustaining this momentum with the strategic intent to reach all patients in need of our first-in-class therapies. I look forward to continuing to share updates with you in the future. With that, I will hand it to Laura.

[Laura Williams, Chief Medical Officer at Ardelyx]

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 XPHOZAH, we also continue to expand our medical and clinical understanding of our products. Medical education for patients and HCPs, as well as data dissemination via abstract presentations and publications, continue to provide valuable insights and enhance the science around our products and more generally within these therapeutic areas, which brings me to one of the data-gathering programs that I'm extremely excited about. Today, we announced that we will be initiating a real-world evidence study of XPHOZAH. As we know in clinical development, gaining a real-world understanding of our therapies can vastly increase our knowledge of how these drugs are impacting patients outside of the more controlled clinical setting, complementing our overall understanding of the treatment paradigms for our patients.

[Laura Williams, Chief Medical Officer at Ardelyx]

Real-world evidence studies can shine additional light on the safety, tolerability, and effectiveness of a therapy and provide greater insight into epidemiology, disease burden, treatment patterns, treatment adherence, impact on quality of life, and importantly, how a new drug like XPHOZAH integrates into a patient's lived experience. We anticipate that these types of data will provide Ardelyx with additional insights to help us support the patient and physician community as they integrate XPHOZAH into their treatment practices. It will also help us develop educational materials for patients to maximize their understanding of the drug and potentially enhance their experience while continuing to highlight the favorable benefit-risk profile of XPHOZAH. It will also support ongoing discussions with payers.

[Laura Williams, Chief Medical Officer at Ardelyx]

This will be a real-world, long-term, prospective, observational cohort study designed to capture the impact of XPHOZAH-based regimens in patients with hyperphosphatemia on maintenance dialysis who were either not controlled on or intolerant of binder therapy. To that end, patients on the XPHOZAH-based regimen will include those who are using XPHOZAH in combination with phosphate binders, as well as those who are taking XPHOZAH as monotherapy. We will follow these patients over a period of up to three years to understand the persistence of treatment effectiveness in achieving and maintaining serum phosphorus within the guideline-recommended range. This extended analysis period will allow us to also examine changes in treatment patterns, discontinuation rates across treatment regimens, and the impact of an XPHOZAH-based regimen on patient satisfaction. I am very excited about what XPHOZAH may be able to do for our patients.

[Laura Williams, Chief Medical Officer at Ardelyx]

Capturing data in a real-world setting will not only supplement the insights we've gained in our clinical trials, but more importantly, will further expand our understanding and enhance our ability to support the patients and the physician communities who are constantly striving to manage serum phosphorus in the setting of end-stage kidney disease. I look forward to sharing more detail and results from this trial in the future. I will now pass it to Justin.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

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 had 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 relative contributions of our revenue components during the fourth quarter and full-year.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

First, we had U.S. net product sales revenue of IBSRELA in the quarter ended December 31st, 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 XPHOZAH in the fourth quarter following the launch in November. Second, we reported $3 million in licensing revenue in the fourth quarter, bringing our full-year licensing revenue total to $35.8 million, which is comparable to the $35 million in licensing revenue that we recognized in 2022.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

Finally, we reported product supply revenue of approximately $800,000 in the fourth quarter and $6.1 million for the full-year of 2023 compared to $1.5 million during the full-year of 2022. Research and development expenses were $9.5 million for the fourth quarter of 2023 compared to $9.1 million for the same quarter of 2022. In 2023 and 2022, R&D expenses were $35.5 million and $35.2 million respectively. Selling, general, and administrative expenses were $47.7 million for the fourth quarter of 2023, an increase of $28 million from the $19.7 million we reported for the same period of 2022. The increase was due to the costs associated with the continued commercialization and growth of IBSRELA, as well as the launch activities for XPHOZAH. On a full-year basis, total SG&A expenses were $134.4 million compared to $76.6 million in 2022.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

We had a net loss of approximately $28.8 million or $0.12 per share in the fourth quarter of 2023 compared to net income of $10.7 million or $0.06 per fully diluted share in the same period of 2022. The net loss for the fourth quarter of 2023 includes $5 million in combined non-cash expenses from share-based compensation and non-cash interest expense related to the sale of future royalties. Our net loss for the full-year 2023 was $66.1 million or $0.30 per share, which included $17.9 million of non-cash expenses from share-based compensation, non-cash interest expense related to the sale of future royalties, and impairment of a right of lease use asset. In 2022, we reported a net loss of $67.2 million or $0.42 per share for the full-year.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

As of December 31st, 2023, we had total cash, cash equivalents, and short-term investments of $184.3 million as compared to $123.9 million at the end of 2022. This includes $22.4 million in net proceeds that we drew in mid-October from our term loan agreement with SLR Capital, which we announced following the approval of XPHOZAH. In addition to our cash as of December 31st, 2023, in January, we received a $3 million milestone payment from Fosun Pharma following the U.S. approval of XPHOZAH. We also intend to draw the next $50 million tranche from our term loan agreement with SLR prior to the expiry of this option on March 15th, 2024. Now, let me take a few minutes to give you some insights to what we currently expect for 2024.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

First, as it relates to IBSRELA, our strong performance in 2023 was driven by consistent uptake for IBSRELA across each of our key measures, including new writers and repeat writers, as well as new and refilled prescriptions. IBSRELA's performance to date and, as Susan shared earlier, the continued insight from our infield experience has strengthened our confidence in the potential for this product. As a result, in January, we announced we currently expect IBSRELA's U.S. net product sales revenue for the full-year 2024 to be between $140-$150 million. As a reminder, our guide does not include any anticipated XPHOZAH, partner milestone payments, or product supply revenues. As we've continually done since the launch of IBSRELA, we have thoughtfully increased our investment as our internal expectations evolved.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

We began additional planned investments into our sales and marketing in January, including the expansion of our field presence from 64 to 124 dedicated to IBSRELA, as well as increasing our spending in marketing initiatives, including digital engagement, product sampling, and our patient support services. As a result, by the third quarter of 2024, we anticipate incurring incremental operating expenses averaging approximately $20 million more per quarter when compared to our fourth quarter of 2023. We feel confident that our current cash position will support our expected spend, including these investments. We are excited about IBSRELA's performance, the early days of XPHOZAH, and the strength of our cash position. We will continue to be thoughtful with how we deploy capital while focusing on maximizing shareholder value. With that, I'll hand it back to Mike.

[Mike Raab, President and CEO at Ardelyx]

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 Ardelyx. 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]

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. The first question comes from Dennis Ding from Jefferies. Please go ahead.

[Dennis Ding, VP and Equity Research Analyst at Jefferies]

Hi. Thanks for taking our questions, and congratulations on all the progress. So two questions for me. For XPHOZAH's gross-to-net, can you remind us your guidance on that and the various pushes and pulls that could take place in Q1, given you guys have made some comments on things like copay assistance and patient assistance programs? And then question number two is also on XPHOZAH, but around HR 5074. I appreciate this is sort of out of your control, but can you elaborate on some of the different scenarios that could come out of this and that you are confident in your ability to manage the business in each of these scenarios? Thank you.

[Mike Raab, President and CEO at Ardelyx]

Sure, Dennis. Let me address the second question first, and then I'll pass it off to Justin for some discussion on gross-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 XPHOZAH and obviously continue to monitor and participate as much as is practicable in what's trying to be accomplished in D.C. Obviously, the broader questions there in terms of the continued resolution, the government functioning, is what the priority is there in D.C. And we will continue to update you and everyone else as when anything changes with the work that's being done there. Justin?

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

Thanks, Mike. Hi, Dennis. So for the fourth quarter, our gross-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 XPHOZAH patients on Medicare compared to IBSRELA. So due to the government segment rebate dynamics, we expect that the gross-to-net deduction may be slightly unfavorable for XPHOZAH compared to IBSRELA, but it's somewhat early. And of course, we haven't really experienced the seasonality yet because it's obviously the first time we've launched and started selling XPHOZAH in the first quarter of the calendar year.

[Dennis Ding, VP and Equity Research Analyst at Jefferies]

Got it. Thank you.

[Operator]

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

[Chris Raymond, Senior Research Analyst at Piper Sandler]

Hey. Thanks. And congrats from us too on the progress. Maybe two questions, and they're both on XPHOZAH. So just on this 3-year observational study, at least in terms of the Spherix data that we get, and I know you guys get that too, intent to prescribe is really robust, awareness, almost universal. And there's just a ton of evidence that docs are, at least initially here, very satisfied with the drug. And it seems like the pinch point really is access, as you might expect right now. So I guess the question is, maybe what commercial itch does this trial scratch with that kind of reception you've already had? Or is there a regulatory commitment that this fulfills? And then I've got to follow up.

[Mike Raab, President and CEO at Ardelyx]

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 XPHOZAH can be used. And it's certainly curiosity, but it's also understanding that as this continues to grow, there's going to be questions and thoughts from payers and others that we want to be prepared to answer. And the only time to start is before you get those questions. So it's better to have these data than not. And it has as much to do with our belief in the clinical utility and capturing the data, demonstrating that. Laura, anything to add?

[Laura Williams, Chief Medical Officer at Ardelyx]

Yeah, Mike. I think the only other piece to add is, again, this, as you said, no regulatory commitment. This really reflects our desire to better understand the impact that a drug like XPHOZAH could have on patients. We think that impact will be positive. And I think the other piece of it is we also want to get a sense of patient satisfaction. When you launch these drugs, you obviously have an objective to address unmet needs. And I think the ability to capture data on how patients are experiencing these drugs in their lived day-to-day sort of quality of life settings is really, really important.

[Chris Raymond, Senior Research Analyst at Piper Sandler]

Okay. Great. Thanks. And maybe a follow-up. Susan, in your comments, you mentioned out of the gate, working through prior auths, expecting that out of the gate. But again, back to the Spherix data that it looks like about 20% or so of patients do not involve prior auths. 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 auths? Reduce the sort of lead time or the turnaround time for those or both? Or any sort of comment on the dynamic and what your focus items are as you try to streamline the process for access?

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

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. XPHOZAH is the only non-binder available. It is the first-in-class phosphate absorption inhibitor. It's the only option now for patients that have been treated on binders and have been found to be inadequate. So we really are not going to be contracting. There is no path forward for a formulary position that is going to be first before treatment with binders.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

So the prior auth path is the direction that we're on. So what's critical for our commercial success is the comprehensive patient services support in the office to enable that prior auth process and getting the physician and the office comfortable with that process. And what we're finding exactly is with IBSRELA, once they run through the process a few times and they get more and more comfortable with it and realize that when they go through that administrative process, the patient ends up having access to XPHOZAH because of all of our patient assistance programs and ability to buy down their commercial copay. But both from an access and affordability standpoint, our patient services really enable the physician to successfully navigate that PA process.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

So for us, the success in the access path is really continuing to support that nephrology interest and wanting to go through the process because they believe the patient's in need of XPHOZAH and supporting them through that process. What we're finding so far is that when they do so, we're getting those prior auths approved, and patients are gaining access to XPHOZAH.

[Chris Raymond, Senior Research Analyst at Piper Sandler]

Great. Thanks so much.

[Operator]

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

[Laura Chico, Managing Director at Wedbush]

Hey, good afternoon. Thanks very much for taking the question. One on XPHOZAH and then one on IBSRELA. For XPHOZAH, could you just talk a little bit more about at what point you would move to secure TDAPA for XPHOZAH, and how should we think about the base case in terms of duration in which that would be active? I'm not sure if the calcimimetic experience would be a relevant proxy here.

[Mike Raab, President and CEO at Ardelyx]

Yeah. So Laura, I think we're still trying to determine that as well. Obviously, if we go into depth, 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.

[Laura Chico, Managing Director at Wedbush]

Okay. 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.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

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-prescribing 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.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

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 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.

[Laura Chico, Managing Director at Wedbush]

Thank you.

[Operator]

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

[Louise Chen, Managing Director at Cantor Fitzgerald]

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 2024 and beyond? Thank you.

[Mike Raab, President and CEO at Ardelyx]

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.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

Yeah. 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. We try to be thoughtful and measured in how we approach our spending and our planning. And so on top of the $184.3 million we had at the end of the year, this really does put us in good shape. And we are obviously always trying to balance and meet our 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.

[Justin Renz, Chief Financial and Operations Officer at Ardelyx]

We're not really positioned to give you an exact date now, other than we're in really good shape for the near term.

[Louise Chen, Managing Director at Cantor Fitzgerald]

Okay. Thank you.

[Operator]

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

[Yigal Nochomovitz, SMid Cap Biotech Analyst at Citi]

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.

[Mike Raab, President and CEO at Ardelyx]

Sure. Laura?

[Laura Williams, Chief Medical Officer at Ardelyx]

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.

[Mike Raab, President and CEO at Ardelyx]

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 that might be relevant.

[Yigal Nochomovitz, SMid Cap Biotech Analyst at Citi]

Right. Okay. And then I was doing some math on the guidance. So 140-150 works out to 9%-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 $1 billion in 2021. It took nine years. If you take the low end of your guidance on a quarter-on-quarter, you will get to $1 billion in, I guess, somewhere around 2029, 2030. So just curious, what would you think about that timetable?

[Mike Raab, President and CEO at Ardelyx]

Well, I think your math is very good. But what we've said is that we see this as a billion-dollar 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 that you just described.

[Yigal Nochomovitz, SMid Cap Biotech Analyst at Citi]

Okay. Great. Thank you.

[Operator]

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

[Ryan Deschner, VP and Senior Equity Research Analyst at Raymond James]

Hi there. My question is 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 XPHOZAH for patient subpopulations, actually both with and without adequately controlled serum phosphorus. So my questions are, how big of a market segment is represented by patients who are failing phosphate binders, largely due to poor compliance? And how are you thinking about potentially addressing the market segment represented by patients with controlled serum phosphorus who have strong desire to reduce pill burden in the future?

[Mike Raab, President and CEO at Ardelyx]

Yeah. I mean, I'll ask Susan to address some of this too. But that second population, that falls potentially within a definition of intolerant, right?

[Mike Raab, President and CEO at Ardelyx]

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?

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

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 global guideline target levels within a six-month period. 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 aligned with our indication is really quite large. And I think 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 XPHOZAH as a first-in-class phosphate absorption inhibitor, there's broad application to be used for those patients that are inadequately managed despite binder therapy.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

On top of that, the intolerance consideration is another opportunity for use of XPHOZAH. So clearly, the compliance benefit is something that people speak to. I mean, one small pill twice a day, especially if it's being added to a therapy regimen, the patients are responding really favorably like, "Wow, I could take this." Or if the physician decides to discontinue the binder, now they're on one pill twice a day. Yeah, that's really resonating with physicians and with patients. And it's really part of the momentum driving the use of XPHOZAH. And ultimately, the compliance is so intermingled with why patients have been unable to reach target levels. So we're quite confident that there's a really strong opportunity within the labeled claim. And we're seeing that in the enthusiasm in the marketplace.

[Ryan Deschner, VP and Senior Equity Research Analyst at Raymond James]

Thanks so much. Appreciate it.

[Operator]

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

[Joseph Thome, Managing Director and Senior Research Analyst at TD Cowen]

Hi there. Good afternoon. Congrats on the progress. Thank you for taking my questions. I have one on XPHOZAH, and then I'll have a follow-up on IBSRELA if possible. Maybe first on XPHOZAH, are you able to provide any sort of information on the number of prescribers that have maybe written since launch? Or I guess if you can, going forward, what sort of metrics do you anticipate providing to kind of gauge how launch is progressing? And then I'll have a follow-up.

[Mike Raab, President and CEO at Ardelyx]

Thanks. 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.

[Mike Raab, President and CEO at Ardelyx]

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. 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. What's your question on IBSRELA?

[Joseph Thome, Managing Director and Senior Research Analyst at TD Cowen]

And then on IBSRELA, I had a question on the RALI study, the phase III in pediatric patients with IBS-C. I guess how important are data from this study? Kind of 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 kind of get that on the label? Thanks.

[Mike Raab, President and CEO at Ardelyx]

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

[Laura Williams, Chief Medical Officer at Ardelyx]

Yeah. In terms of the pediatric study, I mean, again, we've got an ongoing study in patients who are age 12-18. That study is progressing nicely. We have another study that is planned in pediatric patients age 6-11. 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.

[Mike Raab, President and CEO at Ardelyx]

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

[Joseph Thome, Managing Director and Senior Research Analyst at TD Cowen]

Great. Thank you very much.

[Operator]

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

[Thomas Yip, Equity Research Associate at H.C. Wainwright]

Hi. Good afternoon. This is Thomas Yip asking a couple of questions for Ed. Thank you for taking my questions. First on IBSRELA, can you provide some details on a plan that was previously announced to expand U.S. 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?

[Mike Raab, President and CEO at Ardelyx]

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 evidenced by the third quarter of this year.

[Thomas Yip, Equity Research Associate at H.C. Wainwright]

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

[Mike Raab, President and CEO at Ardelyx]

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 of the first quarter, all those things, with IBSRELA, it was 4.5, 5 quarters underneath our belt before we came out with any guidance.

[Thomas Yip, Equity Research Associate at H.C. Wainwright]

All right. Sounds good. Thank you again for taking my questions.

[Mike Raab, President and CEO at Ardelyx]

Of course. Thank you.

[Operator]

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

[Matt Kaplan, Managing Director and Head of Healthcare Research at Ladenburg Thalmann]

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?

[Mike Raab, President and CEO at Ardelyx]

Yeah. Susan, you want to address that?

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

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 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.

[Matt Kaplan, Managing Director and Head of Healthcare Research at Ladenburg Thalmann]

Okay. That's helpful. And then with respect to XPHOZAH, what are you seeing in terms of the current mixture of patients on XPHOZAH in terms of using it in a combo setting versus a monotherapy? And I guess how do you think that evolves over time?

[Mike Raab, President and CEO at Ardelyx]

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

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

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 XPHOZAH to the current regimen and seeing a nice response in phosphorus reduction. We're seeing patients reducing the binder dose and adding XPHOZAH and also having a favorable experience. And we're seeing physicians just eliminate the binders and initiate use of XPHOZAH and seeing a response or if they and then potentially adding back the binder if they need it. So I think early in the launch, what we're finding is that because of the novel phosphate-blocking mechanism and one small pill twice a day, it really gives the physician a lot of flexibility in terms of how to use the product.

[Susan Rodriguez, Chief Commercial Officer at Ardelyx]

And then overall, they're telling us that the patients are responding favorably and satisfied, and they're seeing reductions in phosphorus levels. So it's all very encouraging. Over time, we'll do our own as we conduct this and market research; it would have to be custom work. It's not really something available through the script data. We'll have a better understanding on how that cuts. But overall, it really just leads to a broad-based use and seeing XPHOZAH as applicable to a broad range of patients and that they can customize.

[Mike Raab, President and CEO at Ardelyx]

Okay. Yeah. And Matt, I think that's why we're referring to this as an XPHOZAH-based regimen, is it allows the flexibility for clinicians to do exactly what Susan just described.

[Matt Kaplan, Managing Director and Head of Healthcare Research at Ladenburg Thalmann]

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

[Mike Raab, President and CEO at Ardelyx]

Thanks, Matt.

[Operator]

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.

[Mike Raab, President and CEO at Ardelyx]

Thank you, everyone, for joining us this evening, and especially to those many shareholders who've been on this wild ride with us, whether for the past few years, the past few months, or even the past few weeks. I hope that what you've seen and heard from us today is that we are thoughtful and measured in how we build our business, that we focus on executing on our priorities, and that we have the right team in place. To that team, Team Ardelyx, I would like to extend a special and heartfelt thanks to all of you for what you do every day to further our efforts to deliver on our mission and, most importantly, to support patients. With that, we can close the call. Thank you, Daniel.

Participants

Executives

• Caitlin Lowie, VP of Corporate Communications and Investor Relations
• Justin Renz, Chief Financial and Operations Officer
• Laura Williams, Chief Medical Officer
• Mike Raab, President and CEO
• Susan Rodriguez, Chief Commercial Officer

Analysts

• Chris Raymond, Senior Research Analyst at Piper Sandler
• Dennis Ding, VP and Equity Research Analyst at Jefferies
• Joseph Thome, Managing Director and Senior Research Analyst at TD Cowen
• Laura Chico, Managing Director at Wedbush
• Louise Chen, Managing Director at Cantor Fitzgerald
• Matt Kaplan, Managing Director and Head of Healthcare Research at Ladenburg Thalmann
• Ryan Deschner, VP and Senior Equity Research Analyst at Raymond James
• Thomas Yip, Equity Research Associate at H.C. Wainwright
• Yigal Nochomovitz, SMid Cap Biotech Analyst at Citi