Ardelyx, Inc.

Good afternoon, everyone, and welcome to the RDELX fourth quarter 2022 conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please say no to 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 and then one using your telephone keypad. To withdraw your questions, you may press star and two. As a reminder, today's event is being recorded, and at this time, I'd like to turn the floor over to Caitlin Lowy, Vice President, Corporate Communications and Investor Relations. You may begin.

Thank you. Good afternoon, everyone, and welcome to our fourth 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 Ardell.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 our risk factors in our most recent annual report on Form 10-K, filed today, which can 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 change. Our president and CEO, Mike Robb, will begin today's call with opening remarks and an overview of the company's progress during 2022 with a look ahead to 2023. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the launch of Estrella as well as preparation activities to support a successful launch of Exposa if approved. Justin Renz, Chief Financial and Operations Officer, will conclude today's formal remarks with a review of the company's financial performance during the fourth quarter and full year ended December 31st, 2022. Dr. Laura Williams, Chief Medical Officer, Dr. David Rosenbaum, Chief Development Officer, and Rob Links, Chief Regulatory Affairs and Quality Assurance Officer, will join us for the question and answer period. With that, let me pass the call over to Mike.

Thank you, Kaitlin, and good afternoon, everyone. It is a great pleasure that I provide an update on our XRELA launch and the tremendous progress that we have made on our path to bring Exposa to patients on dialysis. To be clear, the progress Susan, Justin, and I will discuss today is not just about Exposa. It's about Adrella and Exposa. The last year for Ardellis captures the results of well over a decade of hard work, dedication, and tenacity on the part of the entire Ardellis team, as well as our many supporters from the patient and healthcare provider communities. In the midst of all of the challenge everyone faced during this pandemic, our continued success illustrates our ability to execute on our plans and to realize the vision of Ardellis. And most importantly, it demonstrates our profound commitment to doing the hard work of bringing novel mechanism products to patients in need. We say this often, but our mission is to develop, discover, develop, and commercialize innovative first-in-class medicines that meet significant unmet medical needs. Many of us in biotech have similar goals and missions, but it isn't often that a company, especially a company of our size, can say that we have done that once And we are on the path to do it again with the potential to bring another important medicine to patients later this year. In March of last year, we launched our first novel therapy, Hidzarella, for patients with irritable bowel syndrome with constipation. And we're demonstrating significant quarter over quarter prescription growth in both new and refill prescriptions and bringing much needed relief to patients with IBSC. In our December update, Spherics noted that 60% of surveyed GIs reported the use of Absrella, rating their satisfaction with the treatment as either moderate or high. In addition, 32% of non-using GIs surveyed in the report, and they reported an intent to adopt Absrella within the next three months. Absrella is providing clinically meaningful benefits to patients, and Ardellis is establishing itself as a commercial company. In addition, last quarter, we experienced an overwhelmingly positive CardioRenal Advisory Committee vote supporting the benefit of Xfosa, which was then followed by the Office of New Drugs granting our appeal and instructing the CardioRenal Division to work with us on an appropriate label for Xfosa. We are moving quickly towards our NDA resubmission, and in mid-February, we held a Type A meeting with the CardioRenal Division. It was a very positive discussion, and we are really appreciative of the time and responsiveness of the FDA. We are now completing our work on the NDA for EXPOSA and are on track for resubmission early in the second quarter. As we have said before, our base case expectations are that this will be a six-month Class 2 review. We, of course, are hopeful that it could be shorter. Regardless, we are well positioned and will be ready to launch in the second half of this year if approved. As things progress, we will apprise you of the goal review date and any other updates we are able to share. In a moment, I'm going to hand the call over to Susan to walk through the commercial momentum that is building for Exrella and our go-to market planning activities for Expoza. What I want you to take away from today's call is that Exrella is growing and continues to gain important momentum. When we announced the launch of Izrella, we shared that we expected we could capture mid to high single digit share of its 5 million prescription IBSC market, which we expect would yield a peak revenue of at least $500 million. Based on what we are seeing today, there's nothing that changes that perspective. And I believe we are on our way to achieving that target. Importantly, I also want you to have confidence that the Ardelix team is mobilizing and ready to launch EXPOSE if approved. Finally, I want to reinforce a critical aspect of our business and our approach that is behind the results that we are generating. With what we continue to accomplish, we are demonstrating that Ardelix is a company with a crucial remit that spans the discovery and development of important therapeutics, and we are executing on an innovative commercial strategy that is unique and replicable. We have developed first-in-class therapies with strong clinical data demonstrating meaningful benefits for patients. We are in therapeutic areas where there is a persistent and significant unmet medical need. We are executing with Absrella in a large, established market with a concentrated set of specialist healthcare providers, and we expect our commercialization efforts for Exposa will follow a very similar dynamic. We have a long runway of strong intellectual property with no new branded agents on the horizon. And we have an innovative, disruptive commercial strategy led by a highly experienced commercial leadership team that will continue to drive results. What we have is true for our current portfolio of first-in-class agents, both Ibsrella and Exposa. We will leverage this commercial strategy as we continue to build the growth and momentum for Ibsrella. execute on our plans for successful launch of Exposon, and we will seek to expand our businesses to support the next phase of our growth. With that, I'll turn the call over to Susan. Susan?

Thank you, Mike. I will be reviewing several topics today. I will review our strong Q4 and full-year performance for Adrella, traction we are gaining, and position we are establishing that will enable continued market share gains. I will review key achievements of our launch that have established favorable foundational uptake drivers predictive of strong growth momentum for Abzrella in 2023. I will then take some time to cover the opportunity for Exposa, our preparations for launch in the second half of this year, and go-to-market strategy. So let's begin with Abzrella. Our Q4 revenue for Abzrella came in at $8.7 million, representing a revenue increase of 78% versus our Q3 sales of $4.9 million. This brings Adrella total revenue for 2022 from our launch in March through the end of the year to $15.6 million with strong growth momentum going into 2023. Our early launch results demonstrate that Adrella is having an impact with its novel mechanism of action and strong clinical data and adoption is growing. Our launch tracking research demonstrates That over two-thirds of surveyed GIs report if Drilla is unique compared to other IBSC prescription products, and for the majority, its differentiated mechanism of action is the most compelling reason for use. The Spirits December 2022 report also notes that surveyed GIs consider approximately 25% of their patients with IBSC to be good candidates for treatment. These insights align with the consistent growth we are seeing in prescriptions, reflected both in new and refilled prescriptions, as well as new and repeat writers. Our Salesforce presence is clearly making an impact. Our omnichannel initiatives are clearly making an impact. And our market access strategy is clearly working. Payers have evaluated Adrella and set policies that grant access to Adrella via prior authorization, typically if patients have been treated with an existing option. The patients under the care of these high IBSC writing doctors have commonly been treated with one, if not more, of the limited options available, meet these criteria, and therefore prior authorization approvals are being secured. Patients are increasingly being identified as candidates for Adrella, accessing the drug, and responding favorably to the treatment. These key launch indicators suggest that we are in a strong position to continue to advance our market share across what is a favorable market landscape where there are no new branded agents in view across the patent life for Adrella. Transitioning now to our commercial planning for Exposa, I will briefly review the background market dynamics across Hyperphosphatemia and the market opportunity for Exposa. Published data demonstrates that over a six-month period, 77% of patients are unable to consistently maintain established, guideline-directed target levels despite active treatment with phosphate binders, the single class of therapy available to treat this highly prevalent condition in patients with CKD on dialysis. It is clear that hyperphosphatemia is in great need of a next-line alternative. With the approval and launch of Exposa, patients inadequately controlled with phosphate binders will have a new alternative. Exposa, a first-in-class phosphate absorption inhibitor, represents a unique approach to treating hyperphosphatemia by blocking phosphorus absorption via the primary pathway of absorption. It provides clinically meaningful phosphorus reduction and enables a dosing regimen of one tic-tac-sized pill twice a day that is novel to this patient population. In addition, research in December of 2022 by Spirix indicated a high level of interest among nephrologists, a high level of intent to adopt, and a large subset of patients who surveyed nephrologists would consider candidates for Xposa. The product proposition and market opportunity for Xposa has many parallels to Adrella. A first-in-class therapy, entering an established prescription market with a single mechanism treatment option currently that's not meeting patient needs. And those patients are being treated by a concentrated group of healthcare providers that are actively looking for novel approaches to bring to their patients. To launch EXPOSA, we will focus on the 8,000 nephrology healthcare providers that account for approximately 80% of all hyperphosphatemia prescriptions with a dedicated nephrology sales force and a product positioning centered on the important role a blocking mechanism drug can play in helping the many patients who are currently unable to achieve guideline-established target phosphorus levels. Our established commercial capabilities have enabled us to quickly mobilize launch planning activities, and we are poised to rapidly ramp up a dedicated nephrology sales force once we get closer to a launch date. Our commercial leadership team is steeped in nephrology experience, enabling ongoing opinion leader and key stakeholder engagement across the nephrology landscape. If EXPOSA is approved and launched sometime in the second half of 2023, it will launch into a traditional prescription payer model comprised of Medicare Part D, commercial, Medicaid, and VA payers. Our access strategy centers on the unique position EXPOSA will hold as a novel mechanism therapy for patients inadequately controlled by phosphate binders and high level of prescriber demand driven by their motivation to adopt a new treatment option. For this large subset of patients in need, Exposa offers the only new and differentiated option. As is the case for all innovative branded therapies introduced into established therapeutic areas where low-cost options are available, We expect payers will require a prior authorization for access to Exposa. We do not expect this to limit patient access. The majority of CKD patients on dialysis with hyperphosphatemia are actively treated with phosphate binder therapy and in many cases, inadequately controlled. Therefore, meeting prior authorization criteria will be achievable. In addition, Ardellis will provide support through a comprehensive patient services program designed to optimize access and affordability. This is a strategy that is working for Adzrella and will work for Expoza. While we are not ready to announce the launch price for Expoza, I can characterize for you the current pricing landscape in the hyperphosphatemia space. While the majority of dialysis patients requiring phosphate-lowering treatment are on a generically available phosphate binder, approximately 20% are treated with branded binders launched within the last 10 years with list price points ranging from $1,500 per month to $2,300 per month. This current pricing landscape provides opportunity for Exposa to launch at a price point aligned with its clinical value proposition. Across the biotech landscape, Ardelix is in the unique class of companies actively commercializing its own products. We are advancing our market position with Ibstrella and preparing for the potential launch of Exposa in the second half of 2023. The state of our business reflects our vision being realized. These two first-in-class novel mechanism therapies discovered and developed by Ardelix are poised for commercial success with favorable product, market, and competitive dynamics, and are powered by our disruptive commercial strategy for innovative therapy products. Our Q4 results for Xrella and strong growth momentum going into 2023, combined with the commercial promise of Xposa, illuminate the potential for Ardelix to build strong market positions for our portfolio of assets as a successful commercial biotech company. I will now turn it over to Justin to walk through our fourth quarter and year-end 2022 financials. Justin?

Thank you, Susan. I'm going to walk you through our product sales, collaboration revenue, and expenses before turning into our cash position and how we were thinking about 2023. We had net product sales of Ibsrella in the fourth quarter of $8.7 million and full-year net sales of $15.6 million. That $8.7 million figure reflects significant quarter-over-quarter growth, a 78% increase from what we reported in sales in the third quarter. We also recognized $36.6 million in collaboration revenue during the full year of 2022 compared to $10.1 million in 2021, 35 million of which came in November and is related to milestone payments and payments under the 2022 amendment the license agreement between Ardellix and KKC, our partner in Japan, for Tanapinor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis. This $35 million in payments was earned upon KKC's submission of a new drug application in October. Research and development expenses were $9.1 million from the quarter ended December 31, 2022, compared to $21 million from the same quarter last year. For the full year 2022, research and development expenses were $35.2 million, a decrease of 61% compared to the full year 2021. The decrease in our R&D expenses is primarily the result of lower clinical study costs from the OPTIMIZE study, lower to NAPNOR manufacturing expenses as we began to capitalize those costs associated with its REL inventory, and lower expenses following the elimination of our research function in the fourth quarter of 2021. Selling, general, and administrative expenses were $19.7 million for the quarter ended December 31, 2022, an increase of $4.4 million compared to the $15.3 million in the fourth quarter of 2021. Full-year SD&A expenses were $76.6 million in 2022, an increase of 6% compared to 2021. The increase was primarily due to the increased costs associated with the launch of Insurella in 2022. Due to the aforementioned KKC payments for the quarter ended December 31st, 2022, we had net income of approximately $11 million, or $0.06 for a fully diluted share. Net loss the year ended December 31st, 2022 was $67.2 million, or $0.42 per share, compared with net loss of $158.2 million, or $1.52 per share in 2021. As of December 31, 2022, we had total cash, cash equivalents, and short-term investments of $123.9 million as compared to total cash, cash equivalents, and short-term investments of $116.7 million the previous year end. We recognize the importance of maintaining a strong balance sheet, and we continue to seek opportunities to strengthen our cash position. As you saw in our press release, we have unaudited cash of approximately $121 million as of February 28, 2023, which includes $20 million we raised through the sales of common stock under our ATM program in January 2023, following the appeal granted letter from the Office of New Drugs. As we look ahead, we will continue to pursue ongoing capital strategy of non-equity solutions, including international partnerships and open territories for Ibsrella and Expoza. These efforts will continue while Susan and the commercial team grow revenue from Ibsrella, and we seek to drive rapid market update for Expoza, if approved. We will continue to make thoughtful decisions that maximize shareholder value. As a reminder, we expect we'll have additional milestones and collaboration revenue from KKC and healthcare wealthy partners in the fourth quarter of 2023, pending the approval of tenafinil or hyposacitimia in Japan. Combined, if KKC's NDA is approved, we expect an additional $35 million of non-equity capital later this year. As we look ahead, 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 for questions. Mike?

Thanks, Justin. As you heard, we accomplished a lot in 2022. Since our third quarter earnings call in November, we've made significant advancements on our commercialization of Azrella and successfully concluded the CRL appeal process for Xhosa, resulting in the granting of our appeal and providing a path forward for approval and subsequent launch in the second half of this year. We also issued our first-ever ESG report, which demonstrates Ardelux's commitment to issues that are critical to all of our stakeholders. I want to thank the Ardelux team and the patient and clinician communities. It is a steadfast commitment of these groups that has gotten us to this point and will be the foundation for our future success. With that, I will now open the call to questions. Jamie?

Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. In order to withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue.

We'll pause momentarily to assemble the roster. And our first question today comes from Laura Chico from Wedbush.

Please go ahead with your question.

Good afternoon. Thanks very much for taking the question. Congratulations on the progress. One, I think I might have missed this in the opening remarks, Could you comment on the latest expectation for cash runway? And then secondarily, would you be able to comment if there's any meaningful off-label utilization occurring within Drell at this point? Thank you.

Yes, let me address the second part of the question first, then I'll hand it over to Justin. You know, we don't obviously see a whole lot of that kind of information. We don't anticipate very much off-label use. Remember that the strategy that we undertook to get these two, hopefully both, drugs approved, is separate NDAs, very different markets, different dosing, different NDC codes, which we think helps that as it relates to any off-label you sent outside of IBSC. Within IBSC, I think our data demonstrates that BID dosing of the 50-meg tablets is where you can get the best effect, so we don't see very much of that. Justin?

Yeah, thank you, Mike. Hi, Warren. As I mentioned, as of February 28, we had unaudited total cash, cash equivalents, and short-term investments of approximately $121 million. And we're going to be very thoughtful in how we finance the company and continue to leverage as many non-equity solutions as possible and be cautious about managing our spending, the targeted approach that Susan has led. We're not going to give specific guidance on any future financings or our runway, but we're confident in our ability to fund our operations.

Thanks very much, guys.

Thanks, Laura.

And our next question comes from from Citi. Please go ahead with your question.

Hi, Mike and team. Thanks for taking the question. I'm just curious, with regard to the Type A meeting, did anything happen in that meeting that would lead you closer to conclude that it would be a six-month or a two-month review?

Um, no, that's why we continue to have our base case at all that, you know, our base case is 6 months. It could be sooner, but I think it's prudent for us to be expecting that. And, you know, if we get perspective that it could be quicker than that, we certainly will share.

Okay, and then with regard to what was required to complete the NDA resubmission, are you able to provide any more details in terms of what what needs to happen there?

You know, I think generally, as I'll ask Rob to comment, is, you know, we know we have to update safety, but I think with additional work that needs to be done, it's pretty straightforward. Rob, anything to add?

I think you've covered it, Mike. I mean, we have a lot of it. It's mostly safety data, as you know, and we have a lot of trials and that we need to include a lot of safety data from our, you know, Japanese and Chinese partners as well as, you know, two studies that we completed after we submitted the initial NDA.

Great. Okay. Thank you. Our next question comes from Chris Howerton from Jefferies.

Please go ahead with your question.

Hi, y'all. This is AJ for Chris. My first question is, could you provide some details on Ibsrella's growth to net, and is it stable? Yeah, Justin?

Yeah, thank you, AJ. Yes, we filed our 10-K order today, and you'll see the information provided there. As a general premise, through the course of our 2022 operations, we range between 25 and 30 percent. You'll see for the year And in 2022, we were approximately 28% as a reduction. So it goes to net, depending on how you keep score, of 72% or 28% as a general premise.

Gotcha. Okay. Thank you. Okay. My next question is, is there any possible risk here in terms of a delay to the review process beyond six months?

Okay. So, AJ, as you know, we're a bit jaded in the way that we think about this, but, you know, we are on a very solid path to launching this drug in the second half of the year. You know, the way that we look at it is appeal granted says to us that the NDA should have been approved. The instructions to the division to work with us in establishing a label says we're on the path to approval. You know, I think the interaction that we had at the Type A meeting doesn't change any of that perspective.

Okay, fantastic. If you don't mind my asking one more question. Go for it. I hope this isn't jumping the gun, but have you given any further thought to when you're going to start back up on your kalemia and acidosis program?

No, so I think the way we think about the pipeline, as Justin said, we've got to be very thoughtful about our outlay of our capital. We've got important things that we're doing with Azarella. You know, we're actually just finishing our national sales meeting and the enthusiasm and what we're hearing from the field and physicians is really quite remarkable. So we've got to invest wisely, thoughtfully, get ourselves on the path that we are going to be on by focusing on Azarella and getting exposure approved. When we have sufficient capital, our ability to then invest in other assets like that will take a higher priority than it does today.

Fantastic, Elwell. Thank you for taking my questions, and congrats on an excellent Q4. Thanks, CJ.

Our next question comes from Matt Kaplan from Leidenberg Thalmann. Please go ahead with your question.

Oh, hi. This is Raymond in for Matt. Thanks for taking our questions, and congrats on the quarter. I was just wondering, as the launch has progressed, I was wondering if you had better visibility on your expectations for 2023?

Yeah, so we are, we're not going to be sharing patient numbers, certainly, and it's too early for us to be giving any guidance in terms of what we expect for script growth or total prescriptions in 23. But, you know, Susan, anything you can add to that?

Yeah, no, I mean, we are clearly seeing strong growth momentum quarter over quarter. We need a little more time to really understand ourselves based on the prescription data, the direction for 2023, and at that time, you know, we'll be ready to give some guidance.

Okay. Yeah. Fair enough. Um, I guess, uh, I was wondering, um, have you been thinking about, you've done several ex us deals for Israel. I was wondering what you thought about Europe potentially.

Yeah, no, certainly. I think as you heard in the opening remarks, those open territories are things that we're working on now as a way of getting non equity sources of capital. Um, so those efforts will continue both for Israel. Uh, and for exposed viral phosphatemia. As you see, we've done well with our relationship with KKC in Japan. We have Fosun that has the rights both in China, for both Israel and exposed in China. So all the other territories in the world are unpartnered and opportunities.

Okay, cool. And just one last question for me, if I may. Sure. What are the kind of rate limiting steps as you kind of prepare for the commercial preparations for a potential launch in second half 2023? And thanks.

Yeah, so we are already mobilizing our preparations for the launch of EXPOSA. We have a very established commercial infrastructure with everything in place as it relates to marketing, sales operations, patient services, distribution, so all of these aspects are already ramping up to be prepared for the launch of Exposa. We have a senior leadership team, you know, well-steeped in nephrology, well-networked across the country, and are in a high level of preparedness. You know, as we get closer to understanding the actual launch date in the second half of 2023, we will be able to rapidly mobilize to get the feet on the ground to have the dedicated nephrology sales force. So everything is lined up quite nicely, and as we mentioned, In our narrative, you know, the go-to-market approach is something that we are already well schooled in and experienced with and successfully executing for Ixrella, so it's falling in line very nicely to be ready for Ixsoza.

Thanks.

Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2. Our next question comes from Peyton. Onsap from TD Callen, please go ahead with your question.

Hi, this is Peyton Onsarjo. Congrats on the truly productive year, and thanks for taking our questions. I guess just really one real quick one. After the Type A meeting, did you guys engage in labeling discussions, or did you get any additional details or clarity about what an eventual label would look like? And then I guess I've got a second follow-up question on Ibsrella.

Sure, so it's a stepwise approach, right? So we need to refile the NDA. So no labeling discussions until you have an active NDA. But I think as we've shared from our appeal-granted interactions with OND, you know, the strength of our data have demonstrated that for those patients that are failing the current binder therapies, which is a large majority, as we've shared as well, that they're going to be ready to take Exposa and benefit from it if approved. So, no, it's premature to have labeling discussions until you have the NDA filed. And we will share, you will know that once we have the goal date that we will share when we get that information post filing the NDA.

But Peyton, we can confirm that no additional analyses will be required and we have the information we need to complete her submission early in the second quarter.

Awesome. Great. And then I guess kind of just switching over to the Ipsrella launch. I know you said you weren't going to say anything on patient numbers or script data, but I was wondering if any of your market research or if any of your internal script data kind of told you about the proportion of patients that are refilling Ipsrella after initially trying the medication? and how that's kind of growing compared to new prescriptions.

Yeah, I'll ask Susan to comment on it generally. I think you heard in her statement that we're seeing both new and refill growing well. I think if you look at the data, whether it's Symphony or Ikezia, you're going to see both in NRXs and TRXs those data that you can draw some assumptions on your own. Susan, I think you could add.

Yeah, no, exactly. So we're seeing a very nice relationship between new and refill prescriptions. And on top of that, we're seeing a very nice trend in new and repeat writers, which is very consistent with the feedback we're hearing on the ground that physicians, you know, are identifying patients that they believe need Estrella, treating them with Estrella and the treatment experience is going very well, you know, per the satisfaction ratings. that they're reporting into the SPHERICS data. So everything is lining up to really demonstrate that strong growth momentum we're seeing in Scripps. And as Mike alluded to, we're not blocking the Scripps, so that's something that you would have access to, and you can take a look and see this kind of momentum for yourself.

Great. Thank you very much for taking our questions. Thank you.

And ladies and gentlemen, in showing no additional questions, I'd like to turn the floor back over to management for any closing remarks.

Thanks again to the questions and to everyone who joined today's call. On behalf of the Ardellis team, I want to reiterate our optimism about our future potential. Ardellis is a company spanning the discovery and development of important therapeutics, and we're executing on an innovative commercial strategy that is, as I said, unique and replicable. And we are excited about the opportunities that lie ahead. Once again, I want to thank the team for their tireless dedication to helping patients. We look forward to sharing more in the weeks and months ahead. With that, we can close the call. Thank you, Jamie.

And with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.