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

We're going to start the afternoon session. I'm Yigal Nochomovitz, biotech analyst at Citi. This is our back-to-school Biopharma Summit in Boston. If you have questions, if you're in the audience, just know you can chime in with the microphones. And also for those listening online, welcome. So the next session is with Ardelyx. And I have with me the senior management, Mike Raab, President and CEO; Justin Renz, CFO; and Eric Foster, CCO. So thank you all very much. Great to see you. Thanks for coming in.

So I guess maybe to start out, Mike, if you want to just kind of summarize where you are with the business, 2 products that are gaining momentum.

Sure. Thanks, Yigal, and to Citi for inviting us. I think we're at an incredibly exciting time for the evolution of the company where you look at the decision that we made to not participate in TDAPA. First, let's get that off the table because that's certainly a question that we get a lot of that, that strategy is working. We're seeing since February month-over-month growth of prescriptions. And you see the total prescriptions, whether they are patient assistance and commercial and Medicaid that we're reading -- that we're meeting the place where we've had more prescriptions written than previous months. So the growth is there. Is it growing as fast as we would like? Not yet. But I think the turmoil that the dialysis community is experiencing really speaks to why that is happening. But you do see the conviction of physicians to get their patients on XPHOZAH. So very excited about that. I think with what you're seeing with IBSRELA, the growth that we saw in Q2 only continues. And our enthusiasm for having IBSRELA be a $1 billion drug clearly is there, if you look at the growth rate and how that continues. So $1 billion is certainly on the horizon for us and with IBSRELA and excited about the $750 million that we're confident we will meet with XPHOZAH.

Okay. Well, maybe we can start with IBSRELA. What are some of the forces in the market that are contributing to the strength? And how are you messaging in terms of the value proposition relative to others that have been more entrenched in the marketplace longer than you?

Sure. Eric, why don't you go ahead?

Yes. Thanks, Yigal. Great to be here. The IBS-C market is -- it's a large market and a fast-growing market. It's well established. The past couple of years, it's grown more than double digits. So we're very pleased to see that and certainly feel that IBSRELA has contributed to that. In terms of -- when you look at the opportunity and really the patient need in the IBS-C market, traditionally, patients have really only had one class of drugs, secretagogues that they could go to, to help with their IBS-C. And we know that only about 25% of those patients are satisfied or very satisfied with their treatment. So the opportunity for us is really a different mechanism of action, one that provides similar efficacy and safety. So for those patients that are out there that are not satisfied, whether it be through lack of efficacy of the product or safety or tolerability, we know that IBSRELA really can help those patients out and meet that need for those patients. So we've been really pleased with the growth trajectory that the brand has been on. Obviously, Q2 was a great quarter, a lot of momentum as we head into the back half of this year.

And how do you identify those patients? Because you can have people that are not satisfied with the drug, but then they may not know what else is out there, right? So how do you get to that?

Yes. Great question. So we certainly -- we have our sales force, which, as you know, completed its sales force expansion at the end of Q3 last year. So we've got 3, full quarters under our belt and really feel like they're hitting their stride. We also have great omnichannel marketing that's out there that's bringing awareness, greater awareness of IBSRELA out there, not just to patients, but also to physicians. And for us, it's a fairly simple diagnosis, if you will. So does the patient have IBS-C? Are they currently on a treatment for IBS-C? And are they continuing to be or to be experiencing symptoms? Or are they not satisfied with that treatment? Maybe IBS-C is getting in the way of their daily activities, and the patient is looking for something else and looking for something new. And that's really where we know that IBSRELA can come in and really be a help for those patients that need it.

The thing to think about Yigal with that is not until the launch of IBSRELA, was there anything really different that a physician could offer a patient. So it got to a place where why would patients keep asking for something when there wasn't there. So I think the work that Eric and the team are doing to educate both the physicians, but also the APPs and the staff of gastroenterology practices. Finally, they now see that there is something different. There's an option that they can try. And as a physician, you can imagine they never would have offered something that wasn't -- they didn't have an option to offer something different. So I think what we've seen in these 3 years since launch, where we're beginning to gain that foothold that you need and the growth that we're seeing out of it in terms of 75% of these patients are not satisfied. They're not getting the relief that they need, and it really interrupts their livelihood and the lives that they can lead. So for us, getting that communication out there and the omnichannel work that Eric's team is doing, very engaged informed patient population to make sure that they ask the physician, is there anything different? I've heard about IBSRELA. Can I try that?

So that sounds like a lot of the growth is coming from the -- essentially the switch market? Or is there growth from new starts as well?

Yes, good question. I mean we certainly do see some first-line utilization. I think as physicians have gained confidence and experience with IBSRELA, they've gone to it more first line. But due to payer dynamics and our internal positioning of the product, we typically position ourselves after a secretagogue because we know that there's a tremendous opportunity out there. Patients need something else. It's a multifactorial disease. And so you need drugs with different mechanisms of action. And there's a clear position for IBSRELA out there. And we feel like that's the right path in terms of focusing after a failure with a secretagogue. But yes, we do see some first-line utilization for sure.

Of course, so there are many dynamics to growing the market, and we can get to each of them. But what about just the overall persistence on therapy? Are you seeing -- what does the data show you in the market as far as time on therapy versus what the prior options that were not working for people?

I mean I think what's interesting is you look at the secretagogues, whether it is a relapsing remitting disease or tachyphylaxis that happens with an agonist from a biological perspective. You do see 5 or so scripts a year generally. With an inhibitor, you don't get necessarily tachyphylaxis. And our objective and what we see is more refills over time that persistence is there.

Okay. And then you mentioned the $1 billion number, you've been saying that for a few...

Since launch.

Yes, so that's coming from what you've described, the growth in the switchers. And then, I mean, what about just -- I mean, price, I guess, has a little bit of an impact, maybe not huge. What else? Is there just an overall growth of the market period for everyone?

So honestly, the market -- and I talk about this all the time, the market could stop growing and we get to the $1 billion because if you look at the millions of patients that are being treated today for IBS-C, given our price, given our position in the market, you need way fewer than 200,000 patients in order to get to that $1 billion. So if you look at it on a patient basis, it is nowhere near the number of patients that are currently on GCC agonist. And with 75% of those patients not satisfied with their current therapy, there is ample room to grow within the established market. But as Eric pointed out, we're seeing organic growth through first-line therapy. Our clinical trial was a first-line indication. We made the decision knowing the dynamics of the market that we would play in the second-line space.

So at the moment, are you doing any sort of post-marketing studies or you don't need that at this point?

So we do have the pediatric indication to commitment to -- that you make to the FDA. And we'll always explore other things that make sense. But at this point, we're not besides the pediatric studies.

Okay. Okay. And so -- but you still have presence at conferences and so with regard to keeping up the marketing.

We'll be at ACG later this year and absolutely go to both local and international conferences.

So towards the goal of $1 billion, you haven't said sort of like when, right? Or have you given any range as far as like is this by the end of the decade? Or is this by a certain time?

No. I mean -- and I think that's certainly the next phase for us to lean into that and give you some more perspectives on it. But at our growth rate with the guidance that we've given just for this year, either we need to slow way down after this year to wait to get to $1 billion or if we keep at the rate of our growth, we'll get there before LOE for sure. So that's where I think as we're trying to get people to understand in terms of the opportunity that IBSRELA presents that some of the conservative views of how this business grows, that's our job to change those minds.

Okay. And remind us what the guidance -- just -- you raised it a little bit, right? Just remind everyone what it was and what it is now. And did you give it for each product.

So no, we gave guidance for IBSRELA from $260 million to $250 to -- $250 million to $260 million to $255 million to $265 million. XPHOZAH we're not yet giving guidance. Just given the turmoil that the market has, what we have done is our confident -- spoken about our confidence that XPHOZAH will be $0.75 billion. We've not given a time frame for either 1 of the 2 per peak.

Okay. What -- as you grow the product, what else are you learning about as you scale? Are there new challenges as you scale? Or is it more of the same blocking and tackling, just finding more people, getting more people on therapy?

Yes. I mean, good question. I mean, we think the opportunity is there. We know the patients are there. So if you think about our path to $1 billion, you have a sizable market that continues to grow. As Mike said, we don't need it to grow necessarily to hit the $1 billion, but it is continuing to grow. We've expanded our sales force to really drive to the top of the funnel. So now we're calling on more high-writing GIs, more high-writing non-GIs and more APPs, so nurse practitioners and physician assistants. So feel really good about that sales force expansion. But it's equally important to make sure that you're focused on pulling those patients through. So when the physician identifies a patient, they're able to get access. And so as we said earlier, we expanded our field access manager team. We saw early signs of success of that in Q2 around resubmissions and approval rates. That's still very early in its expansion that just started April 1 this year. So this is -- we're moving now into our second quarter of that expansion. And then I think as Mike mentioned, we know that we have a very active and engaged patient. So we need to find out ways to better engage them so that when they raise their hand and they ask for IBSRELA that the physician is aware of it and they're able to grant that. So for us, I wouldn't say it's new learnings, but I think it's just getting more efficient and tighter around those key components around driving to the top of the funnel, pulling those patients through, driving greater awareness with patients so that they can go in, they can talk to their physician about that new option that they need with IBSRELA. And in fact, they can get the medicine that they need that the physician feels that they need. So we feel really confident about those elements of the business.

And we all hear about it all the time and have our own experiences of how difficult it is to get prescriptions filled, right? And it is -- the dynamics around retail pharmacies are -- it's a terrible business, very low margin for retail pharmacies. So any distraction getting a prior authorization filled is taking away from what it is that they're doing day in and day out. So that's why the FAM team that Eric has put in place is so critically important because the sales force is driving the input at the top end and pulling those prescriptions through is critical. And the system is set up in such a way that it makes it pretty difficult to do that.

Do you -- what about going from the patient side? Do you -- is that something you do much like on the social media platforms directly to consumers? I mean I see so many pharma ads on CNN, it's unbelievable every commercial break, right? But I don't think I've seen IBSRELA yet.

No, I don't think you're going to see us on CNN right now. We're always looking at different media channels and way to reach patients. And certainly, we need to make sure that we're driving awareness for these patients. To your point, though, yes, we absolutely do have a presence on social media. We see high engagement there and very pleased with the results that we see. And we're continuing to evaluate those channels to see where we can get the right mix because driving patient awareness and driving them into the office is definitely a priority of ours and one that we're going to be focusing on a bit more in the future.

And we do know that the rate of -- if I'm a patient going to see you as my physician, my asking you for IBSRELA or another therapeutic has a high rate of acceptance. So getting that patient who are already extraordinarily engaged in their disease to be asking for IBSRELA is certainly an important part of it that we do.

Is that trackable data to know that? Because that's interesting, right? If you couldn't know like whether -- how that was -- this therapy was initiated, whether it came from the patient suggestion. I don't know if that's information I think...

Yes. I mean we do kind of your standard ATU, so awareness trial usage, internal market research data, where we look to understand how many patients are aware when a physician comes in or when a patient comes in and they ask for the brand, what percentage of those patients are granted. But those are internal research numbers that we use to help kind of guide our marketing strategy and our tactics.

Yes. Okay. So you kind of gave a little bit of a notch to guidance a little bit, but you're obviously watching -- Justin is probably watching every day. I think I know he is. Is there a potential to go a little higher with the guidance? Or you just -- you feel good about it for now?

I feel good about it now. And certainly, our objective is always to overperform, right? I mean it is -- I think you've known me and known us a long time where it has become a drinking game for the company that I'm not going to get over my skis, right? I'm going to give you numbers that I have great confidence that we're going to meet. And our objective is to make sure that we show you that we can do better.

And just we went into the year at $240 million to $250 million. And then with a really strong quarter, we really felt like we've got good momentum, and we were able to move that to the $250 million to $260 million range. So just to clarify that number that we moved to $250 million to $260 million.

Right. Okay. Okay. And this was -- when did this -- you first introduce the IBSRELA guidance? Just to give us the history.

It was a year after launch when we first gave guidance for IBSRELA and that is not an unfamiliar path to us. Just we want to make sure that we're confident on the trajectory of where we are. And if you look at the non-Medicare business for XPHOZAH, it's on the trajectory that we think it needs to be on. We want to see a bit more time as the DOs are going through the TDAPA process for binders, it is a distraction for them looking at what we're offering, right? Because we need those dietitians. We need the information from the DOs in order to put in front of insurers the justification, the rationale for filling the script.

Yes. Well, remind everyone what the status is outside of the United States with this trial.

We have a partnership with Kyowa Kirin in Japan for hyperphosphatemia only. And in China, we have a relationship with Fosun Pharma for both indications and then in Canada for both indications.

Okay. And how are those helping the P&L right now?

Canada is a small market, so de minimis. But if you look at KKC, and Justin can address on this, that is a supply agreement that we have with them as we -- if you recall, when we were going through the value of death after the CRL, we monetize the milestones and royalties. So there's nothing today, but some manufacturing benefit.

Correct. We supply them right now, the active pharmaceutical ingredient that they have it on their own. And so they've had very good success since launch. They got approved actually right before we did in the fall of 2023. They've been doing well, and we provide product revenue from our sales to them every quarter. And so we supply them on a regular basis. And it has a modest margin, but it's profitable.

So they can take that API and they can go for ideas if they wanted to.

No. So they only have rights...

They can. So that's open then.

It's actually the second largest market outside of the U.S. for LINZESS. I think one of the dynamics we all need to be aware of as this kind of question is the right one is with MFN, one needs to be very thoughtful with the chance of MFN occurring, one needs to be very thoughtful whether or if you out-license outside the United States.

Yes. You don't want to jeopardize market, obviously, despite possible short-term upside.

Exactly right.

What about Europe?

Same thing. I mean if you look at...

Same story.

Same story.

Okay. So you're being very judicious about what to do.

It's the unintended consequence, right, of the discussions that are occurring, it will potentially prevent patients to benefit from the innovations that happen.

Okay. Well, speaking of MFN, obviously, the related topic is supply chain and manufacturing. Just where does it all happen with your API and your fill and finish?

So Europe broadly, and then it's brought to the states where we do tabling and packaging.