Ardelyx - Q3 2023

Transcript

Operator (participant)

Good day, and welcome to the Ardelyx third quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. 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.

Caitlin Lowie (VP of Corporate Communications and Investor Relations)

Thank you. Good morning, and welcome to our third quarter financial results call. During this call, we will refer to the press release issued earlier today, which is available on the investor section of the company's website at ardelyx.com. During this call, we'll 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, Michael Raab, will begin today's call with opening remarks and an overview of the company's progress during the third quarter of 2023.

Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the performance of IBSRELA and the launch of XPHOZAH following its approval earlier this month. Justin Renz, Chief Financial and Operations Officer, will conclude today's prepared remarks with a review of the company's financial performance during the quarter ended September 30, 2023, before we open the call to questions. With that, let me pass the call over to Michael.

Michael Raab (President and CEO)

Good morning, everyone, and thank you for joining us on the call. I'm very pleased to be here once again, just a short few weeks after we celebrated the approval of XPHOZAH. With this approval, we now have delivered on our mission to provide patients with medicines that matter for the second time. It is something I am immensely proud of. Today, Susan, Justin, and I will share details on the performance from the third quarter, as well as important updates from the first couple of weeks following, in the fourth quarter, following the announcement of XPHOZAH's approval. Before I hand it over to them, let me share a few of my thoughts on the third quarter and what we expect in the near future for Ardelyx. First, IBSRELA momentum continues.

Our quarter-over-quarter growth in Q3 was driven by a clear need patients have for new medicine to address the challenging and sometimes intractable symptoms experienced by patients with IBS-C. IBSRELA is establishing a unique role in what has traditionally been thought to be a challenging market to penetrate. We are demonstrating that when you have a novel mechanism product with a strong safety and efficacy profile that is benefiting patients, and when you're thinking differently about marketing innovative products, that you can disrupt markets. Second, XPHOZAH is ready for success. As Susan discussed on our approval call, awareness, interest, and intent to adopt XPHOZAH are high among the nephrology community. The response to our approval has been nothing short of amazing. It is also humbling, as we now have the responsibility to deliver for patients.

We've received words of congratulations from across the kidney community, with nephrologists expressing their excitement about having this novel therapy available to prescribe to their patients. As we've shared, there is significant pent-up demand, and we expect strong uptake at launch. Our sales team is already in the field, and we expect to have XPHOZAH at our distributors shortly after the conclusion of ASN's Kidney Week. The new era for managing hyperphosphatemia among kidney patients is here. Finally, we are well-resourced for the foreseeable future. We've carefully and thoughtfully financed the company and have a strong cash position as a result, sufficient to fund the commercialization of XPHOZAH and support the critical ongoing investment in IBSRELA. We will also begin investments in R&D in the coming quarters as we work towards the next phase of Ardelyx.

I will now hand it to Susan, who will share more on IBSRELA's performance and additional details on the launch activities for XPHOZAH. Susan?

Susan Rodriguez (Chief Commercial Officer)

Thank you, Mike. It is great to be back today speaking about IBSRELA and now XPHOZAH. We continue to disrupt the established IBS-C market, with Q3 revenue for IBSRELA at $22.3 million, reflecting a 22% increase versus Q2. This first-in-class drug is offering meaningful benefit to patients who have been in need of a novel approach. As I've noted on previous earnings calls, our growth is consistent and persistent. New prescriptions are growing. Refill prescriptions are growing. We continue to grow new writers, and existing writers are expanding their use. These results reflect the extent to which physicians continue to identify more and more of their patients as candidates for IBSRELA, that patients are gaining access to IBSRELA, and that their treatment experience is favorable. Our team's efforts are supported by the strong clinical data package for IBSRELA, which we continue to expand.

Just recently, at the American College of Gastroenterology meeting in Vancouver, we had a significant commercial and medical presence, which included a well-attended product theater as well as two posters and an oral presentation on data analyses about symptom response during treatment with IBSRELA. Our research was incredibly well-received. Our poster, titled "Tenapanor Can Improve Abdominal Symptoms Independent of Changes in Bowel Movement Frequency in Adult Patients with IBS-C," authored by notable opinion leaders, Dr. Darren Brenner and Dr. Anthony Lembo, as well as Ardelyx scientists, was recognized with the Presidential Poster Award by the ACG Abstract Selection Committee. Awarded to less than 5% of all posters, this distinction recognizes high-quality, unique research. Our dedicated team is fully engaged with the physician community and carving out a meaningful role for IBSRELA among the IBS-C patient population.

Based on the uptake we are seeing, it is clear that the potential for IBSRELA is high among this target group of patients who are in need of a novel option, and that IBSRELA is on pace to achieve a high single-digit market share position across this 5 million script market over time. With the price point we established within this market, enabled by the value of its innovation and the favorable uptake dynamics driven by the patient need, we are well positioned for success with IBSRELA. Turning to XPHOZAH. During our call a few weeks ago, I characterized in detail the dynamics and our commercial approach. I will summarize those briefly before discussing our pricing and access strategy in more detail. The market dynamics for XPHOZAH are favorable. Hyperphosphatemia is a well-established therapeutic area, with treatment goals centered on globally recognized treatment guidelines.

80% of the estimated 550,000 patients with CKD on dialysis in the U.S. are treated with a prescription therapy in an effort to control their elevated levels of serum phosphorus. Of those being treated, it has been shown that 77% are unable to consistently maintain target levels of serum phosphorus over a six-month period. The market is primed and ready for XPHOZAH. Nearly 70% of surveyed nephrologists report a high or very high need for a new treatment option, and among nephrologists aware of new treatments for hyperphosphatemia, 3/4 mentioned tenapanor by name. Surveyed nephrologists rate the novel mechanism, efficacy, tolerability, and dosing attributes favorably, and 59% reported that they intend to adopt XPHOZAH within the first six months of product availability. Ardelyx is well positioned to capitalize on this opportunity.

Positioning for XPHOZAH will center on integrating a novel blocking mechanism therapy for their binder-treated patients who have an inadequate response or are intolerant to any dose of binder therapy. WAC pricing for XPHOZAH will be set at $2,960 per month of therapy, reflecting the value XPHOZAH brings to patients in the context of the CKD market pricing landscape. We have built a dedicated nephrology sales force of 60 reps that cover the approximately 8,000 nephrology healthcare providers who write the majority of the hyperphosphatemia prescriptions. Our distribution network is also in place and will provide full coverage across the U.S., aligned optimally to our access strategy. Our comprehensive patient services program, Ardelyx Assist, has gone live for XPHOZAH and is receiving calls. Product is on track to be in the channel following ASN Kidney Week in early November.

As I outlined in our approval call, there are three foundational components to our go-to-market approach, centered on enabling nephrologists to integrate first-in-class phosphate absorption inhibitor XPHOZAH into the treatment regimen of their binder-treated patients who have had an inadequate response or cannot tolerate any dose of binder therapy. First, XPHOZAH is novel. It is a first-in-class phosphate absorption inhibitor. It is not a binder. This is a significant innovation for patients who, up until now, have only had one treatment option for managing hyperphosphatemia. Second, patients are in need of innovation. The vast majority of the 550,000 CKD patients on dialysis who are treated with a phosphate binder to lower their phosphorus levels are unable to consistently achieve or maintain target levels. Third, Ardelyx's commitment to patient access and affordability. Patients prescribed XPHOZAH will have access to comprehensive prior authorization, support, and affordability programs.

Ardelyx Assist connects providers, payers, and specialty pharmacies to help facilitate prior authorization and other administrative processes. For commercial patients, their co-pays will be covered at the level of 100%. Patients unable to afford XPHOZAH can apply for our patient assistance program that provides drug at no cost to patients who meet the program's broad eligibility criteria. I'd like to further characterize the access landscape and our access strategy, as we received a number of questions following our approval call two weeks ago. XPHOZAH, like IBSRELA, will be available to patients through a prior authorization process. We have been engaged with payers for several months to educate them on XPHOZAH, its novel mechanism of action, clinical data, and now the approved label. Over the coming months, payers will issue their coverage policies.

We anticipate that the requirement will be that physicians attest that patients have not had an adequate response to their binder treatment or that they are not able to tolerate binder therapy. While the specifics around the requirements will vary by plan, it is important to note that the majority of patients treated with binders today by nephrologists meet these criteria. What will be most important is that nephrologists prescribe XPHOZAH based on patient need and integrate the prior authorization workstream into their office practice so that patients prescribed XPHOZAH can access XPHOZAH. Nephrologists are well accustomed to the prior authorization processes, as several products commonly used for patients with CKD on dialysis require them.

Given the limited agents available today to treat hyperphosphatemia, the recognized unmet patient needs, and unopposed position of XPHOZAH as the only non-binder next line option for patients, we anticipate that XPHOZAH will be acceptable via the prior authorization pathway early in the launch. We do not intend to contract with payers and anticipate a steady and persistent uptake of XPHOZAH by HCPs based on addressing the patient's unmet needs and effectively engaging in the prior authorization administrative process. The XPHOZAH sales force has been in the field and will be joining the nephrology community this weekend at the ASN Kidney Week in Philadelphia. In parallel, the IBSRELA sales team maintains their singular focus on disrupting the IBS-C market, also with a first-in-class therapy, addressing important unmet patient needs.

The Ardelyx commercial team is executing at the highest level with teams of experienced, dedicated, and highly capable individuals who are delivering on Ardelyx's mission every day, addressing important unmet treatment needs through innovation. With that, I will hand it to Justin.

Justin Renz (Chief Financial & Operations Officer)

Thank you, Susan. Ardelyx has delivered on a number of key milestones since August. Continued growth of IBSRELA across all key measures, the approval and imminent commercial launch of XPHOZAH, the expansion of our commercial organization to support XPHOZAH, the approval of tenapanor for hyperphosphatemia in Japan, the approval of IBSRELA in Hong Kong for IBS-C, which we announced this morning, and an amended loan agreement, which provides additional cash and flexibility to fund our future growth. We find ourselves with a very strong cash position. We are well-resourced to support our ongoing operations, including the commercialization of both of our in-market products. With that backdrop, I will discuss the specifics of our financial performance.

In the third quarter of 2023, we had total revenues of $56.4 million, compared to $4.9 million in total revenues during the third quarter of 2022. The increase resulted in IBSRELA's net product sales growth, as well as milestone and collaboration payments from our international partners. Next, let me take you through the relative contributions of our revenue components during the quarter. First, as previously mentioned, we had U.S. net product sales of IBSRELA in the quarter ended September 30, 2023, of $22.3 million, a 22% increase from the $18.3 million we reported in the second quarter. As a reminder, in the third quarter of 2022, we reported IBSRELA net product sales of $4.9 million.

Second, we reported other IBSRELA net product supply revenue of $2.1 million related to our international partners. This is compared to $92,000 in product supply revenue in the third quarter of last year. Third, we recorded $30 million in licensing revenue as a result of milestone and contract amendment payments from Kyowa Kirin following the approval of tenapanor for hyperphosphatemia in Japan in September. Fourth, we recorded a $2 million milestone payment from Fosun Pharma following the NDA submission for hyperphosphatemia in China, which we announced back in July. And finally, we recorded a small amount of royalty income from Knight Therapeutics as we receive a percentage of their IBSRELA net product sales in Canada. Overall, our revenues were in line with our expectations regarding U.S. net product sales for IBSRELA, as well as milestone payments related to our international collaboration partners.

Looking ahead, we currently expect net IBSRELA sales revenue in the U.S. for the full year of 2023 to be between $76 million and $78 million. Please note that this does not include any anticipated sales from XPHOZAH, partner milestone payments, or product supply revenues. In addition, the FDA approval of XPHOZAH triggered a $3 million milestone payment from Fosun, which will be recognized as revenue and is expected to be received in this current fourth quarter. At the end of Q3, we reported year-to-date 2023 net IBSRELA sales revenue of approximately $52 million. Our raised and narrowed full-year guidance range of $76 million-$78 million represents our expectation of continued consistent growth.

We are still early in our launch and unable to fully anticipate how seasonality may play into performance during the fourth quarter, so we will continue to take a measured approach as we guide you in our expected sales performance. Research and development expenses were $8.6 million for the third quarter of 2023, which is an increase of $1.1 million from the $7.5 million in the same period last year. Selling general administrative expenses were $32.7 million in the third quarter of 2023, an increase of $14 million from the $18.7 million we reported for the same period of 2022. The increase was due to the cost associated with the continued commercialization and growth of IBSRELA, as well as launch preparation activities for XPHOZAH.

As we mentioned during our second quarter call in August, we anticipated that costs associated with XPHOZAH would be an incremental $20 million per quarter, ramping up in the third quarter and then being fully reflected in our SG&A expenses beginning in the fourth quarter this year. We had net income of approximately $6.6 million, or $0.03 per fully diluted share in the third quarter of 2023, compared to a net loss of $22.9 million, or $0.14 per share in the same period last year. Our net income in the third quarter is the result of a $30 million milestone in collaboration amendment payments from Kyowa Kirin, as well as increased sales from IBSRELA. From a cash perspective, we have never been in a stronger financial position as a company.

Let me take a step back and tell you where we are, how we got here, and what it means. First, as you saw in the press release this morning, as of September 30, 2023, we had total cash, cash equivalents, and short-term investments of $165.1 million, as compared to $123.9 million at the end of 2022. This reflects $58.4 million in gross proceeds that we raised during the quarter through sales of approximately 14 million shares of common stock under our ATM program, at an average selling price of $4.24 per share. We also received a $2 million milestone payment from Fosun, following the submission of an NDA for tenapanor for hyperphosphatemia in China, which we announced back in July.

In addition to our cash as of September 30, 2023, subsequent to quarter end, there are also three other contributing factors that I want to point out that significantly strengthens our cash position. First, we have received payment from Kyowa Kirin for the $30 million receivable associated with the approval in Japan. Second, also associated with that approval, is a $5 million milestone payment we have received from Healthcare Royalty Partners. And finally, we drew $22.5 million from our loan agreement with SLR or Solar Capital. Considering these items, as well as the ongoing business in October, as of yesterday, October 30, our cash investments amounted to approximately $218.1 million.

When combined with access to additional capital at our option, via the loan agreement with Solar and our continued financial discipline as a company, we believe that we are very well-resourced for the foreseeable future. We have taken a very thoughtful, disciplined, and patient approach to how we fund the company. We are positioned to support continued investments in our in-market products, as well as beginning investments in our pipeline programs. We will continue to make thoughtful decisions that maximize shareholder value. With that, I'll turn it back to Michael.

Michael Raab (President and CEO)

Thanks, Justin. This is an exciting time at Ardelyx. Within a couple of weeks, we will have XPHOZAH at our distributors and ready for fulfillment to patients alongside IBSRELA. We have focused on execution this year, and yet we are not done. We have a lot of work ahead of us, continuing the momentum we've established with IBSRELA, ensuring a successful launch of XPHOZAH, and looking ahead to next year, where we will begin investing for further growth. We have shown that we can deliver on our promises. We continue to strengthen our company and our balance sheet. We are well resourced and excited about what is to come. I want to thank the members of the investment community who have been alongside us on this interesting journey. However, none of this would have been possible without the dedication, the passion, and the resilience of Team Ardelyx.

Thank you for what you do for patients every day. I will now open the call to questions. Operator?

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Louise Chen from Cantor. Please go ahead.

Louise Chen (Managing Director)

Hi, congratulations on a strong quarter, and thanks for taking my questions. I wanted to ask you, how are you thinking about gross to net for XPHOZAH? And then also, do you think there's a bolus of patients waiting for drug? Just kind of curious how you think about how fast the uptake might be, especially in the last quarter of the year, or do you expect more of the uptake to come in the first half of 2024? And then last question I wanted to ask you was, obviously, you have a very strong cash position. What do you think your cash runway takes you out to? Thank you.

Michael Raab (President and CEO)

Yeah. So, let me ask Justin to address the first and last question first, and then, Susan, please, about the update.

Justin Renz (Chief Financial & Operations Officer)

Great. Thank you, Michael. Good morning, Louise. Regarding our gross to net for XPHOZAH, our commercial strategy will be very similar to IBSRELA, which means that we don't expect significant rebating to payers other than, you know, the statutorily required rebates to certain government payers, which would obviously have, you know, a negative effect on our gross to net. But in general, we expect it to be very similar to what we saw with IBSRELA. There may be some seasonality in our gross to net in our first quarter, being perhaps less the other quarters due to the resetting of commercial co-payment programs. But otherwise, you know, we're very confident that it'll be certainly in the early years comparable to IBSRELA.

Then, regarding our cash position, you may see in our 10-Q, which we filed early today, that we no longer have a going concern, which means our auditors are confident we have more than a year of cash. For us, we believe that it is more than that. We have enough cash runway for quite a while. We can't specifically put it on because we're waiting to see how successful we are with the XPHOZAH launch, but we're quite confident in our cash position.

Michael Raab (President and CEO)

Susan?

Susan Rodriguez (Chief Commercial Officer)

Yes, please. And, regarding the uptake of XPHOZAH, you're exactly right. There is, you know, a very large group of patients today who, despite treatment with binders, are unable to consistently maintain target levels, and patients that can't tolerate binder therapy. So there's clearly a nice opportunity there, and now these patients will have a new option with XPHOZAH. I think what's important here is thinking about the integration of novel mechanism XPHOZAH into the nephrologist prescribing pattern. You know, how exactly they're gonna integrate use of XPHOZAH across their patient groups. So it's always going to take some time for the physician community to adapt their practices now that they have an expanded treatment armamentarium.

So given that, and given our promotional presence with nephrologists, we believe that the uptake of XPHOZAH is really going to be really quite steady and consistent as they identify patients early that they believe are most in need of XPHOZAH, and then, based on their experience, proceed to expand their use to those additional patients that they're quite aware today, are not meeting the target levels, despite binder treatment.

Michael Raab (President and CEO)

Thank you.

Operator (participant)

The next question comes from Dennis Ding with Jefferies. Please go ahead.

Dennis Ding (Vice President and Equity Research Analyst)

Hi, good morning. Two questions for me. Number one, maybe on the, you know, congressional action to delay moving orals into the bundle, can you comment if you have met with the CBO, and what can you disclose from this [audio distortion] from those discussions as it relates to XPHOZAH pricing, and how the $3,000 a month price would impact their cost estimates for moving orals into the bundle versus keeping them out? And then number two, on the IBSRELA guidance, you know, seems based off of scripts, which continue to generally grow week over week. Your guidance for the year seems a little bit conservative for Q4. So is there anything you could be expecting in the quarter that, you know, investors are missing? Thank you.

Michael Raab (President and CEO)

Sure. Thanks for the questions, Dennis. So with any congressional action, you know, in meeting with the CBO, we don't meet with them. I've never seen that companies actually meet with the Congressional Budget Office. Any bill going through Congress needs to get scored. That's just standard fare. So that's our expectation that's gonna be happening here. Whether or not our price has an impact on that, again, that is the process the CBO goes through, and that's not something that we have transparency to. With IBSRELA, I think as in the guidance, as Justin said, and I think as you've seen, we take a very measured approach in the way that we have certainly financed the company and the guidance that we give.

We're very confident, confident with this range and felt that raising it the way we did and narrowing it was giving you a perspective in terms of our confidence of where IBSRELA revenue and uptake is going.

Dennis Ding (Vice President and Equity Research Analyst)

Got it. Thank you.

Michael Raab (President and CEO)

Thanks, Dennis.

Operator (participant)

The next question comes from Yigal with Citi. Please go ahead.

Yigal Nochomovitz (Director, Biotech Equity Research)

Yeah. Hi, Michael and Justin. Thank you very much for taking the question. On the pricing for XPHOZAH, can you just give a little more insight into the thought process around the $2,960? If we look at the binders, obviously they're priced around $20,000 a year, WAC. A year about a 75%-80% premium. Obviously, you have a very significant value proposition with the unique mechanism action, and we don't have anything else like it in the market. But nonetheless, can you maybe spend a little more time discussing the thinking around that type of a premium? Thank you.

Michael Raab (President and CEO)

Sure. Thanks, Yigal. You know, I think what you just described as the significant difference in the opportunity and the benefit that XPHOZAH would bring to patients, that's really the differentiator here, is looking at what we're thinking is the best thing and what's most appropriate for patients, especially in the context of other branded binders within the marketplace. So we're very comfortable with where we've landed, and think that the price is exactly where it needs to be, and it's appropriate for the patients and what we are going to be bringing for them.

Yigal Nochomovitz (Director, Biotech Equity Research)

Okay, thanks. And then maybe for Susan. Susan, if you could talk a little bit more about IBSRELA. I'm not sure if you have this data, but could you tell us what the refill rate is and the number of scripts per writer so far, if that's data you have access to?

Susan Rodriguez (Chief Commercial Officer)

Yes. Thanks, Yigal, for the question. Yeah, we track that closely. We have not specifically disclosed those growth rates. But what I can tell you is that the refill rates, you know, are growing at comparable or greater than the, you know, the new Rx rates. So both are showing very healthy growth, and that has been persistent. So reflecting that, physicians are continuing to write new scripts for patients, and when those scripts are written, they're getting refilled. So it's very encouraging looking at those rates. And in terms of the average script per writer, again, it's not a specific metric we have disclosed, but we track that very closely. And what's really encouraging is that every single month, we see a new cohort of writers join the IBSRELA writing group.

So we're persistently accumulating writers, and when you track existing writers monthly on a persistent level, they're increasing their prescription volume for IBSRELA. All of those fundamental demand indicators continue to be very strong.

Yigal Nochomovitz (Director, Biotech Equity Research)

Okay, thanks. And then one quick one for Justin on the cash and the finances. Obviously, you highlighted a very strong cash position as of yesterday. Just curious, and you also mentioned that you did report positive net income, although I know that it was driven by perhaps some one-time items. But nonetheless, I'm just curious, Justin, if you could kind of give us a sense as to the likelihood that you might need to use the SLR credit line again, or if that's more of a you know, a backup plan, and it's not really something you're expecting to draw on again?

Justin Renz (Chief Financial & Operations Officer)

Hi, Yigal. I'm sorry, I had trouble understanding the second part of your question. You asked about our cash runway 'cause there was one-time items?

Michael Raab (President and CEO)

And then the rest of the question was whether or not you'd be accessing, we'd be accessing the credit that we have or financing the company in the future, how that's-

Justin Renz (Chief Financial & Operations Officer)

Oh, okay. Thank you. Thank you, yes. You know, so, we're very pleased with our third quarter. We're clearly not at a point yet where we can share where breakeven is, but we, we take a very measured approach to our funding, as you've seen. I do think with our internal projections, we can be very flexible and patient. We have until March fifteenth of next year to potentially draw the next tranche of debt, and so that's something that, as a team, we'll evaluate as we see how well XPHOZAH launches and the continued growth of IBSRELA. So, it's, it, it's something that we want to have the flexibility on. You know, we don't have any intentions to do a significant equity raise this time. We're always looking at all of our different ways to raise capital when appropriate.

Michael Raab (President and CEO)

Yeah, and Yigal, what I'd add to that is, you know, Solar has been a spectacular and unique partner in this whole process for us, right? I mean, you think about when we first established a relationship with them, the company was in a very different position. And the terms around this loan are really favorable to us and what we're able to accomplish with it, which is why we drew down the $22.5. The additional $50 at our discretion is nice to have, and we may, at some point in the future, take that down before the timeframe that Justin just mentioned. But, you know, I think it's important that we have taken the approach that we have and have strong partners like Solar to grow the company to where we want it to be.

Yigal Nochomovitz (Director, Biotech Equity Research)

Got it. Okay. Thank you very much.

Operator (participant)

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

Ed Arce (Senior Research Analyst)

Hi, thanks for taking my questions, and congrats on the approval and the quarter. First, I wanted to ask about IBSRELA. You know, given the guidance, the new guidance range, if you could discuss sort of what you're continuing to see as drivers of additional uptake, both with new and existing writers. And then, turning to XPHOZAH, I'm wondering if, you know, with initial sales in the fourth quarter, are you expecting to report quarterly metrics, say, fourth quarter or early next year, and sort of disclosing those and tracking those beyond scripts? And then finally, on pricing.

I know this was already brought up, but I wanted to ask how you came to that number as you think about balancing, you know, the ability to capture the differentiated value proposition with the patient access and affordability that you've mentioned is important for your launch. Thanks so much.

Michael Raab (President and CEO)

Sure. Let me make a couple comments on all of those, Ed. Thank you for the question. And then I'll ask Susan to address all of them as well. So, you know, the IBSRELA uptake dynamic, it's because the drug works, right? It is something that people are getting, you know, the samples and then their first prescription, and the drug is doing something that they've never experienced before with the products that they've previously been utilizing. So that's really what's driving this, is the experience is positive, and our Ardelyx Assist program that facilitates access is extraordinarily important, and a hallmark of what we do and the way that we help patients get access to the drugs that we develop.

With XPHOZAH metrics, you know, would love to provide as much as we can, but we'll provide what we think is appropriate. Early in the launch, you know, we wanna make sure that, as we did with IBSRELA, it's probably gonna be four to five quarters of, you know, these questions being asked, and that we'll do the best to answer them before we're giving, you know, more solid metrics as we see as things evolve. And with pricing, you know, pricing is an art as well as a science.

I think what we have done here, given the expansiveness of the entirety of what we do for patients, that this is a completely appropriate price for what this drug brings because there are no other drugs to manage phosphorus, that are next-line opportunities with a novel mechanism that may very well be the way that we can ultimately get a greater percentage of our patients to goal. And that's what we should all be focused on, is that we, with this approval and the field force out there already, next week- this week with ASN is gonna be spectacular. And we're all gonna learn a lot about this together. And we feel very confident that we have priced this appropriately and are gonna be reflecting that in uptake over the ensuing, you know, quarters that we work together talking about this.

Susan, would you like to add anything?

Susan Rodriguez (Chief Commercial Officer)

Yeah. Thanks, Mike. I think in terms of. Let me take the IBSRELA aspect of your question first and then touch on the XPHOZAH pricing.

I think for IBSRELA, what we're, you know, we're finding is, I mean, there are many high-writing physicians who are just beginning to prescribe IBSRELA. And as we get in their offices with the frequency and the sampling, we continue to bring on more and more new writers. So that's really, there is a lot of runway there to continue to bring on new writers for IBSRELA. And then, as I mentioned before, on top of that, the existing writers expanding their use across their patient population. And what we're finding, you know, even at the third dimension, you know, as a growth driver, is as they gain the favorable experience with IBSRELA, they're expanding their view as they see patients daily in their office, on patients who could benefit from IBSRELA.

So we have very, very strong, growth dimensions there in view for IBSRELA, taking us into the future. I think in terms of exposure pricing, as Michael mentioned, we consider multiple dynamics. Let's just talk a little bit about, you know, obviously, we've talked about the novelty of the drug, the unmet need, and our commitment to patient access. If you look at the CKD pricing landscape, there have been a few innovations launched recently, which is really encouraging for CKD patients on dialysis, you know, in high unmet need areas like, nephropathy, IgA nephropathy, lupus nephritis. Those, products priced in the range, depending on which one, depending on $4,000-$10,000 a month. If you look at specifically hyperphosphatemia, I know Yigal had mentioned, the branded pricing, of the product.

If you look at the number of capsules that they're on, and it depends on which product they're on, the expensive branded binders is actually distributed across a pretty broad range, which ranges from $1,400 a month to, we estimate around $2,400 a month. So in that context, you know, if you consider the overall CKD pricing landscape, the hyperphosphatemia branded binder range of cost per month, the novel innovation, that exposure represents, we believe that it's an appropriate price point. You had mentioned the commitment to access. Mike has emphasized this, both for IBSRELA and XPHOZAH. You know, we are quite confident with the program we have in place, that we're going to support the nephrology offices with this prior authorization submission, so patients can gain access to XPHOZAH.

That XPHOZAH will be affordable, either because we can offset their co-pay for commercial patients, and for patients who can't afford the product, who don't have low co-pay programs, they would be eligible for our patient assistance program. So, access and affordability really is our primary focus, and that's what's going to be important to bring XPHOZAH to these patients.

Ed Arce (Senior Research Analyst)

Great. Michael and Susan, thank you so much for those comments. Very helpful. Look forward to seeing the team later this week in Philly.

Michael Raab (President and CEO)

Thanks, Ed. We'll see you then.

Operator (participant)

The next question comes from Joseph Thome with TD Cowen. Please go ahead.

Joseph Thome (Managing Director, Senior Biotechnology Equity Research Analyst)

Hi there, good morning, and thank you for taking my questions. Maybe the two on IBSRELA uptake. I guess, are you seeing physicians... obviously, the drug is launching well. Are you seeing physicians want to use the drug earlier in the treatment line of their patients? Or obviously, we talked about the target, you know, post-linaclotide market, but, are you seeing them want to use it earlier? And then second, we did see the phase 3 trial in adolescent patients. I guess, what is the current uptake in adolescent patients between 12 and, I guess, 17, 18 years of age? And what's sort of the eventual goal of this study?

Would it be just to remove that line on the label that said, "Safety and efficacy of the drug aren't available in pediatric patients less than 18," or is there something else that can be done with it after the study reads out? Thank you.

Michael Raab (President and CEO)

Sure. Thanks for the question, Joseph, and I'll ask Susan to speak to the IBSRELA uptake. But first, let me address the pediatric adolescent question. That was an interim look at some of the data that was presented. We are still indicated only for adults with IBS-C, so that hasn't changed. So any insights that we have, I can't think of any that say that we're treating adolescents, because that's not indicated in our label, nor is first-line therapy, right? I mean, if you look at the way that we position this, it is a drug that's gonna be used for patients that are no longer responding to the GCC agonist. Specific feedback as to whether or not people are using it earlier, Susan, you want to address that?

Susan Rodriguez (Chief Commercial Officer)

Yeah. Thank you. The, actually, it's interesting for, if, if you recall, we have a very focused approach calling on the highest prescribing physicians for IBS-C indicated prescription. For those physicians, the patients they see in their offices daily, have all been cycled, you know, have cycled through GCC agonists. So very important to think about the context on where we're focused with IBSRELA. So for those physicians, patients they see daily, typically have already been treated with these products, so it depends on how you define early. What we're finding is that, because the patients meet already the prior authorization criteria, it's really, the, the physician's eagerness in identifying increasingly patients that they believe can benefit from a novel option.

Joseph Thome (Managing Director, Senior Biotechnology Equity Research Analyst)

Great.

Susan Rodriguez (Chief Commercial Officer)

Remember that the overall label for IBSRELA does support broad-based use, but in our case, focusing on these high-writing physicians, it's really not an issue for the patients who walk into their office every day meet the prior auth criteria.

Joseph Thome (Managing Director, Senior Biotechnology Equity Research Analyst)

Okay, perfect. Thank you very much.

Michael Raab (President and CEO)

Thanks, Joseph.

Operator (participant)

The next question comes from Matt Kaplan with Ladenburg Thalmann. Please go ahead.

Matt Kaplan (Managing Director, Head of Healthcare Research)

Hey, good morning, guys, and, congrats on the strong quarter. Just, just focusing on IBSRELA a little bit. Maybe Susan, can you talk about how patients are using IBSRELA in a real-world setting now, versus the use in the long-term clinical studies?

Susan Rodriguez (Chief Commercial Officer)

Yeah, Matt. Actually, what we're finding in our clinical data package really shows a rapid response to IBSRELA and a sustained response to IBSRELA, which is really a piece of our overall product profile and clinical data profile that physicians respond very favorably to. And what we're finding in the real world is that that has been their experience, that patients have responded to IBSRELA, and when they respond to IBSRELA, they continue to have a sustained effect. I mean, obviously, you're not going-it's not going to be the best, the right drug for every single patient, but we're-the physician feedback really has been quite favorable on their treatment experience, consistent with their expectations based on the clinical data package.

And Spherix has been tracking the launch over time, and persistently, they're reporting either moderate or high satisfaction with treatment with IBSRELA and reporting low discontinuation rates.

Matt Kaplan (Managing Director, Head of Healthcare Research)

All right. Thank you. And then, I guess, given the similarities between the IBS-C market and the hyperphosphatemia market, in terms of going into these two markets with a novel mechanism of action combined with the unmet need, can you talk a little bit about the learnings that you've had in the launch of IBSRELA that you're going to apply to XPHOZAH in that?

Michael Raab (President and CEO)

Sure. Susan, please.

Susan Rodriguez (Chief Commercial Officer)

Yeah. So, yeah, you're spot on in terms of the parallels between the two markets, and a very important learning is the physician interest, because of the limited options that they have had and the recognized unmet need, their interest in the novel mechanism profile, understanding, the way the drug works uniquely and its clinical data package. So we're very much a science-based, clinical-based sell, patient-based sell, and also, learned the criticality of emphasizing our commitment to patient access and affordability. So physicians, really, they prescribe based on patients needing a drug, and it's important that we encourage them that they don't [audio distortion] they should not have to have a concern around the prior authorization process, that we can support that. We can remind them that they're [audio distortion] they have familiarity with, that administrative process with other drugs they write, and this one is no different.

And in this case, the patients that they're identifying who are in need of our novel drug implicitly meet the prior authorization criteria. So all of that will be very critical in really supporting physician uptake, integrating novel mechanism XPHOZAH into their treatment patterns for these patients who, for so long, have had no options outside of binders.

Michael Raab (President and CEO)

And, Matt, what I would add to that is, you know, the power of Ardelyx Assist and the comprehensiveness of that program, when physicians utilize it in the way that it's been designed, I think they find an extraordinarily seamless program where they get confidence that if they're gonna write a script, that their patient is going to get it, irrespective of whether or not it's a co-pay pay down, it's an affordability issue, Medicaid, Medicare. Ardelyx Assist is there to accomplish an awful lot. So it's really that program and how physicians and ultimately the patients who are receiving, whether it's IBSRELA or then XPHOZAH, are finding that Ardelyx Assist is really doing the job that it's been designed to do.

Matt Kaplan (Managing Director, Head of Healthcare Research)

Okay, great, great. And then last question, can you provide a little bit more detail on the presence that you're going to have at the upcoming ASN meeting later this week?

Michael Raab (President and CEO)

Sure. Susan?

Susan Rodriguez (Chief Commercial Officer)

Yeah. So we will have a very strong presence for XPHOZAH at the upcoming ASN meeting. We will have a strong promotional booth presence reflecting our whole launch campaign for XPHOZAH. As we mentioned earlier in the narrative, we have a sales force out and deployed, calling on nephrology healthcare providers as we speak, so we'll have a strong promotional presence at ASN. Reminder ad banners, you know, I think anywhere you look across the ASN floor, you're going to see XPHOZAH and its novel blocking mechanism campaign. We also have, you know, a clinical scientific presence at ASN. We'll have a product theater where we have opinion leaders presenting on the novel product profile of XPHOZAH and its clinical data package.

We're quite encouraged about all of the events at ASN, and hopefully we look forward to seeing you there.

Matt Kaplan (Managing Director, Head of Healthcare Research)

Great. Thanks, Michael. Thanks, Susan.

Michael Raab (President and CEO)

Thanks, Matt.

Operator (participant)

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

Laura Chico (SVP, Equity Research)

This is Ingrid on for Laura Chico. How should we be thinking about gross to net dynamics for XPHOZAH pricing over time? And what, your steady state rate expectations for gross to net discounts? And then just our last question is, could you perhaps review why IBSRELA as a competitor makes sense?

Michael Raab (President and CEO)

Let me start with the last one first. It's a great question, is why does IBSRELA as a competitor make sense? I think Susan is the best one to address that, given what the experiences are that we're seeing in the field. And then I'll ask Justin to address gross-to-net for XPHOZAH and discounts. Susan?

Susan Rodriguez (Chief Commercial Officer)

Yeah. So I think IBSRELA as a competitor, let's just take a step back, and think it's some of the parallels that Matt alluded to. So as a novel mechanism drug, a specialty drug, I think there are, you know, the gross to net components take into account the distribution, the mandated government rebates, and other considerations, that Justin can touch on. Overall, and the gross to net between the two products, we're gonna need to wait and see because the mix of patients, the payer mix of patients, also determines the extent to which the government-mandated rebates become a part of your, you know, gross to net profile. But what is comparable between the two, which is an important comparator, is that there will not be incremental rebates that we're providing payers for access to the drug.

Access to the drug will be achieved by a prior authorization, because for these patients, in both cases, they have limited options and a physician prescribing our novel mechanism drug is because those options have not been adequate, and they're in need of a new option. So that's how patients will access our drug, and therefore, there will not be the incremental payer rebate gross to net item. Which we get a lot of questions on that because I think for product launches, those are rebates that are negotiated over time, so they start to, you know, integrate themselves into your gross to net profile. That is one item that we can tell you today is not gonna be something that's gonna show up on the profile for either product.

Michael Raab (President and CEO)

Just to follow up on the question, were you asking about the financial comparator or the clinical comparison to other drugs in the market?

Laura Chico (SVP, Equity Research)

Financial comparator.

Michael Raab (President and CEO)

Great, thank you. Justin, do you wanna address gross to net for XPHOZAH and discounting?

Justin Renz (Chief Financial & Operations Officer)

Sure, thank you. Susan briefly touched on it, and I'll just to elaborate, the most important thing for us is access and making sure the patients have access to it. And so our commercial strategy will be very similar to what we did with IBSRELA, which means, as Susan mentioned, we don't do significant rebating to payers, but we will have our same generous commercial co-pay, commercial, buy-down process, where if you have commercial coverage, we will take care of your co-pay at 100%.

And so as a result, we, we may expect to see the seasonality that we saw with Linzess, where in the first quarter of the year, when many patients' plans reset, there may be deductibles where we will help the patient meet that need, and then it may improve, if you will, over the course of the following subsequent quarters. So as a general premise, with Linzess, you may have seen our first quarter was at just about 33%. It's come down into the high twenties over the course of this year, and I think it's fair to say, at least initially, we expect similar gross-to-net margins for XPHOZAH.

Operator (participant)

Thank you. 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.

Michael Raab (President and CEO)

Thank you, everyone, for joining us this morning. Before I close the call, I wanna recognize a member of the kidney community who we recently lost, Derek Forfang. Derek was an incredible person and patient advocate who meant so much to so many people in the kidney community and beyond. For Ardelyx, Derek brought the patient voice to the Ardelyx Scientific Advisory Board and was the driving force behind the creation of the Ardelyx Patient Advisory Council. Derek was a warrior who, despite his many health challenges, always persevered, put others first, and continued his mission to advocate for kidney patients with a smile. Derek's passing is a reminder to all of us that our job is not done. There are so many patients with CKD who need innovation, and we need to continue investing in and developing innovations with urgency for this community of patients.

With that, we can close the call. Thank you, operator.

Operator (participant)

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