Ardelyx - Earnings Call - Q2 2022

Transcript

Speaker 0

Good afternoon, and welcome to the Ardellix Second Quarter twenty twenty two 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. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised.

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 Ardellix. You may begin.

Speaker 1

Thank you, and good afternoon, everyone, and welcome to our second quarter financial results call. During this call, we will refer to the press release issued earlier today, which is available in the Investors section of the company's website at ardellix.com. On the call with me today are Mike Robb, President and CEO and Susan Rodriguez, chief commercial officer, with prepared remarks. Doctor Laura Williams, chief medical officer, doctor David Rosenbaum, chief development officer, and Rob Blanks, chief regulatory affairs and quality assurance officer, 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 on Form 10 Q filed today, which can also be found on our website at ardellix.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 should change. And with that, I will pass the call over to Mike.

Speaker 2

Thank you, Justin, and good afternoon, everyone. It is a great pleasure that I provide you an update on our progress since our last call. First, for Ibsrela, I'm pleased to report that we continue to make great progress in our launch, laying the foundation for growth and meaningful market penetration of this important product. During these first three months of launch, the commercial team has made significant inroads in building demand for IBSRELA. Physicians are enthusiastic to have a novel drug added to their IBS C treatment armamentarium and are responding favorably to the IBSRELA first in class mechanism and clinical data.

Integration of IZRELA into already established processes across GI offices is driving favorable prior authorization approval rates, thus enabling patient access for IZRELA. Awareness and intent to prescribe ADRELA is growing with well coordinated scientific engagements and education, our high impact sales force efforts, and broad reaching omni channel initiatives. Susan will provide more details on the momentum we are building and why we are excited about the important role that we believe XERELLA will play in the treatment of IBS C. Turning briefly to Exposon. As we announced in June, we received notification from the FDA that they will convene a cardiovascular and renal advisory drug advisory committee tentatively scheduled for November 16 to gain additional insights into the clinical meaningfulness of the phosphate lowering effect observed in our Phase III clinical program for Exposa.

We welcome this advisory panel as it will allow the FDA to receive input from treating clinicians to get a better understanding of their perspective on the clinical meaningfulness and significance of the phosphate lowering effect observed in our clinical trials at Exposa. There is strong support within the nephrology community for Exposa, bolstered by their belief in the importance of the need for novel mechanism therapies for the treatment of hyperphosphatemia. We are preparing for the AdCom with the goal of demonstrating the important role Exposa can play in advancing the management of hyperphosphatemia for patients with CKD on dialysis. We are driven by our commitmentations and stockholders and know that execution and operational excellence is imperative to our success. We take great pride in our accomplishments across our programs, especially in such a tough market environment.

We continue to exercise cash management, and we've undertaken multiple steps to bolster our balance sheet and raise non dilutive capital. In April, we announced an amendment to our license agreement with Toyo Kirin or KHC, our partner in Japan for hyperphosphatemia, which may provide us up to an additional $40,000,000 payable in two tranches in return for reduced royalties. The first tranche is expected within the second half of this year following KKC's mission of its application to market tenapanor in Japan. The second tranche is expected within the second half of twenty twenty three following KKC's receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan. In addition, last month we announced that we had further monetized under the remaining royalties due to us from KKC, under which we may receive up to an additional $20,000,000 Under the agreement, we received a $10,000,000 upfront payment.

And additionally, we expect to receive $5,000,000 following KKC's receipt of regulatory approval to market tenapinol for hyperphosphatemia in Japan and $5,000,000 in the event net sales in Japan exceed a certain annual target level in 2025. In return, health care royalty partners will receive the royalty payments and commercial sales milestones that may become due us under our agreement with KKC. In summary, we see ourselves as a highly differentiated revenue generating biopharmaceutical company. We are in the early phases of launching IZRELA, an important advancement for the treatment of IBS C. We have an opportunity ahead of us with the November 16 Advisory Committee meeting to advance our formal dispute resolution process and demonstrate to the committee of the meaningfulness of the exposes phosphate reduction.

We have a pipeline of two internally discovered candidates which include RDX-thirteen for hyperkalemia and RDX-twenty for metabolic acidosis, and we have a strengthening cash position. This unique position is a result of our dedicated, tenacious and talented teams across the company. It is evidence of our vision, our science and our belief in the drugs that we've created, coupled with persistence and a laser focus on the execution of our strategies. Now I'd like to pass the call to Susan to provide an update on the launch of IDZRELA. Susan?

Speaker 3

Thanks, Mike. We are three months into the launch of IDZRELA, and I'm pleased to report early and solid progress across a number of key launch parameters that are good proxies for future market penetration and revenue growth. Our on market experience is confirming the need for new options to treat IBS the role Izarella can play to address this need, and the extent to which a significant subset of currently treated IBS C patients are seen as candidates that can benefit from Izarella therapy. First, our access and reach with prescribers. Our sales force is mobilized and making good headway securing face to face meetings with top prescribers.

These sales efforts are further amplified by omnichannel tactics targeting these high prescribers, leveraging the rapidly advancing marketplace dynamics on how and where HCPs receive information. As of month three, our sales force has reached 56% of the highest write in GIs with 87% of our target GIs reached at high intensity levels through our omnichannel digital tactics. Second, physicians are responding favorably to the availability of IBS C and confirming that a meaningful subset of their existing patients are in need of a novel treatment approach. We are positioning IBS C as a first in class NHE3 inhibitor with a triple action to treat IBS C, emphasizing its differentiated mechanism of action and clinical data that demonstrates significant improvement in abdominal pain, bloating, constipation with a quick onset of action, sustained efficacy and an acceptable safety and tolerability profile. In addition to the ramp up of our promotional efforts, visibility of EXPAREL across scientific forums during our launch quarter is also noteworthy.

The American Gastroenterological Association announced their updated clinical practice guidelines on the pharmacological management of irritable bowel syndrome with constipation in May. Within a month of our launch, the updated guideline includes Ibsrela for the treatment of IBS C. In addition, Ardellix had a strong commercial and scientific presence at Digestive Disease Week, the largest annual gastroenterology meeting that was held in May in San Diego. The meeting included poster presentation of long term data demonstrating the impact of on abdominal pain and other abdominal symptoms, effective Idrella on treatment satisfaction, degree of relief, and quality of life, and early onset of action in treating symptoms of irritable bowel syndrome with constipation. Idrella is gaining visibility across the medical community, and the product's favorable reputation is growing across the GI community.

Findings reported by the independent syndicated launch tracking research published monthly by Spherix Global Insights, who has selected Izrella as one of the key launches in the GI space to follow, indicate that our promotional efforts and medical presence is having an impact. Spherix reports that as of month '3, 66% of GIs report unaided awareness of Idrella, forty one percent report use of Idrella, and ninety two percent of those surveyed rate Idrella as either a substantial or moderate advance over currently available therapy. Percent of patients considered to be candidates for treatment with IZRELA was reported at thirty one percent. A third key launch parameter centers on the office submission of prior authorization to enable patient access to Idrella. Offices are integrating Idrella into their practice processes, working through their already established preferred specialty pharmacies or through Ardellix Assist, our patient services program, to access Idrella for their patients.

Our early results demonstrate that we are altering IBS C prescribing habits practice by practice based on the fact that treatments have been limited and Idrella as a differentiated therapy option addresses an important patient need. HCPs and their office teams recognize the need to submit prior authorization when they prescribe Idrella and are motivated to do so since the patients they believe can benefit have already been treated with existing treatments and meet the prior authorization requirements. Our distribution network further supports office practices for handling specialty product prescriptions. We are pleased to report a newly established agreement with BioRidge, a specialty wholesale distributor with a comprehensive network of over 200 specialty pharmacies to support the distribution and dispensing of Izrella. Additionally, Idrella is stocked across all major wholesalers who also supply independent specialty pharmacies.

Securing direct agreements with large GI group in house pharmacies is also ongoing. Turning to a fourth key launch parameter, market access, I'm pleased to report that outcomes in our first quarter of launch have exceeded our expectations. We are finding early in our launch that there are many patients who have been treated with the limited therapies available, have been in need of alternative mechanism options, and until the launch of Ibsrela have had none available. As a result, we are finding the patients prescribed Ibsrela commonly meet payer step edit prior authorization requirements and therefore are yielding favorable PA approval rate. Additionally, our co pay assistance program that can be accessed by patients with commercial insurance, combined with the reasonable out of pocket requirements for certain segments insured by government payers, makes ADRELA affordable for many patients.

And those who cannot afford ADRELA are eligible to apply for patient assistance and can access IBSRELA at no cost if they meet the eligibility criteria. The access and affordability dynamics we are seeing early in this launch are promising early signs that will build uptake momentum. The fifth and last key launch parameter I would like to highlight is among the most important. Physicians are reporting positive feedback regarding their early treatment experience with IZRELA, telling us that Izrella is working well and provided a much needed new option. The month three SPHERIX readout states that forty one percent of the physicians that have used Izrella report moderate satisfaction and fifty nine percent report high satisfaction.

In summary, our first launch quarter was characterized by advances on multiple fronts that made deep inroads in laying the groundwork for revenue growth. Physicians are recognizing patient needs for Ibsrela where there have been limited options historically. Physician offices are motivated, willing, and experienced in navigating prior authorization requirements. The pool of patients who meet the prior treatment requirement is sizable, patients are gaining access to IBSRELA, and physicians are reporting satisfaction with their early experiences. We look forward to keeping you posted on our activities and progress toward realizing the market potential for Istrela.

I will now turn the call over to Justin to review our Q1 twenty twenty two financials. Justin?

Speaker 1

Thank you, Susan. At the end of the second quarter of twenty twenty two, we had total cash, cash equivalents and short term investments of $81,000,000 as compared to total cash, cash equivalents and investments of $116,700,000 as of 12/31/2021. In our first quarter of launch, net product sales of Ibsrela were approximately $1,600,000 When combined with our launch pre stocking revenue shipments we made in late March, we're at just over $2,000,000 in net product sales as of June 30. Research and development expenses were $9,700,000 for the quarter ended 06/30/2022, a decrease of $16,300,000 or approximately 63% compared to $26,000,000 for the same quarter last year. This decrease in our R and D expenses is primarily the result of lower clinical study costs from the OPTIMIZE study, lower tenapanor manufacturing expense as we have begun to capitalize costs associated with Ibsrela inventory and lower expenses following the elimination of our research function in the fourth quarter of twenty twenty one.

Selling, general and administrative expenses were $18,900,000 for the quarter ended 06/30/2022, a decrease of $1,300,000 or approximately 6% compared to $20,100,000 for the quarter ended 06/30/2021. The decrease in selling, general and administrative expenses was primarily due to the timing of costs associated with preparing for and carrying out the commercial launch of IZERRALA. The net loss for the quarter ended 06/30/2022 was $26,900,000 or $0.19 per share compared to $45,200,000 or $0.45 per share for the same quarter last year. We recognize the importance for us to maintain a strong balance sheet and cash position. We are pleased to have completed important transaction in the second quarter such as the KKC license agreement amendment and the HCR royalty tail financing that have the potential to provide us with significant non dilutive capital.

We will continue to pursue all efforts to strengthen our balance sheet and exercise judicious cash management. As a follow-up reminder to Mike's earlier comments, we now have the opportunity to receive up to an additional $70,000,000 in nondilutive capital over the next sixteen months based on the potential advancement of tenopinor for hyperphosphatemia in Japan. We have confidence in our ability to continue to fund our operations. I will now turn the call back to Mike for some concluding comments before we open the call up for questions. Mike?

Speaker 2

Thanks, Justin. In our first quarter call, I highlighted the exciting and transformational time for Ardellix, where we are evolving into an impressive growth story with many opportunities ahead. As we report on our significant progress and momentum in the second quarter, those words could not have been more prophetic. Before I open the call to questions, I'd like to emphasize a number of points. We are committed to our efforts to drive significant progress on the commercial front with Israel.

Our continued focus on launch execution supports and is facilitating the market's embrace of this new treatment option and is already driving change in the treatment practices for patients with IBS C. The positive response we hear from early adopters of Azerella and the role it can play in treating patients with IBS further convinces us of the importance of this critical new medicine. As is the case in the launch of any new product, there continues to be work ahead on continuing to build upon this early momentum. I want to emphasize that I have tremendous confidence ZYNZRELA, what it can bring to patients with IBS C and a spectacular commercial team that Susan has built, and their ability to meet our corporate objectives. The opportunity for us with Ibsrela is significant as it provides clear line of sight to financial breakeven.

Finally, as we look forward to making the case for Exclusa to the FDA's Advisory Committee meeting in November, as we believe that it will be an essential treatment for patients with CK on dialysis with hyperphosphatemia. We look forward to keeping you apprised of our progress. And with that, I will now open the call to questions. Abigail?

Speaker 3

Thank you.

Speaker 0

From the line of Chris Howerton with Jefferies. Your line is open.

Speaker 4

Great. Well, thanks so much for taking the questions and congratulations on the strong numbers so far from the launch. I think maybe just a few questions as it relates to the launch and then one on the pipeline if you don't mind. With respect to the launch itself, wondering if you could describe to us the nature of the scripts that you're seeing thus far. I mean are they my assumptions would be that they would mainly be from patients that are dissatisfied with currently available treatments, so like second line or refractory patients perhaps we would call them.

And then as it relates to the doctor's offices, how often are you seeing instances where there's multiple scripts or patients being treated with IBSRELA by the same doctor or office? Then, a third just kind of main like housekeeping question as it relates to the launch would be how well do things like IQVIA track everything thus far?

Speaker 2

Sure. So first, you know, I think we're, as I said in even in the first quarter discussion is that we're still in the anecdotal phase of this. But, you know, I got to tell you some of the stories that we hear coming from the field of, sure, there's plenty of patients that are tough to treat who have been trying to find relief for years and have been unsuccessful with the therapies that are out there. And we get these comments of, you know, patients when the physician comes in after the trial of using Azrela and they're crying because they've never had relief like they had our experience with Azrela. So it's very heartening and not surprising that, you know, those difficult patients who have not been responsive to other therapies are the first ones that physicians want to seek to find relief.

Let me pass it on to Susan to further that and talk about what we're seeing in terms of refills and multiple scripts written and sort of how that experience is beginning to emerge.

Speaker 3

Thank you, Mike. Thank you, Chris, for the question. I think, you know, one thing to point out, you used the term second line or refractory, but what we're really seeing on the ground as we in our first three months of launch is that physicians are feeding back that they have really had a need for an alternative approach for novel mechanism approaches. What we hear from them is that they consider IBS C to be a condition of multifactorial pathophysiology. And I think people, you know, haven't realized truly when you look at the IBS C market to date, it's actually a market with rather limited options.

It's an uncluttered market. There's a really limited number of options, all that work through basically the same mechanism. So what we're finding in terms of the patients that are being selected is that physicians are telling us that, you know, these are all highly symptomatic patients. They communicate their symptoms to the physician, and they've been doing that for quite some time. So those are the patients that are being treated with EXPAREL, patients that the way the physicians characterize to us are patients that are in need of novel approaches.

And what's very encouraging in terms of an early sign in our launch is that this group of patients really seems to be quite sizable. As I noted in the narrative, SPHERIX data tells us that the physicians surveyed report around thirty one percent of their patients are considered to be candidates for treatment with ISRELa. I think in terms of the repeat scripts and refills, etcetera, we are clearly seeing some nice refill rates moving forward, but it's still very early. I think what's important to note is this you know, in these first three months, you've really hit some key parameters in terms of integrating into office, you know, prior authorization practices, get you know, they're they're they're having early favorable experience with prior authorization approval rates, and they're having early favorable experience with the treatment of Ibsrela. So all these things are happening as we speak.

It's still early, and clearly we see opportunity moving forward for these practices where we have built a foundation and we're established to grow the number of patients that they're using Ipsrela with. And I think your last point around IQVIA and Symphony, it is very interesting. You know, it's always challenging early in launch based on the capture rate and the projection methodologies that actually differ between IQVIA and Symphony and are are not completely transparent. But what we find, they have set directionally. They give us some some sense of of of our growth trajectory.

But, really, one probably, you know, which one is closer to the actual, we really can't tell you right now. But directionally, they are somewhat informative.

Speaker 1

Okay. Very good.

Speaker 4

I guess maybe I'll hop back in the queue to give others a chance. I really appreciate it. Thank you.

Speaker 2

Thanks, Chris.

Speaker 3

Thank you.

Speaker 0

Our next question comes from Matt Kaplan with Ladenburg Thalmann. Your line is open.

Speaker 5

Hi, guys. Good afternoon. Thanks for taking the questions. I guess focusing on the IZRELA launch, are you doing any any sampling, or is there any free drug that you're you're giving away at this point?

Speaker 1

Yeah. Susan?

Speaker 3

Yes. We of course, yes. We are sampling all of our key target offices, so that is typically how the the physicians like to trial Kydrala. They start with the samples and see that they're responding well and move forward with the prescription. So we are having, you know, very smooth uptake process from that perspective.

And the other thing we offer through our patient services program, to the extent that there is a delay in payer approval of the PA, which we're actually seeing them go through pretty quickly, but in the event where there is any delay, we can offer the patient some bridging product. But that is that represents the total offering for the patient to try to make it the smoothest trial process, get the prescription filled, make sure that the patient can access Estrella.

Speaker 6

K. Great.

Speaker 5

And then assuming there's a positive outcome for the AdCom, what are the next steps after that, and what's the path forward to to potential approval?

Speaker 2

Sure. I'll couple of comments, then I'll ask Rob Blanks, our chief regulatory officer, to comment on the process. Is it you know, it depends upon what comes out of the AdCom. You know, it could be a shorter two months. So we don't have an NDA on file, so we have to refile.

It could be two months or it could be six months depending upon what the outcome would be for the trial. Rob, anything to add?

Speaker 7

No. Not really, Mike. Just to you know, obviously, this is part of our appeal process once we have the AdCom, and the the OND then has thirty days to respond to us. If our appeal is granted, we as Mike has said, we'd have to resubmit the the NDA.

Speaker 5

Okay.

Speaker 6

And it's Okay.

Speaker 2

Matter work is being done on that now is that we're as prepared as possible. Just resubmit that, once we hear back from from the FDA.

Speaker 5

Okay. And at that point, they either grant you grant you a a two month or a six month review is what you're saying?

Speaker 2

That's correct.

Speaker 5

Okay. Great. Thanks for taking the questions, guys.

Speaker 2

No worries. Thanks, Matt.

Speaker 0

Our next question comes from the line of Peyton Bontak with Cowen and Company. Your line is open.

Speaker 6

Hi, guys. This is Peyton on for Joe. Congratulations on the strong launch. I guess, the first one from us would be, for kind of in terms of the umbrella launch, how many of the like, once you get to a certain number of these high level prescribers that you guys are first targeting with your Salesforce, is there another tranche of prescribers that you would go for, and what would be, like, the key metrics that you guys would look at, to kinda go on to that next tranche? And then, I guess, kinda more broadly, what is kind of, like, the the main thing that you're looking at launch to kind of determine success?

Thanks.

Speaker 2

Yes. Susan?

Speaker 3

So, yes, we you know, as as we had mentioned before, our our our whole go to market strategy is very much centered on a targeted approach because there is a concentration of writers that account for 50% of the total scripts in IBS C. And that is where we're focused with the opportunity for XERLA, and that is a population of less than 10,000 HCPs. So as you had mentioned, in our early stages of launch, we're very focused on the highest writing position in that context. However, we are continuing as we get Ibsrela established in the practices and the writing of Ibsrela and demonstrating those favorable access rates, definitely expanding our reach across that target audience. So that is the intention and over time can continue when ready to add resources.

We are finding early in the launch that it truly is a promotion sensitive market. When our sales reps have the face to face time and work with these offices, we are seeing productivity of prescriptions. So we are on pace to hit the target we talked about and with an understanding that we can continue to earn out and build out our reach across the target audience.

Speaker 6

Great. Thank you. I guess kind of just following up on that, how many of those physicians that you've already reached, do you know, or how many of them have actually prescribed Zekrela?

Speaker 3

Yes. Yes. No, the you know, I don't want to misquote the number because I look at it in so many different ways. But, yes, we are seeing that I mean, the SPHERIX data itself is reporting that forty one percent of GIs are writing Ibsrela. And as I mentioned, we're reaching fifty fifty six percent of GI.

So we are seeing response in Ibsrela prescriptions as we are getting the message out to these targets.

Speaker 6

Great. Thank you, and thanks for taking our questions.

Speaker 2

Thanks, Peyton.

Speaker 3

Thank you.

Speaker 0

And we have a follow-up from the line of Chris Howerton with Jefferies. Your line is open.

Speaker 4

Awesome. Yes, I just wanted to follow-up with one question with respect to the co pay assistance programs. Could you describe to us what type of patients would be eligible for that? And I guess could you articulate what percentage of your targeted patient population you think that could comprise?

Speaker 2

Sure. You know, I think what's been interesting early on is that we are having patients fill prescriptions across all types of peries, commercial Medicare and Medicaid. So, you know, the strategy that Susan and team put in place for market access, including copay assistance for commercial, has been working as anticipated. Susan?

Speaker 3

I'm sorry, Mike. Can you repeat the question?

Speaker 2

Chris was just wondering about co pay assistance, you know, how that's looking, and is it meeting sort of the expectations of what we have?

Speaker 3

Oh, thank you very much, Chris, for the question. Thank you, Mike. So yes, actually, things are going extremely well with our co pay assistance program. We're finding that we have some, you know, nice redemption rates, so which really just makes Idrela affordable for patients with commercial payers. But we're also finding that patients who are Medicare patients or Medicaid patients, we're finding that they have affordable co pays associated with their benefit plans, and we're seeing those prescriptions get filled as well.

So and that's reflected overall in our our mix of scripts. It's still very early. However, if you look at the mix of our early scripts in our first three months, we see, you know, a mix of commercial patients, Medicare and Medicaid patients.

Speaker 4

Okay, very good. And then I guess what the what was lost in translation slightly was just what could you anticipate what percentage of the patients that would be eligible for co pay assistance comprise your targeted market?

Speaker 3

Yes. Yes. Yes. I understand, Chris. So the the general profile of the IBS C market is about fifty fifty, the rule of thumb, commercial payer patients, and the other 50% are government payer patients.

So half of the patients across the market would be eligible for the co pay assistance program. And we're seeing nice utilization of that program for those with commercial payers. But important to note that we're also finding that Idrella is affordable for patients who are not commercial and who are government payer patients.

Speaker 4

Okay. Excellent. Thank you very much for taking the follow-up. I appreciate it.

Speaker 2

Thanks, Chris.

Speaker 0

Thank you. I would now like to turn the conference back to Mike Robb for closing comments.

Speaker 2

Thank you all for joining our call and staying abreast of our transformational progress as we launch ADRELA for patients with IBS and continue to navigate the regulatory process with Exposon. We look forward to keeping you apprised of our progress in the coming months. And Abigail, you may now end the call.

Speaker 0

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