Hi, good morning, and welcome to the 2024 Jefferies Healthcare Conference in New York. My name is Dennis Ding, biotech analyst here at Jefferies, and I have the great pleasure of hosting a fireside with Ardelyx. We have CEO Mike Raab and CFO Justin Renz here with us to discuss, you know, some of the great progress that you guys have made over the last 12 months and the path forward. So, you know, why don't we kinda start there? Just talk about, you know, what you guys have done and your plans for this year.
Yes, so I think as what you saw in our first quarter results is both continued great performance on the part of IBSRELA. What we've done there, showing that this drug works for these patients with IBS-C, and the response that we've seen out there has been nothing short of spectacular. I think in January of this year, as you recall, we leaned in more and said that we think that this is easily a billion-dollar opportunity at peak. Based upon what we're seeing, that's at a 10% market share.
So extraordinarily excited about what we're seeing in the field and the responsiveness on the part of the physicians, which is why we expanded the sales organization from, at the end of last year, which was, 64 people, to what will be about 124, by the end of this quarter or early next. And we're excited about what that means for us. With XPHOZAH, I think is, as Dennis, as you saw, and your notes commented a number of times, is the performance that we're seeing out of there is, you know, what one would hope for in terms of the difference that we're making for patients.
There are patients who today have a serum phosphorus level that is closer to whether it's the goal of 5.5 or even lower, that they've never previously been able to accomplish. So this mechanism is complementary to what we see with the patients on binders, whether than the binders are down titrated or kept the same. You know, that dynamic continues to evolve, as we understand more of what's happening in the field.
Great. If we can kinda start off with IBSRELA, right? And you guys gave your guidance for this year at the beginning of the year, $140 million-$150 million for 2024, which is, you know, very impressive. Talk about, you know, what you saw on, you know, in the first quarter, and given that we're already in June in Q2, you know, talk about how, how you see the trends, you know, going.
Yeah, I think what we all experienced in Q1 was the seasonality that so many of us in this industry experience. I think that was exacerbated by what we all saw with Change Healthcare, that added yet another headwind to what we all experienced in Q1. I think we're through that. Hopefully, that doesn't happen again. I think there's learnings for all of us in the industry around the importance of those single points of failure. And seeing us through that, I think you know, we're confident that we're past it. The seasonality is something that we all see, right?
When you reset your insurance plans at the end of a given year and restart, your out-of-pocket, your copay, your deductible kicks in again, and that's what you saw as well as it relates to the gross amount that, that Justin can certainly comment on. I happened to be in the field a week ago today and only see positive and hear positive responses from the treating physicians, as to the experiences that they're getting in having their patients on IBSRELA. So it is all continuing on the path, Dennis, that, that supports the guidance that we gave, both for this year and the ultimate peak that we expect.
If you can comment a little bit about gross to net in Q1, and kind of your expectations through the rest of the year. I appreciate last year, there was actually a pretty material improvement, sequential improvement from Q1 to Q2 in gross to net, and I'm just curious, is that kind of what you guys are expecting as well?
Yes. So in the fourth quarter of 2023, for IBSRELA, our gross to net was around 26%. And then, as Mike was mentioning, we still had quarter-over-quarter growth from around $28.1 million to $28.4 million for IBSRELA, and that at a 33.5% gross to net reduction, so unfavorable, if you will, of 7.5 percentage points from Q4 to Q1, primarily around, as Mike mentioned, the commercial copay program. So we have a generous commercial assistance program where we will help pay down the commercial customer's copay at the point of sale. And so with these plans that reset, that is the predominant difference between the two quarters.
What we saw in 2023, which gives us confidence we think that will be similar in 2024, is we had a gross to net deduction in Q1 of 2023 of around 33%-34%. As I mentioned, it worked its way down to around high 20s, mid-20s, and as I mentioned, in Q4 was around 26%. We can expect something similar again in 2024 based on our view. It was around 33.5% in Q1, and we hope to see closer to 30% here in the quarter we're living right now, and then hopefully come down a couple points the rest of this year.
Got it. That's very helpful. So, maybe if I can ask a little bit around your commercial expansion. I mean, you mentioned earlier you guys are essentially doubling your sales force for IBSRELA. But at the same time, you also gave the $140 million-$150 million guidance for this year for IBSRELA. So, I'm curious how much of that guidance, you know, factors in the expected doubling of the sales force, or if that could kind of be considered upside here?
No, good question. So, as you can imagine, a company like ours goes through various iterations of a budget, and we're starting to go through that now, frankly, for our preparations for 2025. As we looked at the business in 2023 and seeing the promotion sensitivity, the responsiveness on the part of treating physicians, it made sense to expand, and those plans were in place when our budget was set at the end of 2023. So the guidance that we gave contemplated the expansion.
Okay, got it. And with the incremental around 60 new reps, what are you hoping to achieve with that in terms of the incremental prescriber base or the incremental-
Sure.
addressable patient population?
Yeah, if you look at who we call on, right? There are roughly 5 million prescriptions written for IBS-C. We're calling on half of the physicians that write those scripts, right? So nominally, half of that 5 million, and that's all high-writing GIs and high-writing non-GIs. What this expansion really allows is for us to see more of those, because we certainly have not seen them all, and to allow both, as a result, breadth and more writers. You need new writers. The funnel needs to get filled, but you also need the depth. The depth is critical, to make sure that it's not only onesie, twosie patients in a GI's practice or HCP's practice, but it's actually a larger percentage of the patients that they are treating for IBS-C, who are candidates for IBSRELA.
So you, you guys announced that you guys would hire new reps at the beginning of the year. Have some of those already been hired yet in Q1, specifically? And did we see any benefit, from those sales reps in terms of, the new sales reps, in terms of productivity already?
Yeah, it's been primarily in the latter part of Q2, into Q2 and towards the latter part. We'll be fully staffed on board with a majority of all of them by the end of this quarter or early next.
Okay, got it. Very helpful. And then if we can switch over to XPHOZAH. You know, talk about the progress that you guys made there. I know there was a lot of, you know, this whole two-year saga with the FDA that ultimately culminated in you guys getting approved. You know, talk about your, you know, the launch progress that you guys have seen so far, including, what you guys had in Q1.
Yeah. You know, it's important to reflect on those 2+ years of what we went through with the formal dispute resolution process. The fundamental part, Dennis, of what we're learning is this drug is really good. It really works. And the patients who are coming on board, and, you know, many of them, it's just with XPHOZAH on top of their established binder regimen, are seeing serum phosphorus levels below 5.5, at 5.5 or lower, closer to normal. And these are things that they've never experienced or experienced very infrequently, certainly on dialysis. So it's heartening to really see that not only were we right, but that the battle that we fought was so worthwhile fighting, for what these patients experience.
So that dynamic of, you know, these patients, if you think about it, just the broad statistics, 550,000 people on dialysis in this country. We lose about 20-25% of them in any given year, yet the business or the population continues to grow about 3%-5%. So it's a significant impact on many, many people. And phosphorus is one of the things that they work really, really hard to manage, and it has been nearly impossible for them to do so historically, with only one mechanism, binders. You think about, you know, this little pint of water, you're limited to one or two of these a day of fluid to ingest if you're on dialysis. And taking handfuls of pills, as well as 10-12 other oral medications that you're taking, is brutal.
It's really hard. So having these two small pills a day that enable folks to get to their target range, either within the dialysis center of 5.5 or thereabouts, or below, is remarkable. And it's working. So that is one of the fundamental parts of it, Dennis. You know, there continues to be an awful lot of work that we need to do to even reach the physicians. You know, we're 5-6 months into this. We still have, you know, with 60 people in the field, still many of whom we have to meet with and talk to. And, you know, we've been to the spring clinical meetings at NKF.
We continue to show posters, presentations, papers, as we continue to publish more and more of the work that we've done, and it's resonating well in terms of the impact it's having on patients. So, very pleased with the first quarter. I know there are a number of people that were very, very surprised about it. You know, we aren't in a place yet, as I think you've heard us say before, that we're not gonna be in a position to provide guidance for a while. We want to see how this continues to evolve. But really encouraged by, most importantly, the response on the part of the patients and the physicians' enthusiasm, and obviously pleased with the numbers that we were able to generate.
There are a number of other therapies in the hyperphosphatemia. Can you just comment a little bit on what those are and where XPHOZAH specifically fits in?
Sure. So the whole dialysis program, and I won't go in too long into history, it really started under Richard Nixon, and the only approach that you had to manage serum phosphorus, until XPHOZAH approval, was binders. And binders are basically, think of them as a sponge or a magnet that you take with the food that you ingest in order to absorb the phosphorus in the matrix of, of whatever the binder's made out of, and it's excreted in the feces. That's all these patients have had. Dialysis is very inefficient in eliminating phosphorus from the diet or from the, from the body. Phosphorus independently is predictive due to long-standing, ongoing studies, for an increase in morbidity and mortality as your serum phosphorus rises above five.
All of us in this room, and please make sure this is always the case, our serum phosphorus is 2.5 to 4.5-ish, right? That's normal. Above 5.5 is where most patients are. So those 550,000 patients on dialysis, you got about 80% of those that are hyperphosphatemic and man, and require management for their phosphorus. Of those, and these are statistics from DOPPS and many other sources, say that roughly 70% of those patients in any six-month period of time are out of range, meaning above that 5.5. Not normal, right? I mean, if it was normal, it'd be even a greater percentage of patients that are out of range.
So these patients are in dire need for new mechanisms, like what we've been able to show with XPHOZAH. And not only new mechanisms that may provide a benefit, but one that actually can be taken, right? If you're introducing something that's yet another handful, it's not gonna work in the same manner. But the fact that we have these two little pills, and it's a pharmacologic intervention, is what makes it fundamentally different.
Got it. And, you know, your point around being a different mechanism, is that something that really resonates with doctors?
It is. You know, binders are somewhat a promiscuous, blunt instrument, if you will, and you gotta take a lot of it for it to work, and you gotta take it with the food that you eat. And you think about the social aspects of, you know, Dennis, if you and I were going out for a meal, for me to pull out a handful of pills and take them beforehand, there's some social challenges that it's hard to do that. You don't wanna do that. So people miss, or during snacks, they miss taking their, their binder. What you have here is a drug that's taken, you know, before your two big meals a day. You know, nominally, that's gonna be before breakfast and, and before dinner. And you don't have to take during the day. You don't have to take it during snacks.
You can't take it during dialysis, however. That's explicit in our package insert. And with binders, you can't take it during dialysis because you're not allowed to eat during dialysis, so binders don't work that way. So it has resonated extremely well, also because of the science behind it, of what we've shown, which was critically important to understand phosphorus transport. You know, historically, there's been thoughts around Na+/H+ and other active transporters in the epithelia that are responsible for phosphorus transport.
But through the research that Ardelyx undertook to understand the mechanism of tenapanor, we determined that the paracellular space between the cells is where the majority of phosphorus is transported. That has been resonating extremely well with nephrologists to say, "Gee, this is something that was a bit of a black box historically." Now that we understand more about the primary pathway of phosphorus absorption, it really helps a dialogue and a discussion that's different.
So if we can talk about your, you know, the commercial path forward and how revenue for XPHOZAH will look through 2024. I mean, Q1 was obviously very strong. You guys had $15 million. I think that was much higher than what a lot of people had been expecting. Talk about the different dynamics that went into that $15 million, including gross and net. You know, maybe you guys can comment on that as well. That'd be really helpful.
Sure. You know, when you're first launching a drug, understanding those physicians that are quick to adopt, you always have early adopters. You're gonna have friends and family that are gonna be part of that as well. Friends and family, what I mean by that, not literally, but the people that you have longstanding relationships with or were part of your clinical trials tend to be early adopters. How sticky that is and how that then resonates with others, that's what we're gonna learn altogether. That's why we're not in a position yet that we're confident or comfortable that we'd wanna give guidance. I think we feel good, and certainly, the scripts that everyone can see continue to demonstrate the growth that we need, because what you want is obviously breadth, right? You want more writers. That's critical to fill the funnel.
But really important is depth, and you want people treating more than onesie, twosie patients within their practice, and that's the dynamic you begin to see kinda now, where you've had physicians trying it on their more challenging patients. And when that works, and mostly it does work in those patients, we're seeing then that there's a larger percentage or larger number of patients that then come in as new prescriptions under that same physician.
So the dynamics are setting up really well for what we would anticipate, and I think that's a mix of that kinda drove, since we launched in November. I think that a mix of that is what drove the performance in Q1. I think, you know, we were thrilled to see the gross net, and Justin will address it. That, as he'll describe, has as much to do with patient mix. It's a different patient mix in the dialysis as compared to IBS-C, and that's probably the biggest difference that we saw.
As we mentioned earlier when we discussed IBSRELA, we have a generous commercial co-pay program, and so when we looked to launch, XPHOZAH in the fourth quarter of last year, it did that. Again, we talked a little about seasonality. The fourth quarter, we had a little bit of unknown of what we're going to see in terms of patient mix and the amount of the individual claims that people would submit, because most folks have a calendar year healthcare system. So coming into the first quarter of 2024, we were pleasantly surprised, that the patient mix has a number of folks who are what we'll call dual eligible, where they're both Medicare and Medicaid.
The amount of their co-pay claim was less than it was for IBSRELA, and that meant about a seven percentage point difference on co-pay alone as a discount between IBSRELA and XPHOZAH. So our XPHOZAH gross to net discount in the first quarter was in the neighborhood of 22%, which again, we thought it would be closer to 25%-30%, and so that was very encouraging. I do expect it to tick up a little bit over the course of the year as we learn more about that patient mix. That's why, as Mike alluded to, we're not really in a position yet to give guidance. It's only been six months that we've been selling it, but still very encouraging look so far that we'll be able to, you know, retain most of the proceeds, as opposed to having to make larger claim payments.
Have you seen that mix, so far in Q2, be consistent with Q1?
Yes. So far in Q2, again, we're still in the middle of the quarter, but, so far we do see a 55%-60% Medicare and a 40-45 non-Medicare mix of patients.
Okay, and similar to how IBSRELA gross net is usually worse than Q1, and then it improves through the rest of the year, is that something that we should expect for XPHOZAH as well, generally speaking?
No. So as I just mentioned, I think it might tick a little bit higher because I think the big variable of the commercial copay that we see in IBSRELA, that improves over the course of the calendar year, we already have seen a relatively low amount of claims, if you will, so there's not much room for that to improve.
Okay. Got it, very helpful. And, you know, if we can talk a little bit about H.R. 5074. And maybe that's something that some of the folks in this room or who are listening may not be totally familiar with, but remind us, you know, what that bill is, what's the status quo in terms of reimbursement for these phosphate binders, and what, you know, what is that bill trying to achieve?
Sure. So going back into about 2011 or so, there was an effort that was begun to be in place about putting different products, drugs that are given to patients during dialysis into what's referred to as a bundled payment system. So it is a capitated fixed rate that should cover a bucket of services and drugs that are given during a dialysis session. That's probably the easiest way to think about it. And there have been a couple of classes or products that have gone into the bundle subsequent to the beginning of that process. The process is really there to try to manage utilization of drugs within that system. It's an incredibly expensive amount of money that we spend federally on Medicare. So, you know, it's somewhat understandable trying to control utilization of certain products.
With oral-only drugs, they didn't quite fit the bill in terms of, pun intended, on how and if, as I mentioned earlier, things like oral-only drugs that are not given during a dialysis session would fit within that construct. And there had been this one carve-out called oral-only drugs, cinacalcet was originally part of it, and that's for secondary hyperparathyroidism. Ultimately went in because it had a IV precursor, Parsabiv, in order to do so and facilitate the process. There is right now the expectation that oral-only drugs, which are only binders, and XPHOZAH, would begin a process in early next year, January of next year, of also then subsequently being included into that bundled payment system.
But that has been the issue since the beginning of this process, and there have been three bills historically that have pushed out oral-onlys and excluding them from the bundle three previous times. And Dennis, you referred to the PATIENT Act in this current 118th Congress, which has been through two of the critical parts of getting a bill through the House. If any of us remember Schoolhouse Rock and how a bill becomes a law, you start with the House. You can start with the Senate, too, but usually the House, and you have to go through certain Energy and Commerce and Ways and Means, have joint jurisdiction for Health in the House, and then you go to the Senate. If the bills are different, then there's reconciliation, and theoretically, it then goes to the President for signature.
That's the way a bill becomes a law. But there's a lot of toing and froing that occurs, right? With this Kidney PATIENT Act is what's so critical about this, it's universally accepted. There's no one against it. Patient organizations, providers, many other constituencies that are impacted by kidney disease and dialysis are in favor of the efforts of getting this bill through. And everything that we can do, we're gonna assist with that. The bill made it through Energy and Commerce, very strong vote. In fact, the important staffers that are part of E and C had a tweet showing this bill getting approved through E and C, one Republican, one Democrat, saying, "This is how bipartisanship could work." And that was pretty heartening to see, is that this patient issue ultimately caused bipartisanship on the Hill.
Ways and Means, bipartisan as well, not as strong a vote, but also went through, which was really heartening to see for these patients who suffer so much. It needs a vote on the floor and/or it also needs a bill in the Senate, and, you know, that work is certainly ongoing by Congress. Ultimately, I think what we all need to recognize is that most bills in this country go through reconciliation or a large omnibus at the end of any given year. We're obviously in a presidential election that causes a little bit more complexity as it relates to when, how, and if those things occur.
But those are the sorts of things that we're paying attention to, Dennis, as to what progress is made on the Hill, and then ultimately, what the presidential election or cause, does this cause a continuing resolution at the end of the year? That then says post-inauguration, that's when the omnibus would happen. There's so many other things like that that could occur. But we continue to be enthusiastic supporters and heartened by the bipartisanship that we see for this critically important policy, for dialysis patients.
Right, and I'm assuming you guys have done multiple scenario analyses in terms of what to do in various kind of situations. And you guys have also commented around applying for TDAPA in the second half of the year. Is that kind of still the case, the base case for you guys?
Yeah, and I think we all should expect the PPS, the draft PPS, to come out in the near term. And for us to understand the logistics around what that's gonna say is gonna be critical, right? Because therein will lie at least their view, CMS's view, of how this is propagated through the system. Then we can react, and there's a period of comment before it's actually official, and that's towards the end of the year, before it then gets in place in January.
Got it, and if I could squeeze in one last question. You know, I appreciate that both launches have been doing really well, been very strong. They've been ramping up. But you guys have had some recent changes at the commercial level. Can you talk a little bit about that or, like, kind of put that into context for some of the folks who are listening?
Oh, absolutely. You know, Susan joined us four years ago and was so instrumental in the approach that we take and what we've accomplished, right? That is absolutely critical to recognize those contributions and ultimately helping us get on the path that we're on right now, and much of what we've talked about today. You know, people make decisions and change, careers go other places, and that's not an abnormal thing, Dennis, and I recognize that people would like to read into it a whole lot more. There isn't anything to read into.
These are decisions that are made and people go through all the time. This is an incredibly strong commercial team who has been driving much of, if not all of this, that continues to be incredibly strong. I have confidence in, the board does as well. I, the board, also have massive amount of commercial experience, so I understand the uncertainty. No one likes it, but there, there's nothing substantive there that people should be concerned about.
But you guys feel good that in terms of commercial activities through the rest of the year or even 2025, you guys feel pretty good about that, that-
Oh-
... there's not gonna be any minimal-
Not only feel good-
There's not gonna be any disruptions.
... I feel great about it, and where we are and where we're going.
Very good. All right, well, thank you, guys.