Good day, and welcome to the Ardelyx First Quarter 2024 Earnings Call. [Operator Instructions]. 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.

Thank you. Good afternoon, and welcome to our first quarter 2024 financial results call. During this call, we will refer to the press release issued earlier today, which is available on the Investors section of the company's website at ardelyx.com. During this call, we will be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ materially from those described. We encourage you to review the risk factors in our most recent quarterly report on Form 10-Q 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. Our President and CEO, Mike Raab, will begin today's call with opening remarks and an overview of the company's progress during the first quarter of 2024. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the performance of IBSRELA and XPHOZAH. Justin Renz, Chief Financial and Operations Officer, will conclude today's prepared remarks with a review of the company's financial performance during the first quarter ended March 31, 2024, before we open the call to questions. With that, let me pass the call over to Mike.

Good afternoon, everyone, and thank you for joining us on this call. Q1 earnings always seem to come quickly after we report our Q4 results. And yet, as usual, a lot has happened since we last provided you an update. First, XPHOZAH's performance out of the gate following the launch in November continues at a remarkable pace. This is a first-in-class product in a therapeutic area that has seen no innovation in decades. The response from the prescribing community clearly demonstrates the significant unmet need among this patient population. XPHOZAH is an important new option for physicians to help patients whose serum phosphorus remains elevated despite best efforts. All demand indicators are favorable. Prescribers are eager to learn more about XPHOZAH's blocking mechanism and are working to identify potential candidates for therapy. Like IBSRELA, Ardelyx assist in supporting prior authorizations and helping patients take advantage of our affordability programs. Patients are accessing the drug and the feedback is that patients are seeing sustained reductions in their serum phosphorus. We are focused on ensuring prescribers are aware and educated on XPHOZAH and ensuring patients have access to treatment. As you can see by our performance, it's going very well. IBSRELA continues to perform strongly, providing an important option to again address the large unmet need among IBS-C patients. We believe that this can be a $1 billion product and on the path to achieving that piece, we expect full year net sales revenue for 2024 to be between $140 million and $150 million. As I consider the first quarter performance, the underlying demand metrics and fundamentals of the business are robust and continue to demonstrate growth in new and repeat riders and new and refill prescriptions. Our reported revenue reflects demand growth, offset by the impact of seasonality, which is standard across the industry that we experienced during this first quarter. Importantly, our cash position remains strong, resulting from our revenue, the third tranche of debt from our partnership with SLR and thoughtful management of our expenses. We are at an exciting time in our evolution as a company, and our top priority is to build upon the growth momentum of IBSRELA and XPHOZAH. Now I will turn the call over to Susan to discuss first quarter performance for both of our products. Susan?

Thank you, Mike. It is great to be here today to discuss the commercial performance for IBSRELA and XPHOZAH. Our performance reflects strong execution of our disruptive commercial approach for both first-in-class products, which centers on targeting the high-volume writers in our disease areas, driving identification of patients in need of a novel treatment option as their response to existing treatment options is deemed to be inadequate. And enabling patient access and affordability with favorable coverage policies that define the path to access prior authorization support and patient support programs. Let me begin with IBSRELA. Our confidence in this product is driven by the strength of the fundamentals driving IBSRELA's performance. HCPs are evolving their treatment practice now that they have expanded treatment options for their IBS-C patients following the launch of IBSRELA. Based on the favorable clinical response they are seeing and confidence in the path to access, HCPs are increasingly identifying patients in need of a novel treatment option. During the first quarter, we saw increases across all key demand parameters for the product, including growth in new writers and repeat writers, as well as growth in new prescriptions and refill prescriptions. We are very encouraged by the continued growth of these key demand metrics despite IBSRELA being impacted by first quarter seasonality that is commonly seen across the industry linked to insurance plan resets and prior authorization renewal processes. During the first quarter, we began the process to expand the IBSRELA dedicated salesforce footprint from 64 territories to 124 territories. We experienced a strong response to the job posting, attracting sales talent with extensive GI experience who are motivated and enthusiastic to join the IBSRELA sales team and be part of disrupting the IBS-C market with an innovative therapy. Hiring, training and full deployment of this team…

Thank you, Susan. I'm very pleased to be with you today to discuss the first quarter performance we reported, which included meaningful progress towards our IBSRELA net sales revenue guidance, a strong launch of XPHOZAH, careful management of our finances and a strong cash position. Let's start with revenue. As you saw in this afternoon's release, we reported significant year-over-year growth, bringing our total first quarter product-related revenue to $45.6 million compared to $11.4 million in the first quarter of 2023. Net product sales revenue for IBSRELA was $28.4 million during the first quarter of 2024, more than doubling the $11.4 million in revenue we reported during the same period in 2023 and 1% quarter-over-quarter growth compared to the fourth quarter of last year. Volume demand grew for IBSRELA during the first quarter, which was offset by deductions associated with the reset of annual prescription drug plans. Most notably, this was related to our commercial co-pay program. The impact of the commercial co-pay program is most significant in the first quarter when most commercial healthcare plans reset and patients have higher out-of-pocket requirements. As patients fill prescriptions throughout the year and begin meeting their deductible requirements, our expenses related to the commercial co-pay program declined. Our gross to net deduction for IBSRELA during the first quarter was in line with our expectations at 33.5% and comparable to the 33.7% we saw in the first quarter of 2023. We expect this percentage to improve as the year progresses as it did last year. In addition, we saw the anticipated impact of the prior authorization renewal process that occurs at the start of the calendar year for many healthcare plans. The strong demand and expected improvement in gross to net deductions reinforce our confidence in the ongoing performance of IBSRELA. As such,…

Thanks, Justin. I hope that what you took away from our performance during the first quarter is at, one, we continue to have high expectations for IBSRELA, including $140 million to $150 million in net sales revenue this year and on the path to at least 10% market share and $1 billion in annual revenue. Two, XPHOZAH's launch progress is exceptional, and it is already beginning to disrupt the hyperphosphatemia market where there remains significant unmet needs among patients. And finally, we're in a strong cash position to invest in growth. We have a lot of important work ahead of us, and we have the team in place who is able to deliver. I look forward to sharing our progress with you over the coming quarters. And I will now open the call to questions. Operator?

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

And congrats on the great success here with XPHOZAH. Just -- maybe one question on that and a follow-up as well. So I know you guys are early in the launch, and you've already established sort of a cadence here for guidance after having a number of quarters that you've set with IBSRELA. But just -- but the magnitude of the speed is obviously more than any -- the expected. Can you provide maybe any sort of color here? I think everybody sees the script data and if folks were following that, they're even surprised. Those who have been following the script data closely are surprised by the number. Any sort of color in terms of the uptake in what we should be thinking in terms of the implications for the next several quarters -- a couple of quarters anyway? And then maybe the follow-up is, I know, Mike, you're not in the business of predicting legislation, but in the absence of sort of any progress in terms of pushing the phosphate binders into the bundle, pushing that off, at what point do you start maybe planning for that as a reality?

So Chris, thank you for the questions. I guess, first of all, I hope by now you can tell that we're not quitters, and that we see what we're doing for patients and the uptick that we see with XPHOZAH is and has been absolutely worth the fight that we're fighting. I think as you see with what we've done with IBSRELA, these IBS-C patients as well deserve the attention that we're giving them. What you saw with IBSRELA is we need and we expect to have roughly 4 quarters under our belts before we give guidance. We don't want to get over our skis. We're excited and thrilled by this performance. The anticipation for the drug out there, the enthusiasm our [ABDs] are seeing in the field is remarkable. The ability that we have in helping people through the prior authorization process through Ardelyx Assist is working extraordinarily well based on so many learnings that we got through with IBSRELA. So although I would like to give you a clear answer on both of those, I'm sorry, I'm sure you understand that I can't.

The next question comes from Yigal with Citi.

Congrats as well on a very strong launch. Susan, I just had a few questions on the commercial franchise. Regarding IBSRELA, can you comment on the percent that were new writers versus repeat writers in the quarter? And then with the almost doubling in the territories, how do you expect that to scale in terms of the size of the base of the prescribing physician community? And then with XPHOZAH, you nicely articulated 3 buckets, the ones where you add XPHOZAH and get them to go, and ones where you can add and then reduce the binder and then you can add XPHOZAH and potentially remove the binder altogether. Do you have any anecdotal or early evidence or data to discuss sort of roughly what percent fall into each of those 3 scenarios?

Thanks, Yigal. Thanks for the question. In terms of the new and repeat writing, we have not disclosed the specifics in terms of those percentages. But what I can tell you, that's a really important metric to track, is just the persistence of new writers being generated weekly, monthly, quarterly. And what we're seeing since launch is that this has been persistent with new writers being generated constantly on a weekly, monthly and quarterly basis. So seeing that persist, really gives us great confidence in the momentum and our guidance for this year. In terms of repeat writing, what's important to note there is that now that we're several quarters into launch, we have the data to show that new writers write again. So we're seeing that repeat writing is also persistent where the growth opportunity is, is in continuing to drive that new writer growth but then also amongst that growing writer base, really growing depth of writing. So these repeat writers could write more often and for more patients. And what our salesforce is executing on is really driving that broader view based on the foundation of positive experience they've had to date of patients that now really need to be considered as candidates for IBSRELA because they do have persistent systems, have been tried on other things, and now physicians have seen that there is a path to access and that patients are responding well. So they're broadening their view on potential candidates, and that's really an important growth opportunity for us as well. In terms of the salesforce impact, that's exactly why we believe it was critical to continue to invest in our salesforce footprint because our experience to date shows that the space is quite promotion sensitive. So the more we call on doctors, the more they write IBSRELA, we see that relationship. The more they engage in all of our omnichannel initiatives and in our program, the more IBSRELA they write. So expanding our footprint from 64 to 124 really gives us an opportunity to get those -- get into those HCP offices more frequently to continue to drive that expanded writing and really capitalizing on the fact that they are broadening their view on patients who are candidates for XPHOZAH. And at the same time, can also continue to penetrate our target space and generate new writers. So really being able to execute -- to achieve both.

Okay. Great. And then if you could comment on the XPHOZAH question, if you have any data there regarding the way it's bucketing and reducing the binder versus...

Yes, not specifically from a percentage standpoint, Yigal. But what we're hearing persistently is that all nephrology -- in general, nephrologists are just commenting on the flexibility. And that's what's really exciting because that means that, that patient group that they identify, that they believe is inadequately managed on binders or don't tolerate binders, they see XPHOZAH because of its complementary MOA, blocking mechanism of action as a drug that, that patient could benefit from. And they don't have an ingoing concern around how it gets integrated because they can be flexible on initiating therapy and then perhaps some of them are initiating, tracking and then taking them off, some of the binders. Some of them just cut the binders right away. Some of the time, they just eliminate it entirely, as I mentioned in my narrative. So what we hear more is just that with each doctor is actually using the drug with this level of flexibility and that they see that as a way to really be able to realize the benefits of novel mechanism XPHOZAH across their patients that they see are inadequately managed.

Yigal, it's Mike. Just one additional comment with that is, I think, as we spoke of earlier in other calls is you never had multiple mechanisms like you do with some many other diseases to manage what the drugs are trying to address. So it's not going to be a static ratio in any given patient. There's going to be an intern intrapatient variability depending upon their serum phosphorus. There's now flexibility and tools for these physicians to finally get phosphorus in the target range that they're looking for. So I think that's an evolve. And as we understand that better in the coming quarters, we'll certainly share it.

The next question comes from Louise Chen with Cantor.

Congratulations on the progress this quarter. So first question I wanted to ask you about was XPHOZAH and the $15.2 million. Is that all demand sales? Or is there any stocking in there? And secondly, just back on the Buddy Carter bill, if it doesn't move through, then is that $1 billion of peak sales you have for IBSRELA at risk or that is regardless of whether or not Buddy Carter happens?

Yes. I mean, there are two different product lines in different patient populations. So our guidance with IBSRELA is independent of that. But thanks for asking that. As it relates to stocking, let me ask Justin to address that.

Thank you, Louise. It has been really just in time, if you will, approach with XPHOZAH. So through our network, we've seen very low inventory rates since launch in November. So I would say, this is absolutely demand of the patients and not allow any stocking, very limited to roughly between 1 and 2 weeks at max in the channel.

The next question comes from Ryan Deschner with Raymond James.

Congrats on the stong early XPHOZAH launch. Two good questions from me. At this point, I was wondering what the breakdown is looking like so far between patients getting access to XPHOZAH through Medicare versus non-Medicare? And then comparing the how much of XPHOZAH's strong start are you attributing to the differences in market dynamics versus differences in your commercialization strategy? In other words, is your commercialization strategy for XPHOZAH markedly different from that of the early IBSRELA launch? Or is the main driver more related to differences and things like unmet need, patient visit rate, et cetera?

Yes. Ryan, thanks for the question. The easy answer is, of course, it's our very, very unique and disruptive commercialization approach. No kidding, I think what we do here and Susan can address it in greater detail, it truly is one about having really good drugs that are making a difference for these patients, having a commercial team that knows how to communicate that to the omnichannel initiatives and remarkable sales team with feet on the ground, talking to physicians about what these drugs can do for their patients because these drugs work. Susan?

Yes. So I would say exactly to Mike's point, our go-to-market strategy, actually, there are really very important parallels between IBSRELA and XPHOZAH and the novel MOA and the fact that there's limited options and the fact that there's patients in need of novel options. So where I see -- what's an important distinction is that for XPHOZAH, we went into the market with a very, very ingoing high level of awareness of XPHOZAH across the nephrology target base and high interest and intent to adopt and high level of awareness on the range of -- the patients that they see that they have challenges in managing serum phosphorus on binder therapy. So I think there was a higher level of market awareness about both the product and the unmet need. Whereas with IBSRELA, while it's a parallel situation where patients have limited options and are inadequately managed and in need of a novel option in our go-to-market approach, it's really our promotion and our education on our target base that really got them to begin to identify, wow, yes, patients are inadequately managed. We never had another option. Now that we have another option, we're increasingly identifying these patients, we're actually engaging in dialogue with these patients. And now we're expanding the way we treat and using IBSRELA for those patients inadequately managed. So there was a little bit more market need education required on the IBSRELA side. And those are the only differences, path to access is the same and the coverage policy that they're being defined have also been favorable on both sides.

Got it. And then on the Medicare versus non-Medicare breakdown for the first quarter?

Susan?

Yes. Thank you, Mike. Yes, so right now, it's actually really interesting being on the market now for a full quarter that we can see from our IQVIA data what the percent mix is for the XPHOZAH prescription. And on average, between 55% and 60% is Medicare and the remainder is non-Medicare.

The next question comes from Dennis Ding with Jefferies.

Congrats on the quarter. Few questions from me, if I may. On gross to net for XPHOZAH, this was definitely better than what people expected in the first quarter. So how does this evolve through the year and we should use the 23.8% as the new base going forward? And then secondly, I want to take another stab at this question. But on HR-5074, if the bill is to be signed into law in the first half of '25, XPHOZAH would need to go into TDAPA. But then, if the bill gets signed, XPHOZAH would need to come back out of TDAPA. Can you perhaps shed some light on that process and some of the logistics around that?

Dennis. Yes, let me just address that quickly. Currently, I think as we've said, our intent is to enter TDAPA. I think the specifics of what you're just describing, that's going to play out over time. But our current intent is to go through the process and as we hope and the work that we're doing and what Buddy Carter is doing and others on the [hill], is understanding how important this medicine is for patients. This is a good policy. It's the right thing to do to ensure that patients get access to a drug that's already beginning to make a difference in many, many lives of dialysis patients. So the work continues and the specifics about how things come in and out based upon these next 6 months or more, we'll get that to you as we also learn. And Justin, if you can address the gross to net.

Thanks, Mike. Dennis, in the first quarter, XPHOZAH's gross to net deduction was 23.8%. It obviously is very early in the launch and also the first quarter of the calendar year. So as Susan articulated, our Medicare and non-Medicare split is around 55% to 60% Medicare, and the rest non-Medicare. We're still awarding the patient mix. This is going to drive the gross-to-net ratio through the course of the year. So as a reminder, like I said, it's our first full quarter. We're currently estimating that maybe it will slightly increase over the next few quarters. But in general, we believe for the rest of this year, it will be in the mid-20s range. And we will obviously comment more for you to have greater clarity.

The next question comes from Roanna Ruiz with Leerink Partners.

One for XPHOZAH, could you talk a bit about what the early adopter patients look like in terms of their main features? And what's really encouraging physicians to find them and identify them as optimal candidates for XPHOZAH?

Yes, I'll ask Susan to address it, but the realities are, they are not that hard to find. When we know that patients are out of range. And they've been waiting for something like this. So it [indiscernible]. As you asked the question, do you have patients above? The answer is, of course, yes, and then we move forward.. Susan, sorry, I took the...

Yes. No, no, you're absolutely right. But I think in terms of -- I appreciate your question on who are these early patients we're getting. And I think to Mike's point, first of all, important to know that these phosphorus lovers are tracked very closely. So nephrologists have like an ongoing understanding of their patient base and where their phosphoruses are. So what we're seeing in terms of the patients that are being initiated on XPHOZAH right away are those that the nephrologists had in mind that they know historically, they've really had challenges in keeping them in target ranges. That's who we're getting now. And what's really important as we continue to execute is now that the XPHOZAH is available to really make sure that the nephrologist begins to adapt their behavior and turn to XPHOZAH when possible looking at their patients that are outside of target ranges.

The next question comes from Laura Chico with Wedbush.

Just 2 from me. First on XPHOZAH, what needs to happen to hit the high end of the guidance range now for 2024? And then I just wanted to follow up on XPHOZAH, the conversation around the current Medicare, Medicaid mix. Does that -- is that where you're projecting at a steady-state level, you remain kind of roughly even split between Medicare and non-Medicare patients? And I'm just kind of thinking ahead in terms of the revenue that might be more exposed to TDAPA environment versus not. If you could just share any color in terms of where you see that payer mix split ending up over time? That would be helpful.

No to just briefly address the IBSRELA question, it's execution and everything that we have been doing is what we need to continue doing. Expanded footprint certainly is going to be a benefit as we said, trained in the field by the end of the quarter. So that's certainly a big part of it, too. But it's execution. The patients are there, they're waiting, and when you ask the right questions, if physicians identify, then we help them go through the prior authorization process. Susan, do you want to address the first question?

Yes, sure. So I think just as anything regarding XPHOZAH at this moment, only having one full quarter under our belt, it's hard to predict, Laura. I don't want to give you the impression that this is exactly steady state. However, it is not unexpected when you just understanding the patient mix in the dialysis setting and the mix that we've seen even for -- in the IQVIA data for the binder therapies, this is not unexpected. But we need few more quarters before we can tell you for certain. One thing that's important is just understanding that the coverage policies have been defined across all the payer segments. So -- and I think that's really what driving the ultimate outcome in terms of the profile. So that is established and will be consistent as we move into the -- as we proceed through this quarter and going forward since we have nice coverage policies in place across all those segments.

The next question comes from Joseph Thome with TD Cowen.

Congrats on the strong launch. Maybe on XPHOZAH, can you give us a little bit of idea of the proportion of patients that are on free drug or using the patient assistance program as they weigh coverage? And maybe how long does it take to navigate that prior authorization process from a physician writing script to actually getting the drug? And then second, Mike, you mentioned the cash balance, maybe what's your appetite to invest in R&D, either internally in the pipeline or maybe externally and bring something in?

Let me address both the first and the last question. It's early days for us to be sharing what's on the patient assistance program. So we're going to wait until we've got more experience under our belts with that. And as you saw just under 1.5 months ago, we hired Mike Kelleher as our Executive Vice President, Corporate Development and Strategy. That should be the signal to your question, our willingness to invest in pipeline opportunities with its organic development or opportunities we may find outside as I think what we are demonstrating is that the approach that we take to commercialization of drugs is clearly unique. Our ability to attract remarkable performers in the field, I think, is evidence of what you see in both IBSRELA and XPHOZAH performance. So leveraging that and bringing Mike on board, certainly is a big part of us going in that direction.

The next question comes from Ed Arce with H.C. Wainwright.

This is Thomas asking a couple of questions for Ed. Congrats on the strong early traction for XPHOZAH. Perhaps first question, can you discuss how many patients are on XPHOZAH therapy to date? And among these patients what's the split between GI gastro and then PCP prescribers? And then I have a follow-up question as well.

Yes, it's a little bit hard to hear the question, but I think you're asking about the split of patients in GIs versus PCP. I think as Susan has spoken about our targets, it's high writing GIs and high writing PCPs who act as other GIs and have big practices. I don't know, Susan, if you want to add anything more to that?

Yes, exactly. So we identify -- our target audience is 9,000 HCPs that account for 50% of the total IBS-C indicated market. So even though so many doctors write IBS-C scripts, the opportunity of really targeting this concentrated group that accounts for 50% is really what drives the IBSRELA opportunity for us. And as Mike mentioned, what we find is that there really isn't a distinction between a PCP and a GI. What we have is the high-writing GIs and then we have high-writing non-GI that actually behave like GIs and just decide to take an interest in treating IBS-C and using the IBS-C indicated drugs to manage their patients. So it's really not a distinction that's relevant in our go-to-market approach.

Got it. And also, can you discuss how many patients are on XPHOZAH therapy [indiscernible] and also the script data could be a reasonable indicator for underlying demand of growth?

I think you're asking how many people are on 60-day versus 30-day scripts. I think, again, it's early days for us to be sharing that kind of information.

The next question comes from Matt Kaplan with Ladenburg Thalmann.

Nice out of the gate launch for XPHOZAH. Congrats there. Just wanted to dig in a little bit more to XPHOZAH's performance during the quarter, I guess, what that could mean for demand in 2024 and beyond, but I guess, especially given the high levels of interest you're seeing in the Spherix survey. Were these initial doctors kind of -- adopters that really take on new therapies and then -- will it be more difficult to get additional adopters down the line because these are the early new therapy interest there?

A quick comment and then I'll let Susan to address in more detail, is, nephrologists have been trying their entire careers with these patients to get their serum phosphorous levels in check. And they have been woefully unable to do a single mechanism of action of binders irrespective of the type of binder that it is. Patients don't want to take that amount of material. Low phosphorous foods are unpalatable. It's really a difficult life. And when a new mechanism of action just comes in and as Susan spoke in her opening statement about how this is being utilized along exactly what the votes were in our Adcomm, it's really heartening. And I think physicians see the opportunity to finally have a tool in their toolkit that may help their patients get into the target range that they've been trying to do. And as Susan said also in our opening comments that we are hearing from patients and from physicians that these effects are sustained. That's heartening and extraordinarily rewarding that we're going to have that kind of impact on patients. It is early days. You always are going to have early adopters, right? That's not an uncommon phenomenon. But the difference here is there's not one nephrologist out there that has not struggled with, nor one patient out that has not struggled with how to manage their serum phosphorus. Susan, anything to add?

Yes. I would just say, the Spherix data did report a 56% user base, and that's data that was generated in April. So -- and what we're seeing in the field is that nephrologists really want to spend time with our sales team. We're getting into these offices, they're learning about it. And they do have patients in mind once they are detailed on XPHOZAH. So I think it's more around -- it's not around an early adopter profile as much as every doctor, to Mike's point, has been managing this challenge of getting these phosphorus levels within target ranges with the limited options they have and now are very open to incorporating XPHOZAH into the treatment regimen to try to do better. So I think that's pretty common across all nephrologists. Where it's going to be important to continue to move the uptake is to expand their thinking where it's not just that patients that they've always had in mind has been so challenging. But now that you have a new tool, as you see these phosphoruses every month, don't wait for multiple reads or try to make everything work for them on diet or other things, the things that they've struggled with. Now they should treat these patients because of the expanded treatment armamentarium they have with exposure. So that's what's going to be important is just moving beyond that first cohort of patients that they clearly were waiting for something new and now adapting their practice to having a blocking mechanism drug like XPHOZAH.

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

Thank you, everyone, for joining us this evening, including our investors who've been on this journey with us, the employees who drive our success, our partners who support us and the patients that we serve. With that, we can close the call. Thank you, operator.

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