Ardelyx, Inc. (NASDAQ:ARDX) Q1 2024 Earnings Call Transcript May 2, 2024
Ardelyx, Inc. beats earnings expectations. Reported EPS is $-0.11, expectations were $-0.13. Ardelyx, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the Ardelyx First Quarter 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Caitlin Lowie, Vice President of Corporate Communications and Investor Relations at Ardelyx. Please go ahead.
Caitlin Lowie: Thank you. Good afternoon and welcome to our first quarter 2024 financial results call. During this call, we will refer to the press release issued earlier today which is available on the Investors section of the company’s website at ardelyx.com. During this call, we will be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ materially from those described. We encourage you to review the risk factors in our most recent quarterly report on Form 10-Q that was filed today and can be found on our website at ardelyx.com. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change.
Our President and CEO, Mike Rob, will begin today’s call with opening remarks and an overview of the company’s progress during the first quarter of 2024. Next, Susan Rodriguez, Chief Commercial Officer; will provide an update on the performance of IBSRELA and XPHOZAH. Justin Renz, Chief Financial and Operations Officer, will conclude today’s prepared remarks with a review of the company’s financial performance during the first quarter ended March 31, 2024, before we open the call to questions. With that, let me pass the call over to Mike.
Mike Raab: Good afternoon, everyone and thank you for joining us on this call. Q1 earnings always seem to come quickly after we report our Q4 results. And yet, as usual, a lot has happened since we last provided you an update. First, XPHOZAH performance out of the gate following the launch in November continues at a remarkable pace. This is a first-in-class product in a therapeutic area that has seen no innovation in decades. The response from the prescribing community clearly demonstrates the significant unmet need among this patient population. XPHOZAH is an important new option for physicians to help patients whose serum phosphors remains elevated despite best efforts. All demand indicators are favorable. Prescribers are eager to learn more about XPHOZAH’s blocking mechanism and are working to identify potential candidates for therapy.
Like IBSRELA, Ardelyx assist in supporting prior authorizations and helping patients take advantage of our affordability programs. Patients are accessing the drug and the feedback is that patients are seeing sustained reductions in their serum phosphorus [ph]. We are focused on ensuring prescribers are aware and educated on XPHOZAH and ensuring patients have access to treatment. As you can see by our performance, it’s going very well. IBSRELA continues to perform strongly, providing an important option to again address a large unmet need among IBS-C patients. We believe that this can be a $1 billion product and on the path to achieving that piece we expect full year net sales revenue for 2024 to be between $140 million and $150 million. As I consider the first quarter performance, the underlying demand metrics and fundamentals of the business are robust and continue to demonstrate growth in new and repeat riders and new and refill prescriptions.
Our reported revenue reflects demand growth, offset by the impact of seasonality which is standard across the industry that we experienced during this first quarter. Importantly, our cash position remains strong, resulting from our revenue, the third tranche of debt from our partnership with SLR and thoughtful management of our expenses. We are at an exciting time in our evolution as a company and our top priority is to build upon the growth momentum of IBSRELA and XPHOZAH. Now, I will turn the call over to Susan to discuss first quarter performance for both of our products. Susan?
Susan Rodriguez: Thank you, Mike. It is great to be here today to discuss the commercial performance for IBSRELA and XPHOZAH. Our performance reflects strong execution of our disruptive commercial approach for both first-in-class products which centers on targeting the high-volume writers in our disease areas, driving identification of patients in need of a novel treatment option as their response to existing treatment options is deemed to be inadequate. And enabling patient access and affordability with favorable coverage policies that define the path to access prior authorization support and patient support programs. Let me begin with IBSRELA. Our confidence in this product is driven by the strength of the fundamentals driving IBSRELA’s performance.
HCPs are evolving their treatment practice now that they have expanded treatment options for their IBS-C patients following the launch of IBSRELA. Based on the favorable clinical response they are seeing and confidence in the path to access, HCPs are increasingly identifying patients in need of a novel treatment option. During the first quarter, we saw increases across all key demand parameters for the product, including growth in new writers and repeat writers as well as growth in new prescriptions and refill prescriptions. We are very encouraged by the continued growth of these key demand metrics despite IBSRELA being impacted by first quarter seasonality that is commonly seen across the industry linked to insurance plan resets and prior authorization renewal processes.
During the first quarter, we began the process to expand the IBSRELA dedicated sales force footprint from 64 territories to 124 territories. We experienced a strong response to the job posting, attracting sales talent with extensive GI experience who are motivated and enthusiastic to join the IBSRELA sales team and be part of disrupting the IBS-C market with an innovative therapy. Hiring, training and full deployment of this team is on track to be completed by the end of the second quarter. This sales force footprint puts us in a strong position to capitalize on the promotion sensitivity we have seen across our high-riding HCP targets to further drive increases in new writers as well as drive expanded use across our growing writer base who are continuously broadening their view of patients who are candidates for IBSRELA.
The fundamental drivers behind IBSRELA are strong and we anticipate continued quarter-over-quarter growth with our expectations for the 2024 performance consistent with our stated guidance. Turning to XPHOZAH. We are extremely pleased with the nephrology community’s response to this first-in-class phosphate absorption inhibitor. It is clear that patients have been in need of a new option to manage their phosphorus when binders were insufficient or not well tolerated. Our dedicated nephrology sales team, comprehensive blocking messaging campaign, speaker and promotional programs and omnichannel initiatives are driving high interest and early uptake of XPHOZAH. Nephrologists are responding favorably to the novel blocking mechanism and clinical data profile are pleased with their early clinical experience, encouraged by the defined coverage policies and increasingly integrating this novel blocking mechanism product into the therapeutic regimen for their patients.
The feedback we regularly receive from the field is that physicians are seeing that their XPHOZAH treated patients, many of whom have been continuously outside of target ranges, are reflecting consistent improvement in serum phosphorus levels and that these levels are being maintained. We are also hearing that patients are responding favorably to the dosing profile and that HCPs are pleased with the flexibility they have in adapting the patient’s treatment regimen. Where they can add XPHOZAH to the patient’s existing binder regimen or they can add XPHOZAH and reduce the patient’s binder regimen or they can add XPHOZAH and fully discontinue the patients binder regimen. HCPs are adopting XPHOZAH and are adapting regimens based on the needs of the patients.
We are very pleased with the $15.2 million in sales we reported for XPHOZAH during the first quarter. This performance is consistent with the uptick indicators we are seeing in the field. Our sales force is experiencing highly engaged meaningful discussions with our target HCPs who are eager to learn about XPHOZAH. Nephrology HCPs are rapidly identifying patients who they believe can benefit from therapy, reporting to us that they may have many patients outside of target ranges despite treatment with binders or are intolerant of binders therapy. HCPs are pleased with the clinical response they are seeing and patients are responding favorably to the treatment experience. Coverage policies are being defined that outline a path to access by our prior authorization attesting to the fact that the patient has been treated with binders and inadequately responding or unable to tolerate the therapy.
HCPs are seeing that when prior authorizations are submitted for patients meeting the criteria, patients are gaining access to XPHOZAH. Nephrology HCPs and their office staff are responding favorably to our specialty pharmacy distribution network as well as to our comprehensive patient services offering, Ardelyx Assist that further enable patient access through prior authorization support and patient engagement with the affordability programs available to them. Our own internal metrics are supported by external research conducted by Spherix [ph], who is tracking the launch of XPHOZAH. According to the April 2024 launch dynamics report nearly all of the 77 surveyed nephrologists, 98% rate XPHOZAH as an advance over currently available hyperphosphatemia therapy.
In addition, 56% of the surveyed nephrologists reported using XPHOZAH and of those, again, 98% report satisfaction with treatment. The research demonstrates that awareness is high among the nephrology community interest and intent to adopt is high and satisfaction with the treatment is high among users. We will continue to build upon our launch momentum, capitalizing on the high nephrology awareness of the number of patients that are in need of a new treatment option despite treatment with binders and their intent to adopt XPHOZAH for these patients. Our go-to-market strategy is working. We have established a strong presence in nephrology offices across the country and HCPs are responding favorably to the novel blocking mechanism and clinical data profile.
They are identifying patients that could benefit from XPHOZAH therapy and with coverage policies in place, patients are gaining access and responding favorably to treatment. We are pleased with the performance thus far and our focus on continuing this growth momentum. We have several exciting months ahead as we will have strong commercial and clinical presence across key annual medical conferences for both IBSRELA and XPHOZAH, where we’ll have the opportunity to present more clinical trial data on our products, connect with the prescribing community and deepen our relationship with patients. I look forward to continuing to share updates with you in the future. With that, I will hand it to Justin.
Justin Renz: Thank you, Susan. I’m very pleased to be with you today to discuss the first quarter performance we reported which included meaningful progress towards our IBSRELA net sales revenue guidance, a strong launch of XPHOZAH, careful management of our finances and a strong cash position. Let’s start with revenue. As you saw in this afternoon’s release, we reported significant year-over-year growth, bringing our total first quarter product-related revenue to $45.6 million compared to $11.4 million in the first quarter of 2023. Net product sales revenue for IBSRELA was $28.4 million during the first quarter of 2024, more than doubling the $11.4 million in revenue we reported during the same period in 2023 and a 1% quarter-over-quarter growth compared to the fourth quarter of last year.
Volume demand grew for IBSRELA during the first quarter which was offset by deductions associated with the reset of annual prescription drug plans. Most notably, this was related to our commercial co-pay program. The impact of the commercial co-pay program is most significant in the first quarter when most commercial health care plans reset and patients have higher out-of-pocket requirements. As patients fill prescriptions throughout the year and begin meeting their deductible requirements, our expenses related to the commercial co-pay program declined. Our gross to net deduction for IBSRELA during the first quarter was in line with our expectations at 33.5% and comparable to the 33.7% we saw in the first quarter of 2023. We expect this percentage to improve as the year progresses as it did last year.
In addition, we saw the anticipated impact of the prior authorization renewal process that occurs at the start of the calendar year for many health care plans. The strong demand and expected improvement in gross to net deductions reinforce our confidence in the ongoing performance of IBSRELA. As such, we continue to expect that full year U.S. IBSRELA net product sales revenue will be between $140 million and $150 million. XPHOZAH had an exceptional first full quarter performance as we are reporting $15.2 million in net sales revenue, driven by the meaningful demand for this product. Our gross to net deduction came in favorably for XPHOZAH at 23.8%. As we progress into the launch of XPHOZAH and learn more about the patient mix that drives the associated gross to net deduction, we will share more.
In addition, we had $2.5 million in combined licensing and product supply revenue. We are very pleased with our top line results during the quarter which demonstrated the growth momentum Mike and Susan both spoke to. At the same time, we continue to be thoughtful on how we manage our expenses. Research and development expenses were $10.6 million compared to $9.1 million during the first quarter of 2023. Selling, general and administrative expenses were $53 million for the first quarter compared to $26.8 million for the same period of 2023. The increase was related to launch activities for XPHOZAH as well as continued investments to grow IBSRELA which we made throughout last year. Importantly, our costs were comparable to our spending in the fourth quarter of 2023.
We expect to complete the current expansion of the IBSRELA sales force that Susan previously mentioned by the end of the second quarter. Substantial top line growth, combined with thoughtful cost management, resulted in a net loss of approximately $26.5 million or $0.11 per share in the first quarter of 2024, compared to a net loss of $26.8 million or $0.13 per share in the same period of 2023. The net loss for the first quarter of 2024 included $9.3 million in combined noncash expenses from share-based compensation and noncash interest expense related to the sale of future royalties. As of March 31, 2024, we had total cash, cash equivalents and short-term investments of $202.6 million as compared to $184.3 million at the end of 2023. This includes $49.8 million in net proceeds that we drew in March from our term loan agreement with SLR Capital.
We are very pleased with our performance during the first quarter, driving top line growth across all reported revenue lines, planning for success, investing in our supply chain managing our operating expenses and strengthening our cash position. We will continue to be thoughtful with how we deploy capital while focusing on maximizing shareholder value. And with that, I’ll turn it back to Mike.
Mike Raab: Thanks, Justin. I hope that what you took away from our performance during the first quarter is at one, we continue to have high expectations for IBSRELA, including $140 million to $150 million in net sales revenue this year and on the path to at least 10% market share and $1 billion in annual revenue. Two, XPHOZAH launch progress is exceptional and it is already beginning to disrupt the hyperphosphatemia market where there remains significant unmet needs among patients. And finally, we’re in a strong cash position to invest in growth. We have a lot of important work ahead of us and we have the team in place who is able to deliver. I look forward to sharing our progress with you over the coming quarters. And I will now open the call to questions. Operator?
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