Good afternoon and welcome to Ardelyx's First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session after the prepared remarks. As a reminder, today's call is being recorded. I would now like to turn the call over to Justin Renz, Chief Financial Officer of Ardelyx. You may now begin.

Thank you and good afternoon, everyone and welcome to our first quarter financial results call. 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 with prepared remarks are Mike Raab, President and CEO; and Susan Rodriguez, Chief Commercial Officer; Dr. Laura Williams, Chief Medical Officer; Dr. David Rosenbaum, Chief Development Officer; and Rob Blanks, Chief Regulatory Affairs and Quality Assurance Officer, who will 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 quarterly report filed on Form 10-Q earlier today, which can also be found on our website at ardelyx.com. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change. With that, let me pass the call over to Mike.

Thank you, Justin and good afternoon, everyone. We're thrilled to provide you an update on what has been a highly productive quarter filled with positive developments on multiple fronts. 2022 is off to a great start. IBSRELA launches underway and progressing well after just a few weeks on the market and for XPHOZAH we welcome the news from the FDA that an advisory committee will be convened to review and advise on the clinical meaningfulness of our data. These are important catalysts which have the potential to significantly build shareholder value in 2022. The most significant driver of value growth for Ardelyx is in our anticipated success and commercialization of IBSRELA. Indeed. This is a remarkable time for the company as we now are seeing the results of years of research for our internally discovered and developed drug candidate, transformed into a promising new therapeutic that is now in the hands of pharmacies and patients. It with great confidence that the torch so to speak has in pass to our highly capable and talented commercial team led by Susan Rodriguez. In the initial days of launch, I had the pleasure of going into the field and observing firsthand not only the skill and professionalism of our sales team, but also the physician receptivity and excitement as they gain awareness of IBSRELA. I've asked Susan to later on the call provide a robust update on the progress we've made since our official launch of IBSRELA on April 4th of this year. We can say that my observations thus far are consistent with the market research that Susan and her team have conducted regarding the need and attractiveness of a new therapy like IBSRELA. Turning out briefly to XPHOZAH. I'd like to review where we stand in regards to our formula dispute…

Thanks Mike. I echo Mike's sentiments about our strong start to 2022. We've launched IBSRELA, our first-in-class novel mechanism therapy for the treatment of Irritable Bowel Syndrome with constipation IBS-C in adults, with initial stocking and the Salesforce mobilized across the country. Commercial efforts are focused on the 9,000 HCPs who account for approximately 50% of the prescriptions written for IBS-C indicated products, with broad-based product distribution, a targeted specialty Salesforce and omnichannel tactics. Marketing messages center on the multifactorial pathophysiology of IBS-C and the role the novel triple action mechanism of IBSRELA can play to address important medical unmet needs. Revenue reported in Q1 reflects some of the initial stocking of IBSRELA in advance of our April 4th commercial launch. Early market response has been favorable. Interest across our gastroenterology targets is high, with our Salesforce team given quality time to review the novel product profile and robust clinical data for its IBSRELA. HCPs express the need for expanded options to treat IBS-C, respond favorably to the information presented on IBSRELA and share that there are many patients that they believe can benefit from a novel mechanism approach. A foundation of use for IBSRELA is being built. The market environment we are launching into is favorable. The market building investments linked to the introduction of GCC agonist over the past decade has transformed the management of IBS-C converting what was once an OTC market to an established prescription therapy market consolidated largely around two branded therapies with a concentration of high writing HCPs. Within the context of this established prescription market, these HCPs persistently report that approximately a third of patients under their care continue to have symptoms and are considered to be inadequately managed. This relatively uncluttered market with conditions that enable a targeted approach with a stated…

Thank you, Susan. At the end of the first quarter 2022, we had total cash, cash equivalents and short-term investments of $89.7 million as compared to total cash, cash equivalents and investments of $116.7 of million as of December 31st, 2021. As we just discussed, we recognized our first commercial product sales from initial IBSRELA free stocking in March of approximately $0.5 million. Research and development expenses were $8.9 million for the quarter ended March 31st, 2022, a decrease of $11.6 million or 57% compared to $20.5 million to the same quarter last year. The decrease in our R&D expenses is primarily the result of lower clinical study costs from the optimized study, lower to abnormal manufacturing expense, as we've begun to capitalize costs associated with the IBSRELA inventory, and lower expenses falling the elimination of our research function in the fourth quarter of 2021. Selling, general and administrative expenses were $19.3 million for the quarter ended March 31st, 2022, an increase of $2.2 million or 13% compared to $17.1 million for the same quarter last year. The increase in SG&A expenses was primarily due to an increase in costs associated with preparation for the commercial launch of IBSRELA. Our net loss for the quarter ended March 31st, 2022 was $28.1 million or $0.21 per share compared to $33.2 million or $0.34 per share for the same quarter last year. It is important for us to bolster our cash position, and we will continue to pursue and evaluate a number of opportunities, including non-dilutive measures, such as commercial sales of IBSRELA, milestone payments from our partners, as well as judicious cash management. Along those lines, during Q1, we prudently took advantage of our ATM raising $6 million of proceeds from equity sales under the program. As Mike mentioned earlier, in April we announced we'd amended our licensed agreement with KKC. In consideration for a reduction in future royalties upon net sales in Japan, KKC agreed to pay our debt consideration of up to an additional $40 million. KKC reported their Q1, 2022 results earlier this week. And they noted that they remain on track to file their NDA for tenapanor for hyperphosphatemia in Japan in the second half of this year, which in addition to the proceeds we would receive under our recent amendment would also trigger a significant regulatory milestone payment to Ardelyx under our original license agreement. We will continue to actively pursue other non-equity solutions to extend our cash runway further into 2023. We have confidence in our ability to continue to fund our operation. I will now turn the call back to Mike for some concluding comments before we take some questions. Mike?

Thanks Justin. And before I open the call, I want to emphasize a couple points. We look forward to making a case for XPHOZAH to the FDA's advisory committee in the coming months, as we believe it will be an essential treatment for patients on dialysis with hyperphosphatemia. And although, we are just over a month into the launch, we like the positive response we hear from the field for IBSRELA and the role that it can play in treating patients with IBS-C. Susan has built a spectacular commercial team and they're laser focused on successful execution, working to gain meaningful market share. The opportunity for us with IBSRELA is significant, as it provides a clear line of sight to financial breakeven. Finally, this is an exciting and truly transformational time for Ardelyx, and we are becoming an impressive growth story with lots of opportunities ahead. It's really important to note our internally discovered pipeline has fuel diversification and critical optionality and has positioned us well for near-term and long-term future growth. We look forward to keeping apprise of our progress. And with that, I will now open the call to questions. Debbie?

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Chris Howerton with Jeffrey. Please go ahead.

Excellent. Thank you so much. Excellent news on the advisory committee update and thanks for taking the questions team. So, I guess, maybe, what I'll start off by with respect to the advisory committee for XPHOZAH. I think, Mike, you had mentioned that you're expecting within the coming months, be curious to hear, if you could articulate, just give us a little color on your thinking on the timing of that. Also as it relates to the advisory committee, do you anticipate providing any additional information to the FDA prior to that outside of just the standard briefing documents? And if I may, as a third part of that question would be, what is the significance of patient advocacy groups in your argumentation in discussing the clinical meaningfulness of XPHOZAH? Thank you.

Sure. Thanks Chris for the questions. So, we've not yet heard back from Dr. Stein's office and once we do, obviously that's a meaningful bit of news that we would release. So, our anticipation is that it's not going to be months before we hear every week. And we're thinking that we're going to have three plus months to prepare. So, you'd imagine we've already deployed and are working multiple full-time jobs in order to be as prepared as we can for the AdCom. With regard to your second question, there will be no new data submitted. We will provide our briefing book as we'll be, and we can only work with the data that has been submitted part of our NDA, which is all of our clinical work and the entire Phase 3 program. So, there's a lot there to work with that we've talked about since over a year ago, we received a CRL. So, we're confident with the strength of those data as we prepare for the meeting. Patients and KOL advocacy is a critical part of this. And these are patients, as you can probably imagine. And physicians that we've heard from nonstop since the CRL was officially -- it was originally issued just over a year ago. We have been holding back because we wanted to be thoughtful going through the FDR process. But those are folks that are chomping up a bit to be part of having their voice heard of the importance of a drug like XPHOZAH and blocking phosphorus versus having it be absorbed with all the same mechanism drugs that are out there today. So, it will be a critical part of what we do working with the patient and KOL community.

Okay. Well that's -- I mean, like I said, I think that that's excellent that you've been given that opportunity. So, really -- honestly, really looking forward to that. And I don't know if you're allow me, but if I could sneak in one more for you, Susan. With respect to kind of the launch of IBSRELA, what is your position on things like sampling, or other methodologies such as that to increased demand?

Thanks for the question, Chris. It's a -- clearly, what we find with the gastroenterologists that we are engaged with today, that the way they practice the treatment of IBS-C is to sample the patient to -- especially particularly when they're starting a new therapy, to see how the patient responds to that therapy early on. And based on that response, proceed with the prescription and with working through the prior off requirements that they anticipate, having to manage for a specialty drug like IBSRELA. So, sampling is clearly a part of our strategy. But we are pragmatic about it in terms of getting the samples into the offices of the high writers to help them get these new patients started. But not sampling to a level where we're going to interfere with the ramp up of the product. The demand in prescriptions is a very important component to our ramp up to demonstrate demand from the gastro -- the high writing gastros to the payers as we work through the process to secure access for IBSRELA.

Okay. Well, that's very clear. Thank you very much. And I appreciate you taking the questions.

Thanks Chris.

Thanks Chris.

The next question is from Yigal Nochomovitz with Citi. Please go ahead.

Hi. This is Carly on for Yigal. Thanks so much for taking our questions. Just a follow-up on some of your prior comments, can you talk in a little bit more detail about what you're doing to prepare for the XPHOZAH AdCom. I guess, are there any additional analyses you're putting together or can put together to help strengthen the argument around the clinical meaningfulness of the data?

Sure. Thanks Carly. A lot of this -- it is being prepared, like a Broadway show or something like that, to make sure that you are saying all the right things in the limited amount of time that you have. So, you're going to be looking at the science behind that the clinical data, the patient need all of those things with different people in their presentations, as you've seen with other AdCom meetings. So, there are no new -- as I said in previous question, no new data that are going to be submitted. They've had all the data since we filed the NDA. Certainly, we will focus on what we believe are representative of clinical meaningfulness. Just to remind everyone is this is a program that was completely reviewed every single clinical protocol, statistical analysis plan, endpoints, everything was reviewed with the agency in detail, and even their CRL, they recognized the significance of the decrease that we got with XPHOZAH. We hit every single primary and key secondary endpoint with highly statistically significant results. And we will clearly emphasize that and the need that the patients have for something that's different, taking handfuls of pills every single day, doesn't work because they are unable to take as much as they should. And physician should be given the opportunity with the data that we have generated to make the decision based upon those results on which of their patients are candidates or not for XPHOZAH.

Okay. Great. That's really helpful. And then, we just had one question for Justin. Can you comment on how far the additional $40 million expected from KHK, might extend the cash runway?

Sure, Carly. So, we are hopeful, as we mentioned for KKC to file in the second half of this year, and then seek approval from the agency in the second half of 2023 in Japan. We haven't disclosed the breakdown of the $40 million. It's going to be in two tranches between this fall and next fall, but $40 million would clearly impact our runway upon receipt, certainly, targeting second half of this year and next year. So, our burn will be going down as we grow our sales for IBSRELA. So, I can't give you specific how long the $40 million add, but it's clearly a material impact in extending our runway into 2023.

Okay. Got it. Thanks so much for taking our questions.

Thanks Carly.

The next question is from Joseph Thome with Cowen and Company. Please go ahead.

Hello. Good afternoon. Congrats in the progress and thank you for taking our questions. Maybe the first one just on the advisory committee, are you able to sort of suggest a label? So, maybe if they don't feel comfortable giving a broad label for serum phosphorous production in patients, can you say, only use it on top of binders or, patients that can't tolerate binders? Or are you able to kind of suggest anything that might make it a little bit easier, and palatable for the FDA to approve there?

Yeah. Remember the audience for the AdCom are the members of the advisory panel, not the FDA as much, right? So the AdCom, we're going to be speaking to the established AdCom that's there as well as these additional participants that Dr. Stein referenced in his letter to us. And what we will say to them is, the treatment of hyperphosphatemia is something that's considered at a minimum monthly, as it relates to the serum phosphorus levels that are taken of every single dialysis patients at least once a month and often weekly or three times a week when they're in a dialysis session, and a dietician social worker, the staff there continue to remind them to watch their phosphorus, which is standard there. So the FDA will hear the panel. Importantly, we'll hear that understanding which patients are going to respond to, which drug is something that's a very straightforward thing that they're accustomed to doing today. And that the data that we have generated represent powerful information for those physicians and caregivers that are part of the dialysis process to identify those patients that are going to respond and those who aren't or those who tolerate. And those that don't just as is the case today with binders. And right now, the only thing that they can do is switch to another binder or add a binder, which is nonsensical because they're not different from each other meaningfully in terms of the efficacy that they produce. So that's really the way that we'll approach it. I don't think we would go in and say, this is a proposed label. That's not really the purpose of the presentation to the AdCom.

Got it. And then, for IBSRELA, I mean, you mentioned some stocking, I guess, how should we think about revenues on a quarterly basis? Are they going to be reflective of kind of true patient demand, or is there going to be any pattern to stock the channel or anything like that? Any help…

Yeah. I mean, we're five weeks into this. So, everything that we know thus far is anecdotal. It's exciting. It's really -- it's a wonderful experience to be at AdCom. The receiving end of those anecdotes, given the over decade work that we've been doing at IBSRELA to get this drug to the market. So, we're not in a position right now to be projecting what -- or providing guidance as to what revenue's going to look like. Please be patient with us as we learn. And you will learn too, as we look at the reliability of scripts that come from IQVIA or Symphony. As Susan mentioned, there's a lot of specialty pharmacy that's in that, that we need to wrap our arms around and all of you do too, as well as we look and see where those data are best reported. So, this is a -- as I said, a period of anecdotal evidence that is exciting, positive, and all in the right direction. But premature to be giving any specifics as to what guidance might look like.

Okay. And maybe one more quick one, if I can just for Justin. R&D came down a lot, which is great to see from an expense standpoint. Is this now kind of the new steady state, or is there still room to come down in the rest of the quarters? Thanks.

Sure. That's fair. For Q1 and the rest of this year, I think that's a fair number. One thing we did call out in the press release is the stock compensation expense, the non-cash charge that is obviously highly variable, so that could have an impact, but again, that won't affect our runway. But the overall size of the research and development expenditure for the reminder of this year should be pretty consistent or slightly lower the rest of this year.

Great. Thank you so much.

Thanks John.

The next question is from Laura Chico with Wedbush. Please go ahead.

Good afternoon. This is Sam on for Laura Chico. Thanks for taking our question. So, we have one on the tenapanor advisory committee meeting. Just wondering if you could frame for us the range of outcomes, that might come out of this meeting. Thank you very much.

So, it can be a unanimous vote. Yes. Unanimous vote, no. And everything in between. And all of us have observed the peculiarities of what have happened at AdCom over the last year plus. So, this is a fight that we're continuing to fight. We believe strongly in our data. We believe the voice of the KOLs have been part of this and those who have read about it since most all of our clinical programs have now been published. So, it's well known and well recognized out in the field as to what it is that XPHOZAH can provide their patients. So, getting to those physicians and patients who understand that and communicating that effectively to the AdCom. We believe will help us be on the right side of that boat versus on the negative side. And as we all know, the agency is not required to take the advice of their own committees. So that continues to be something that we will all watch mostly and feel that the strength of argument will be one that carries the day.

Makes sense. Thank you.

[Operator Instructions] The next question is from Matt Kaplan with Ladenburg Thalmann. Please go ahead.

Hey, guys. Thanks for taking the questions and congrats on the AdCom. Just a follow-up to the last question in terms of, assuming you have a positive result from the AdCom, what's the timing after that for potential FDA action on?

Sure. Yeah. So, since we don't have an active NDA in place, let me actually ask Rob Blanks, our Chief Regulatory Affairs and Quality Assurance Officer, to address the outcomes of what type of NDA we could potentially submit.

Yeah. Thank you, Mike. Just to let you know, obviously this is -- this AdCom is a response to our appeal to OND. So what we do know is that, 30 days after we get -- the AdCom is held, we will get a response from OND as to the final outcome of our appeal. From there, we would provide a -- we prevail then we would likely have a complete response and be a two month review of our NDA. And -- which would mostly be label negotiations at that point, or the alternative is a six month review.

Got it. Okay. That's very helpful. Thank you. And then, shifting to the IBSRELA launch. Can you give us a sense in terms of the rollout of payer coverage and patient access corresponding to that in terms of commercial plans and Medicare, Medicaid plans, Part D? How we should think about that kind of in the coming year.

Sure. Susan?

Yeah. Thank you Matt for the question. So, first and foremost, it's really important to call out in this early launch phase that there is access to IBSRELA for the physicians who are willing to go through the exception process. And what we're finding in these early stages, because of the way the novel mechanism of the drug, the way we are positioning it, the focus on using this drug in patients that they believe really need a different approach to their treatment. They're motivated to go through that exception process, and we are seeing them clear through that process. And as I mentioned in my narrative, and as Mike had alluded to, we're finding that these high writing gastro groups all are quite linked to -- in many cases to specialty pharmacies who help them with clearing these medic, these exception hurdles. Remember that the world of the gastroenterologist they're involved in writing a lot of specialty products in spaces with costly therapies, ulcerative colitis, Crohn's, HCV. So, we're finding that they have processes in place. So, this early launch phase is really very much about creating that demand and really leveraging that motivation on the part of the gastroenterology groups to work through the exceptions and get these prescriptions through. As we do that, we interface with payers to try to break down some of those hurdles and make it easier for these physicians to secure IBSRELA for the patients that they believe really need it. We -- overall, we anticipate that the access and the commercial side will probably come first just in terms of starting to secure that position. And this is something that we're going to work on. We see throughout this launch sub here in 2022, followed by Medicare and Medicaid, is always the more challenging one from a timeline perspective in terms of trying to knock down some of those barriers.

Okay. Okay. Thank you. And then, in terms of pricing and gross to net, any comments on that.

Yeah. Susan?

Yeah. Overall, well, we have announced the price for IBSRELA at $1,500 a month. So, the rationale around that pricing is linked to the clinical value proposition. Again, that it's -- IBSRELA on a pose in the market today for the patients who are not adequately managed, there are no other options. And within the range of IBS treatments, we see it ranges from around $500 to a high end of $1,800 or $2,000 for the IBS diarrhea products. This is within the range of the IBS pricing landscape. So that's our price point. And it's priced to a link to the value proposition and the targeted approach and our objective that we had laid out there and belief that we could achieve a high single digit share within this marketplace. And in terms of the cost side of it, we -- as I mentioned will not be rebating to match positions of Linzess and Trulance. This market is cooked, it's established. Those products are locked in. It's -- some plants prefer Linzess, some drive preference to Trulance. We're not competing with that because we are -- where we are focus is on the patients who are in need of a different approach and physicians are motivated to work through those exceptions. So, from a gross to net standpoint, we're not going to be heavily regetting the product, but we will be working with payers to try to minimize those hurdles. And -- yeah -- and then beyond that, it's really just our distribution network. And then, we need to contemplate as well. It's important to consider the affordability side of the access equation. And for commercial patients, we will have our commercial copay program to be able to offset their out-of-pocket expense for their IBSRELA script. Those are the key considerations.

Great. Thank you, Susan, for the added detail. Thanks. Thanks for the questions.

Thanks Matt.

This concludes our question-and-answer session. I would now like to turn the conference back over to Mike Raab for any closing remarks.

Thanks for transformational progress as we launch IBSRELA for patients with IBS-C and continue to navigate the regulatory process with XPHOZAH. We look forward to keeping you apprise of our progress in the coming months. Debbie, you may now end the call.

Okay. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.