Ardelyx, Inc. (ARDX) Earnings Call Transcript & Summary

Good morning, and welcome to Ardelyx's conference call. [Operator Instructions] Session after the prepared remarks. As a reminder, today's call is being recorded. I would now like to turn the call over to Justin Renz, Chief Financial Officer of Ardelyx. You may begin.

Thank you, and good morning, everyone. During this call, we will refer to the press release we issued earlier today, which is available in the Investors section of the company's website at ardelyx.com. On the call with me today are Mike Raab, President and CEO; and David Rosenbaum, our Chief Development Officer; Susan Rodriguez, our Chief Commercial Officer; and Dr. William Chey, Nostrant Professor of Medicine at the University of Michigan School of Medicine. A thought with Gastroenterologists, who will share some prepared remarks. Dr. Laura Williams, our Chief Medical Officer, will also join us for the question-and-answer period. 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, which can be also 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. With that, let me pass the call over to Mike. Mike?

Thank you, Justin, and good morning, everyone, and thank you for joining our call. It's my pleasure to walk you through our exciting news today announcing our planned launch of IBSRELA in the second quarter of next year. IBSRELA is our market-ready FDA-approved treatment for adults with irritable bowel syndrome and constipation, also known as IBS-C. The dynamics around the IBS-C market and IBSRELA make it a very compelling opportunity for patients, the company and our shareholders. We'll walk through the details a bit later, but here are the key takeaways. The IBS-C market has significantly evolved in the past 5 years and is now right for a differentiated market entrant with a unique mechanism of action. Today, the market includes over 1.6 million IBS-C patients who are being actively treated with prescription therapies, 35% of whom are inadequately managed and in need of effective treatment alternatives. The market has become highly concentrated with approximately 9,000 high-writing physicians contributing 50% of the 5 million annual scripts for IBS-C. This is a dynamic that is ideal for a small specialized sales force and targeted efficient marketing to commercialize a novel mechanism drug by IBSRELA. Since joining Ardelyx, Susan has had -- always had an eye on IBSRELA and has been a strong advocate for Ardelyx to seize the opportunity and launch it in the manner she will describe. With the work Susan and her team accomplished over the last year, Ardelyx is in a launch and commercial-ready organization with all critical functions in place and ready to mobilize towards a successful launch of IBSRELA. And finally, based on modest assumptions of mid- to high single-digit penetration in the IBS-C market, we project that we can achieve peak annual net revenue over $500 million and be on a clear path to rate even cash flow positivity for IBSRELA, while creating significant shareholder value. So let's take into these points. While building our commercial infrastructure throughout 2021 to support the planned launch of tenapanor for hyperphosphatemia, in parallel, Susan undertook a comprehensive assessment of the IBS-C market to understand better the evolution of the marketplace and the role IBSRELA could play in addressing the clear unmet clinical need that emerged through our research. By leveraging our commercial capabilities and infrastructure, we believe we can capture a relevant share of the IBS-C market. Today, there are 2 actively marketed branded prescription therapies that have made significant investments in building the market over the past decade. That is work that we do not have to do. With IBSRELA, we will leverage their investment by providing physicians and patients with a novel mechanism product with a compelling and differentiated clinical value proposition. This relatively uncluttered market is an ideal opportunity for an efficient sales effort targeting the highest prescribers that's advancing the company into a revenue-generating commercial stage organization. With lunch in the second quarter of next year, we are thrilled to be able to bring it to relative market and most importantly, to make a difference in the lives of patients who are suffering from IBS-C. To share further insights, I've asked Dr. Bill Chey to provide his perspective on the current management of IBS-C and what IBSRELA could mean for patients. David will then walk through the data that supported IBSRELA's approval and which showcased its therapeutic attributes. Susan will share details on the current dynamics of the IBS-C market, market research that informs our projections for the high level of physician interest in and intent to adopt IBSRELA in our commercial go-to-market plans. I'll now turn the call over to an independent thought leading expert in IBS-C, Dr. William Chey, Nostrant Professor of Medicine at the University of Michigan School of Medicine. He's a gastroenterologist who has an active practicing -- active practice treating patients and in addition, was an investigator in our clinical studies. Dr. Chey?

Thanks, Mike. I think it's important to start with what we now understand about IBS with constipation or IBS-C. While patients with IBS-C present with similar symptoms, they have a very similar phenotype, IBS-C is a disorder with a complex and multifactorial pathophysiology. The various causes of this condition makes it impossible for any one class of medication to help everyone. That said, without doubt, there's been much improvement in our treatment of patients with IBS-C over the last 2 decades with the introduction and broad adoption of the guanylate cyclase-C agonist, including linaclotide and plecanatide. And with the active marketing of these therapies, there has been an increased recognition of the condition overall and increased treatment of this condition with prescription medications to the benefit of affected patients. But even with increased awareness, increased treatment and new prescription therapies that have been greatly improved -- that have greatly improved our ability to treat IBS-C, there are many patients that are not helped by the currently available therapies. I would estimate that in my own practice around 40% of patients despite treatment with prescription therapy continue to experience symptoms of constipation, abdominal pain and bloating due to IBS-C. So while the currently available prescription medications have helped many patients, they have not helped everyone. And as I mentioned, it's really not surprising given the multifactorial nature of this condition. Studies that have examined the patient experience among those suffering with IBS-C consistently demonstrate the considerable distress that patients affected with this condition endure. Patients often report the condition restricts their daily activities, including their ability to work and their ability to socialize and interact with their friends and family. The physical symptoms are often accompanied by financial and emotional hardship and patients tend to report that IBS-C has an extremely negative impact on their overall quality of life. Despite all the advances, there remains a clear need for innovation in the treatment of this important condition. The launch of IBSRELA as a first-in-class NHE3 inhibitor represents an important innovation in the treatment of patients with IBS-C, as it offers a new and unique mechanism of action with compelling clinical data. From the mechanism of action standpoint, the first-in-class product that works by inhibiting NHE3 results in 3 unique actions by inhibiting an NHE3 IBSRELA blocks dietary sodium absorption, increasing luminal water content and resulting in accelerated transit and softer stool consistency, decreases intestinal permeability to reduce abdominal pain, and decreases visceral hypersensitivity to reduce abdominal pain. The IBSRELA clinical data is also very impressive. The 2 pivotal studies met their primary and most secondary end points with IBSRELA demonstrating a quick onset of action and sustained efficacy, both in terms of impact on constipation and abdominal pain to hallmark symptoms of IBS-C. And maybe most importantly, from my perspective, is the data around patient satisfaction with treatment as that is the ultimate endpoint for patients in the clinic. In the long-term Phase III trial, the fact that approximately 80% of the IBSRELA treated patients reported that they were at least moderately satisfied and 55%, so over half reported being very or quite satisfied is extremely encouraging. It's my strong belief that the availability of IBSRELA represents a meaningful advancement for patients with IBS-C and the health care providers who treat them.

Thank you, Dr. Chey/ I will now turn the call over to David Rosenbaum to review the IBSRELA clinical data in more detail. David?

Thank you, Mike. IBSRELA discovered and developed here at Ardelyx, is the first-in-class proprietary minimally absorbed oral medicine for the treatment of adults with irritable bowel syndrome with constipation. IBSRELA acts locally in the gut to inhibit the sodium hydrogen exchanger 3 or NHE3, targeting multiple aspects of the pathophysiology of IBS-C. The approval of IBSRELA was based on 2 successful Phase III trials involving over 1,200 patients with IBS-C. Both trials met their primary and most secondary endpoints. Additionally, in both trials, rapid onset of action was observed with improvements from baseline in average weekly bowel movement and abdominal pain observed by week 1 and improvement maintained through the end of treatment. I will briefly review the results from the long-term 26-week T3MPO-2 study in more detail. The study met its primary and all key secondary endpoints. Significantly more patients treated with IBSRELA versus placebo where combined responders, defined as having at least a 30% reduction in abdominal pain and an increase of at least 1 complete spontaneous bowel movement from baseline both in the same week for at least 6 of the first 12 weeks of treatment. There were a number of important secondary endpoints as well. Abdominal pain scores measured using an 11-point scale were significantly lower among IBSRELA-treated patients than those of placebo-treated patients at the end of the study with a mean improvement of 54% from a mean score of 6.3 at baseline to 2.9 at week 26. Abdominal bloating scores also measured using an 11-point scale, were also significantly better in IBSRELA versus placebo-treated patients with a 49% mean improvement from a mean score of 6.7% at baseline to 3.4 at week 26. Complete spontaneous bowel movements among patients treated with IBSRELA increased from a mean of 0.1 per week at baseline to a mean of 3.3 at week 26 compared to a mean increase from 0.1 to 1.7 in placebo-treated patients. And perhaps most importantly, there was a mean improvement of 41% in the patient reported quality of life scores at week 26 versus baseline for IBSRELA-treated patients and were significantly higher compared to quality of life scores reported by placebo-treated patients. An acceptable safety and tolerability profile was also demonstrated across the Phase III clinical trials, including an open-label safety extension study that evaluated patients for up to 52 weeks of treatment with IBSRELA. The most common adverse reactions reported in at least 2% of the IBSRELA-treated patients and an incidence greater than placebo during the 26-week double-blind, placebo-controlled treatment period of T3MPO-2 study were diarrhea at 16%, abdominal distention at 3%, flatulence at 3% and dizziness at 2%. Discontinuation due to adverse reactions occurred in 7.6% of the IBSRELA-treated patients. The most common adverse reaction leading to discontinuation was diarrhea at 6.5%. In summary, IBSRELA offers a novel mechanism of action with multiple ways to address the pain and constipation of IBS-C. IBSRELA works quickly with sustained efficacy over time and has demonstrated safety and tolerability in more than 1,200 patients. With that, I'll now turn the call over to Susan to review market research data characterizing physician response and intend to adopt IBSRELA as well as our commercial launch plans. Susan?

Thank you, David. Our team is excited and ready to execute a successful launch of IBSRELA. The market need is clear. We can efficiently reach key prescribers and our research confirms that the novel mechanism and strong efficacy data of IBSRELA will fuel market receptivity. Now let me share some specifics of the comprehensive research and analysis that has informed our go-to-market plan and our launch strategy for IBSRELA. Our research centered on characterizing the current treatment dynamics with a focus on physicians who are high writers of the GC-C agonist and the patients that are currently under their care. The research demonstrated that 56% of high prescribers reported that they consider IBS-C to be difficult to treat and 83% reported that there was a significant unmet need in the treatment of IBS-C. They reported that today, approximately 35% of their patients who are being actively treated with prescription therapy continue to suffer from symptoms of IBS-C with the dissatisfaction centered on the key efficacy parameters of abdominal pain and bloating. Our research confirms that there is a clinical need for a new entrant with a novel mechanism. IBSRELA will be positioned as a first-in-class NHE3 inhibitor with a triple action in treating IBS-C. The novel mechanism of IBSRELA is differentiated from existing therapy and has been shown to provide significant improvement in abdominal pain, bloating and constipation with a quick onset of action and sustained efficacy. It has also been demonstrated to result in improved patient treatment satisfaction and quality of life versus placebo. IBSRELA, with its new mechanistic approach and triple acting effect provides another meaningful tool in the treatment toolkit for HCPs who treat patients with IBS-C. In our market research, 75% of GIs reported a favorable response to the IBSRELA profile, rating its novel mechanism of action and efficacy as its most compelling product attributes. We ask them to project their use and HCP has reported that they would use IBSRELA in a meaningful subset of their patients currently being managed with IBS-C. Our promotional focus will be centered on the 9,000 high-writing physicians who account for approximately half of the prescriptions written for drugs that are indicated for IBS-C with a targeted specialty sales force, full company engagement and innovative omnichannel peer-to-peer and digital initiatives we will bring IBSRELA to the patients being actively managed today who are in need of additional treatment options. From a payer landscape perspective, prior authorizations and step therapy protocols are standard for this market today with HCPs having to attest to the fact that patients have failed to respond to OTC options and preferred formulary therapies. We expect that payers will put in place step therapy requirements for IBSRELA. We consider these payer challenges to be addressable on the basis of 4 key considerations. First, the patient need for IBSRELA; second, HCP demand for IBSRELA; third, HCP familiarity and experience in addressing these step hurdles implicit in this space; and fourth, our comprehensive support that will put in place to support physician offices to secure their prior of and support patients. In parallel, we will work to put in place contracts to secure access and minimize step therapy requirements. Patient affordability for IBSRELA will be driven by the current payer mix of patients who suffer from IBS-C, which is predominantly 50% -- which is predominantly commercial with 50% of patients in commercial patients with the remainder primarily Medicare Part D. For those patients with commercial coverage, we will have a commercial co-pay program in place to offset out-of-pocket expenses to assist in patient affordability. Patients who are unable to access or afford IBSRELA therapy will be able to apply for IBSRELA patient assistance, which has been designed to be broad and comprehensive. All key elements of the commercial infrastructure needed to support a successful launch of IBSRELA are in place, including all commercial transactional systems, territory alignment, our go-to-market positioning and messaging work, marketing programs, prior authorization support and patient services and distribution agreements and plans. Over the next quarter, we will ramp up our product supply, while in parallel, completing the hiring of our sales force and priming the market to launch with product in the channel and during the second quarter of 2022. I will now turn the call over to Mike for concluding remarks. Mike?

The launch of the IBSRELA marks an exciting and important evolution of Ardelyx to a commercial stage company. We are enthusiastic to enter the marketplace and offer patients with IBS-C a much needed novel mechanism therapy. This is a transformational moment for the company. IBSRELA is a unique and differentiated drug. The IBS-C market dynamics are ideal for its thoughtful targeted approach with a specialized sales organization targeting those 9,000 high-writing physicians who are looking for alternatives for their patients. In the second quarter of next year, Ardelyx becomes a revenue-generating company with a clear line in sight to breakeven for IBSRELA and cash flow positivity. We will have a strong and capable commercial presence and will be poised from a position of strength to support a potential launch of tenapanor for CKD patients on dialysis hyperphosphatemia upon a successful outcome of the formal dispute resolution process. In our business, it is almost never predictable or a straight line to get where we expect to be. However, if we focus on the patient and developing medicines to help them live longer and better lives and persevere when challenges emerge, we will succeed both for the patients and for our shareholders. We look forward to keeping you apprised of our progress. And with that, I will now open the call to questions. Operator?

[Operator Instructions] Our first question comes from Chris Raymond with Piper Sandler.

Mike, just a couple. I'm trying to understand the sequence of events here. Mike, you've talked about wanting to partner this IBS-C opportunity for a few years. And I think you've also made it pretty clear that you haven't been able to find a partner willing to step up with the kind of support that you think the launch would deserve. I know Susan has taken a fresh look at this opportunity. But just looking back at the commentary on these partnering activities like as recently as even June, I think, it seems like you simply couldn't find a partner willing to make the investment. So I guess maybe the first question is what are -- what's everyone missing, I guess, that may be passed on this? And then I have a follow-up.

I think as we've spoken since the IBSRELA was approved, frankly, even before IBSRELA approved is this, you look at where companies have focused or looking at rare diseases, other technologies and populations for diseases, not IBS-C. And as Susan came on board and did the work that she has shared with you all in this call, we clearly saw the opportunity emerging that this is something that could be done in a unique fashion that clearly the other companies where we look for partners don't understand and don't approach the market in the manner that we will.

Okay. And then that $500 million in peak revenue number that you talked about. So just looking at the composition of matter IP, I think it expires in 2029 at the end of the year, I think, of 2029. that's without any extensions. So there might be some more runway. But as you guide to that number, Or should we be thinking that it's within that sort of window? Or is there some other timing we should think about?

We'll be within that window, and we would anticipate extension to 2033.

Our next question comes from Joseph Thome with Cowen and Company.

Maybe the first one for Dr. Chey, just in terms of who would use this product. What does essentially be in the 35% to 40% of patients that aren't responding to branded agents right now? Or would you consider using it in maybe an earlier patient presentation is different? And then maybe second, just on the reimbursement. A bit of information on whether you think you'll be able to, I guess, get to some of these reimbursement hurdles following the launch in the second quarter of next year?

Yes. I think -- so to the first question, I think a lot of -- they're really linked, meaning that for me as a clinician, what ends up happening a lot has to do with what medication -- what prescription medications are covered by patients insurance. So that's just -- and that's probably an obvious statement. The real answer to your question, though, is I think as people are becoming familiar with IBSRELA, they'll tend to use it in that second-line position. That said, for me personally, having been intimately involved with the studies and knowing the data very, very well, actually will have no hesitation not using IBSRELA when it comes online as an equal partner to the other treatments -- the prescription treatments for IBS-C. Again, given the fact that it's got a different MOA, mechanism of action and particularly given the fact that I tend to see patients that have been tried on and failed other therapies, this will be a really valuable tool in my toolbox because having a drug that works by a different MOA is going to be a go-to tool for me in the types of patients that I see in clinic.

Susan?

Yes. Thank you, Dr. Chey. And I think his comments really mirror what we heard in our market research, which is in terms of responding to the unique product profile of IBSRELA and its clinical data, that physicians see a broad application of IBSRELA across their patient population. With that said, we have to recognize the realities of the current payer landscape. And given, again, as I mentioned, that already, this marketplace has -- is defined by climbing hurdle, step therapy protocols, physicians have to attest to the fact that patients have not responded to OTC therapies or preferred formulary therapies. So that practice is already in place, and we anticipate that there will be hurdle for IBSRELA. But as you heard from Dr. Chey, what's really critical here is that there is an unmet medical need. Doctors will be demanding IBSRELA, will be prescribing IBSRELA. And the offices that we are targeting or have very well-established processes in place to address some of the step therapy hurdles that the payers put in place. So we are -- while we recognize that the product will be restricted upon launch, we believe that the demand for the product will ultimately lead to access for patients. And as we work directly in parallel with payers as that demand is demonstrated to contract with them directly and create better access and knock down some of those hurdles, they'll be increasingly more straightforward access for IBSRELA.

Our next question comes from Yigal Nochomovitz with Citigroup.

I guess to ask an earlier question in a slightly different way. I'm just trying to get a sense as to your perspective, Mike, on the timing of this launch because at least the way I see it, it could have happened anytime over the past several years. So I guess the question is why now? And then just secondarily, is there any connection regarding the timing of this announcement and having initiated the formal dispute resolution with FDA for hyperphosphatemia or are these just independent objectives?

I mean I think the best way to think about this is the work that Susan and her team have done over this last year, understanding the IBSRELA marketplace, provided us an opportunity that we wanted to see. Obviously, we don't know where things are going to turn out with the dispute resolution and they are not coupled, but we have a phenomenal infrastructure that she has built and the team have built that just was sufficiently bringing these 2 things together a compelling rationale for us to move forward and commercialize this. I think as you've heard from Dr. Chey, there is a clear need and a desire for a drug like IBSRELA out there for these patients. And it made the best sense to do this as rapid as we could, which is why as we build inventory and prep the market, if we could, we'd launch it today, but we need to do the manufacturing and get this ready and in the channel in Q2.

And did you comment on this already, but any thoughts on -- if you could just give us the annual pricing per patient for the drug?

Yes. So we haven't shared the specific price that we would set. But if you look at the IBS-C market broadly, between constipation, diarrhea, the ranges of those drugs are from $500 to $1,900 per month. So we would be in the range of those drugs.

Our next question from Laura Chico with Wedbush Securities.

I guess I just wanted to follow up again, and I apologize for asking this perhaps in a different way. But I'm trying to better understand what gives you confidence now that this can be accomplished without a partner? And I guess I'm kind of thinking that -- about that in the context of how the spend might change in 2022? And then I have a quick follow-up.

Sure. I mean I think the thing to focus on, as we've talked about, the way we would commercialize whether it was the drugs for hyperphosphatemia, when you have a set of physicians, 9,000 in this case, you really do not need a large sales footprint. And so we don't see that this is a big sales organization. This is a very targeted group of folks feet on the ground plus digital marketing that Susan described and other efforts that the team have designed to address the physicians that write 50% of these prescriptions with a modest sized sales force. So that is the way that we are going to approach it, which is why we say that with a modest amount of the penetration in that market, we can reach peak revenue of $500 million and thereabouts.

Okay. And then maybe one quick question for Dr. Chey if he's still available. I think I'd ask this maybe a little bit differently than the prior question. But I wanted to better understand how -- who would be -- who would you be prescribing this drug to initially? And it sounded like more of the refractory population. And I just wanted to understand if that's actually correct. Or who do you actually see this used in a combination modality?

Yes. So again, I think it depends on what your -- what type of practice you're in. So for me and a tertiary quaternary care practice, I'm going to be using this coming right out of the box. And that's because the patients that I see have been tried on multiple things already. So having a different -- a drug with a different MOA is going to be very attractive. Now at the primary care level or secondary community GI level, I think people are going to be a little bit more cautious. And I think you're going to see what actually this will mirror what's happened with linaclotide and plecanatide. Plecanatide, of course, not for IBS-C, but for chronic idiopathic constipation. And that is that, particularly at the GI level, they're going to attempt to use it for the more refractory patients. The PCPs will wait and see what the GI experience is. So it will take some time to build the market at those levels. But certainly, at the tertiary quaternary care level, I can tell you that people like me and my colleagues will be using this drug immediately.

Our final question comes from Matt Kaplan with Ladenburg.

Just a follow-up on the prior question in terms of your go-to-market strategy. Can you give us a little bit more color in terms of the footprint or the size of the sales force that you expect? And then more on the digital marketing strategy, too, how to create the efficiency you foresee here? And in terms of how much -- how should we think about the cost of this commercial footprint going forward?

Susan?

Yes. I think a key element here that needs to be recognized, which I think addresses a lot of the earlier questions, it's really just taking a current look at this marketplace, the IBS-C marketplace. If you size up the marketplace today, even though there's been such a history of heavy spend in market building, what that's resulted in is a well-established market in place today with the high writers accessible and identifiable. So this is really what is distinctly unique that has really set the framework for our go-to-market approach. Because in that context of an established market, relatively uncluttered with this recognized remaining medical unmet need, we now have the opportunity as a company to target those offices the way Dr. Chey characterized the patients that he sees in his practice, we would be present in those offices across all of the high writing or a large number of the high-writing physicians who account for nearly half of all of the scripts written for IBS-C, that's where we can actually focus our attention. So the commercial footprint needed to get to those offices is something that is very much aligned to a specialty sales force approach and complementing that with innovative marketing strategies. You mentioned digital platform. The GI space, GIs in general are actually very, very tech-savvy, very interested in remaining up to date on innovation. As you know, they're procedure-oriented specialty, rep friendly. So they're very active across multiple digital platforms. Medical platforms like Medscape, we will be present there. their EHR platforms, Epic and Practice Fusion, we will be present there. The social platform Doximity, IBSRELA will be present there, as well as omnichannel and peer-to-peer initiatives where there is really a high level of receptivity for these high-writing physicians to engage with Ardelyx, virtually engage with their peers virtually as well or in person on the ground sales force targeting these offices. So that's really what comprises our targeted go-to-market approach. And it's only because of the market -- the spend that's happened historically by other players in this space who establish a space that's created the market established as it is today that really enables us to approach the opportunity for IBSRELA in this targeted manner.

The way to think about the commercial footprint that we have is including market access, marketing folks, management and sales people with feet on the ground. It's an organization of 50 to 60 people all in.

I would now like to turn the call back over to Raab for closing remarks.

Thank you, everyone, for joining us on our call this morning and exciting news that we've shared with you regarding IBSRELA. We look forward to updating you of our progress as we prepare for launch in the second quarter of next year. And with that, operator, we can end the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.