Morning. Welcome to the Jefferies Healthcare Conference, day one. My name is Dennis Ding, Biotech Analyst at Jefferies. I have the pleasure of having Ardelyx and CEO Mike Raab here with us. Welcome, Mike. Maybe, you know, to kick things off, just give a little bit of background in terms of the company. You know, it has certainly been a roller coaster over the last few years. Just help level set us in terms of where the company was maybe last year or two years ago, and some of the progress that you guys have made, and where the company is right now.
Sure. Good morning, and thank you, Dennis, for having us here. Over the last three years, roller coaster for sure, probably going back to 2021 is the best place to start versus 18 years ago when we founded the company, was when we had taken XPHOZAH through the approval process with the FDA. We ultimately got a CRL that we fought, won subsequently two years later, but at that point made the decision to launch IBSRELA, which had previously been approved. We saw that there was an incredible need for patients with IBS-C who were not being well treated on the GC-C agonists that needed another choice, which was what we had with IBSRELA. Fast forward, we accomplished what we needed to in winning with the FDA on an FDR and an AdCom and launched XPHOZAH.
We now have two commercial products on the market, one for IBS-C, IBSRELA, and the other for dialysis patients who have hyperphosphatemia who need either an add-on to the binders or, if they're intolerant to the binders, they have the opportunity for XPHOZAH. Last year was our first full year of XPHOZAH sales. As we all know, then towards the end of the year began to move, the binders were being moved into the bundled payment system, which is the case for binders today. We made the decision not to participate in that because we felt that it was more important that, at a minimum, those patients that are non-Medicare would continue to have unfettered access to XPHOZAH to manage their hyperphosphatemia. We're going through the chaos that comes from that, as I'm sure we'll talk a little bit about, Dennis.
We also then see IBSRELA continuing to grow at a dramatic rate and reaffirming our guidance for what we've provided for this year of $240-$250 million for IBSRELA. I think we're set up very well to be past the chaos as we begin to just execute and work hard in getting our products to the patients who deserve them.
Great. And, you know, if we can focus a little bit on IBSRELA first and, you know, surely talk about XPHOZAH. But how do you think about, or like, you know, I guess, what are the pushes and pulls on the $240-$250 million guidance this year? And maybe remind us, you know, around Q1 and some of the dynamics there.
Sure. Let me start with the last part of your question. What you see in Q1 historically in the IBS-C market is a contraction of that business for lots of different reasons, but primarily because we all know insurance policies reset January 1st of every year. As people go through their deductibles and out-of-pocket expenses, that tends to hit patients hardest in the first quarter. That shows the contraction that has happened historically in IBS-C. Even with that, the IBS-C market has grown double digits for the last three to four years and continues to do so now going forward. We experienced that contraction for the first time just given the volume and the size of the business that we had in Q1.
That was then exacerbated by another phenomenon that we are all familiar with, which is in the fourth quarter, distributors tend to buy up in anticipation of price increases. As that market contracts in the first quarter, you see a buy down of that inventory. That push and pull is what we experienced in the first quarter of this year. I think it is something we all together can be far more aware of for the IBSRELA business going forward, and it will be something we all factor into the way that we think about those revenue streams on a quarter-to-quarter basis.
In terms of the other pulls for IBS-C, as I said, you know, it continues to grow at a dramatic rate where you see, you know, 50,000 new patients going on therapy for the GC-C agonists every month versus what we need is a small fraction of that to get to what our projections that we have provided publicly of $1 billion at peak is a far smaller number than that. The business is there for us. The team that we have in place is executing extraordinarily well and driving the demand with conviction and ultimately getting these prescriptions filled through Ardelyx A ssist.
Right. And, you know, if I can put a finer point on Q1, IBSRELA revenue did come under consensus, and you're saying the majority of it, or, you know, a big part of it may have been due to inventory dynamics that happened in Q1.
I think that's fair.
As you think about Q2, and, you know, we are already in June, right? Two out of the three months have already been behind us. How, like, how has demand looked in Q2, and how do you think about that trajectory moving forward?
I think if you look at the demand in Q2, what I just reaffirmed is the $240-$250 million for what we provided as guidance for the year. That's something that we're confident that we're going to hit. Pretty straightforward, if you look at what that shortfall was in consensus, add that back in, you can see what the trajectory would be to get to those numbers.
Okay. On the ground, you know, when you talk with physicians, like, what has the feedback been like around IBSRELA?
Excellent. I mean, if you look at the patients who have had a hard time getting benefits from the current products that are out there, the GC-C agonists, when they take IBSRELA and have the benefit both for constipation, for pain, for bloating, and the other symptomatologies that you get for IBS-C, it's a spectacular product for those patients, and they see it. Once they have an experience with one or two patients, our ability to then drive many more patients that come within that practice is occurring with the success that they see.
Okay. What is the feedback on IBSRELA relative to some of the other standard of care in the space, and like, how is it positioned, and how does it, you know, differ?
It is important to note, Dennis, that our clinical work was a first-line therapy drug, right? We made the choice, just given the dynamics of insurance, that we would embrace the idea that we are going to be second or third line, which is predominantly how the product is utilized. We do see a significant number of patients coming in on first line. It is not, it is being used first-line therapy, although we tend to position it such that it is after GC-C agonists because that is the vast number of patients that are out there right now. What they are seeing is that we are providing relief and benefit to those patients that were not getting it with a GC-C agonist. They are getting it with IBSRELA and a new mechanism, a different mechanism, the GC-C agonists.
Has that first-line dynamic been growing recently, or has that always been there since the launch?
It's always been there, but, you know, it's not something that we promote that way. But it's something that is just interesting to watch as physicians and clinicians, healthcare practitioners begin to gain experience with their second and third-line patients. Maybe they're saying, "Gosh, I shouldn't wait and try IBSRELA first line.
Okay. You guys did provide some long-term guidance on IBSRELA of a billion dollars. Can you just walk us through the math in terms of?
Sure. You know, interestingly, Dennis, if you look at the billion dollars that we have set at peak, you know, we said that at launch three years ago, and the market has continued to grow significantly, 10% year-over-year at least. That 10% is now lesser than that, right, to get to the billion. As you look at most of the models that are out there, they tend to take it out until loss of exclusivity, which is in 2033, which means that you'd have to suppress the growth rate that we're seeing over these last three years for IBSRELA. If you look at where we are right now at $250 million, $240-$250 million is our guidance. It's going to, you assume then it's nine years to get to the billion.
You know, I would challenge people to think that there's an opportunity for that to be sooner than nine years, which is why when we say a billion dollars or more, we're very excited about what IBSRELA can ultimately do for patients and the size of the market that we can create.
You know, over the next several years, you know, because, you know, when we talk with investors, I think people are generally very bullish around the IBSRELA business. Given the $1 billion guidance is still many years away, like, what can we do, or like, what can you do to help communicate that better so that, you know, investors understand that more, you know, at least, you know, in terms of the trajectory over the next five years, you know, because I think most people do assume that it goes off, that the $1 billion is at like 2033 or 2034. What can you do to prove or to show that it could actually happen earlier, like 2030 or 2029?
I think if, you know, we hit our numbers this year, that's certainly a big part of it. I think, you know, we started this conversation about consensus and what happened in Q1. You know, consensus is pretty much all over the map in terms of peak, whether or not it's a billion dollars. I think that's the first step is making sure that the sell side understands that when we hit the numbers that we're going to hit this year, that the horizon for a billion dollars is there. The conversations need to be at what rate is that growth, given the history of three years of growth that we'll see, and certainly what we'll see quarter to quarter this year. It should become self-evident that those numbers are likely to be sooner and potentially greater.
Okay. Would you ever consider, and the $1 billion peak, is that just for IBS-C?
That's correct.
Would you ever explore other indications like adjacencies, like CIC and things like that?
Oh, I think that's something we have to do, right? I mean, if you look at the treating physicians, they're seeing both, right? And for the current products, the GC-C agonists, they don't distinguish what it needs to be because it has both indications. So it's incumbent on us now that we have the capital to invest in that to consider that.
At what point? Is it kind of relatively near term in 2025 that you guys would consider starting like a new trial in CIC and some of those adjacencies?
It is certainly something that we are considering. You know, when that decision is made, we certainly will announce that.
What's kind of the gating factor to not, you know, to like have a go/ no -go decision on that? Is it just cash? Is it getting to profitability?
It is and looking at the right trial design, how we do that, and, you know, getting to cash flow break-even, obviously, is an objective that we all have. I think a bit of all of those things, Dennis.
Okay. Can you help frame at least for CIC, just the relative sizing of the market to IBS-C?
If you look at the epidemiology, it's, you know, 30-plus million people have chronic idiopathic constipation or functional constipation, as it's also referred to as, where IBS-C is 10-11 million depending upon it. It's a sizable market, but it is also treated well for a lot of patients with over-the-counter laxatives and things like that. How you actually size that market for a prescription product is something that we're also trying to understand.
Okay. Okay. Why don't we shift over to XPHOZAH? Tell us a little bit about Q1, the $25 million, and, you know, just what you have seen on the ground and like what contributed to that number, as well as just some of the underlying demand trends that you guys are seeing.
You know, if we think about what happened last year in 2024, a remarkable launch, and XPHOZAH has done some remarkable things for patients who need hyperphosphatemia management. I'm proud of the team and what we accomplished then. You know, when we made the decision to not participate in the TDAPA process, one of the fundamental reasons for that was to ensure that those non-Medicare patients would be able to have unfettered access to a drug that can probably change their lives versus participating in that and being bundled literally and figuratively within a perspective that would likely prevent some of that opportunity. It was a tough decision. I think it's not a completely well-understood decision. For us, our patients and paying attention to them and serving them is our North Star. We believe that this decision represents that.
What happened there is you lose 60% of your TAM. That's 330,000 patients, the 550, are now Medicare patients, and XPHOZAH is not available to them because binders moved into the bundle and Medicare Part B as in boy. What we have encouraged nephrologists and healthcare practitioners is to continue doing what they've been doing in the past, meaning sending their prescription to our hub and that we can adjudicate whether it's a Medicare, Medicaid, commercial, Tricare, VA, and then either for a Medicare patient, if they qualify, would get free drug, non-revenue product. If you qualify, you then go through the normal processes of getting coverage approved through your insurance. The turmoil of binders going into a bundled payment system has been dramatic in that dialysis organizations now basically need to become pharmacies, some of them.
Some of them do not have the infrastructure or the staff to do so. Patients are being put on TUMS, which is something that is terrible for the patient. You know, there is all sorts of other chaos that has occurred in the dialysis business that has made thinking about XPHOZAH sort of third, fourth in line of other things that they are struggling with. That said, you look at the number of prescriptions that were written for XPHOZAH in the first three months of this year, because this is frankly, in my opinion, a relaunch of the drug, a totally different environment than what we did in 2024. We have demonstrated with the prescriptions that have been written, there are more written in these three months than there were in the first three months of 2024.
From a launch perspective, if you want to think of it that way, we're doing extremely well in terms of where XPHOZAH is. Is it flat? Is it growing at the rate we want? Of course not, because that turmoil, that chaos has really been a problem for the treating healthcare practitioners and most importantly for the patients. We are seeing the pull-through happening. The field force out there is focused on those physicians who have written successfully in 2025, because the number of patients that they have allows you to go deep in those patients in order to get them pulled through. That's a big part of our focus in the near term. Depth, absolutely, first and foremost, and beginning to expand into breadth. I'm confident that we're going to end up in the place that we need to.
Remember, what we guided everyone to is $750 million of peak sales for XPHOZAH. What does that look like, right? How, in fact, do I believe that to be possible? If you look at our WAC and modest price increases over time, you assume five prescriptions per year, which is what you see for binders. Maybe we can do better with a small molecule, tiny pill. That is about $12,500 per annum per patient. You divide that $750 million by $12,500, 60,000 patients. That is it. Of 220,000 patients, you need to penetrate 30% of those. Knowing what we did in 2024, the benefit that we provided those patients, it is hard to imagine that we cannot accomplish what I just described.
Okay. And, you know, your strategy is very interesting because you are prioritizing access, right? Not necessarily reimbursement, because you do not want doctors to decide whether or not to prescribe XPHOZAH if they have Medicare Part D or not Part D, right? You want to.
Many physicians with whom we spoke to when we made this decision do not discern whether that patient is Medicaid, Medicare, commercial, VA. We want them to be agnostic and make the decision for the patient. That is the right medical decision for the patient.
Yeah. Yeah. You also don't want to make it more difficult or like put additional barriers for the doctors to prescribe XPHOZAH. You want to make it as easy as, you know, as it can be. You know, back to your comments around the disruption happening in the DOs, can you talk a little bit more about that in terms of like how they are navigating some of these challenges? Because you said they now have to kind of operate as pharmacies. Like what kind of strategies have they done to navigate some of this disruption?
You think about what they need to do. You put with binders, they all have protocols. You pull it up and, you know, patient Mike versus patient Dennis is going to get binder A, B, or C. That is going to be their preferred binder in their protocols. XPHOZAH, for some of them, say, available through the manufacturer, right? There is a process that they go through in terms of putting their patients on whichever binders that they have chosen to utilize. That is an internal decision on which one they choose.
Remember what happens during the TDAPA period with binders, and it was not going to be the case with XPHOZAH, is this is a period where there's ultimately the end of this two-year period, CMS will make a determination as to how much money is spent for this, and they will increase the base rate for that after the two-year period. Had XPHOZAH been in the TDAPA period, we were not part of that calculus. People forget that, is that we were not going to be part of the calculus for increasing that base rate, which is a driver for DOs, right? Because that's their bread and butter in terms of what pays for the system that they're engaged in in terms of treating patients who need dialysis. We were always treated as other in that whole process that CMS had put in place.
Also part of the motivation for me to not participate in it, frankly. As they go through this process, they put their patients on a given binder. For some of the DOs, certainly not the bigger ones, but the smaller independent ones who do not have the resources necessarily to put in the infrastructure, it is mail order pharmacy, building those relationships, all of those things, and whether or not the patient's got them, because it is a new system. There is an awful lot of shaking out of what needs to happen to get a patient to get their binder in the process. It has not gone perfectly well, as you would expect.
The patients, as a result, for this first quarter plus, many of whom have not had the binders that they need or are getting binders that they should not have according to guidelines that are all calcium-based, has been one of the bigger challenges. On top of that, for those physicians who have had great experiences with XPHOZAH, they then have to depend on us, which to your point that you made earlier, we want them to be agnostic. They then send to us their patients irrespective of coverage so that we can get them XPHOZAH as they need.
In terms of demand in Q1 and Q2, what have you seen so far, at least, you know, in Q2? Are things kind of improving, you know, on the non-Medicare portion of the business?
A couple of things to think about, Dennis, with that is if you recall in Q1, there were some transitional scripts that happened really mostly in January for Medicare. Some Medicare patients got a transitional script in January. That is not going to happen again, right? Those go away. It is a one-off. If you get rid of those, you actually see growth of that base business of non-Medicare. That is the way I look at it. Is it growing at the rate that we want or expect? Not yet. We are seeing modest growth and certainly potentially we are at the nadir, but you still see choppiness as you look at with your script data, you see that coming out. We still see choppiness. We are on average, we are flat to modestly growing. I believe we will see that going forward.
Can you clarify on what those transitional scripts were? Do you mean like those were written in early January, but for some reason, like the.
Yeah, there was a number of, don't have exact numbers. Some of the payers provided Medicare Part D patients a transitional script at the start of the year. That is a one-off that says, "Mike, you're a Medicare D patient. We're going to give you one prescription on UnitedHealthcare." If UnitedHealthcare did it, "Mike, you get one prescription to transition into the bundle, and then you're never going to get another one." There were a certain number of patients that it was the biggest number of that was in January, and it diminished throughout the quarter.
Okay. Is there a way that you can kind of quantify the revenue impact from those transitional scripts from Q1?
Not off the top of my head. I, you know, if you look at the total revenue that we had in Q1, you know, there was the return release that we had. These transitional scripts are going to be numbers of millions of dollars, not tens of across the months.
Okay. Off of the $20 million in net revenue, a portion of that would be the transitional scripts. When you report Q2 and in your comments around growth quarter over quarter, we should not be using $20 million as the base. We should use, like, I am not sure, like $12 million, $15 million, $18 million somewhere.
Somewhere like that.
Right. Okay. Okay. And then, you know, in terms of recovery, you know, I know it's kind of difficult to see into the future, but when do you expect things to kind of recover? And like, when do you think that is a function of just Salesforce and like education, you know, around Ardelyx Assist and et cetera?
I think it's all of it. You know, I challenge you to think of it as a launch, not recovery, because it is a completely different market. What does it take to launch a drug effectively into a very tumultuous, chaotic market? It's the Salesforce repetition. You try it, Ardelyx Assist, and it works. You get conviction that, in fact, Ardelyx is actually delivering what we said we would. That just grows over time, right? It's the persistence, it's the stubbornness, if you will, and the resilience of our field force, right? I mean, you think about our field force that they were having this remarkable growth in Q4. They got their legs taken out from under them with losing that 60%. Motivating them and making sure that they're focused, that it is okay that we have a relaunch, if you will.
Keeping them motivated, focused, knowing the right thing to do for patients is to continue the efforts to educate all healthcare practitioners, whether it's the dieticians, the social workers, the physician, all the APPs are critical to make sure patients get what they need.
Okay. And, you know, if we can move on to our next topic, which I think people do not really talk about at all, which is really surprising, is the appeal with CMS around the XPHOZAH and the classification of it as a renal dialysis service. So can you give a little bit of background as to, you know, what is going on there? And, you know, maybe when should we expect a decision on that?
If you think back to when we first filed the suit, we believe that CMS had overstepped its remit in defining binders, phosphorus-lowering therapies as a renal dialysis service. Renal dialysis service are the things that you as a physician provide me when I'm sitting in the chair getting dialyzed. That's the original definition of it. It makes sense because that's Medicare Part B as in boy. Part B is you as a physician get paid for the services you're providing me when I'm there with you, right? To expand the definition to include binders, which you're not allowed to eat when you're sitting in a dialysis chair, and you're supposed to take a binder when you eat.
Our package insert explicitly says, "Do not give it before a dialysis session." Because if you're going to have a side effect, which some patients do, you don't want to have to take them off the dialysis machine. It is not a dialysis service. As you know, Dennis, we've gone through the process in the court system, and we're in front of the circuit now. They are about to go into recess, so there is not going to be anything in the near term. Because it is the same judges, they are dealing with an awful lot of the administration issues that are going on, immigration, and others. They have focused on those things at the court level. We expect in the fall that we would have our hearing. What the outcome of that is, I am probably not a crystal ball to look at what that would be.
I know what I would like it to be.
Yeah. Yeah. To frame that kind of situation for investors, because I'm not sure, like, I don't think that many people are aware, is we're talking about a restoration of Part D.
That's correct.
For Exposa.
What I, the way I've characterized it, you're absolutely right. It gets us back to where we were in 2024, which is the objective, is unfettered access for everyone is what we currently have. We did not change that. There's 60% of the patients that would then be back on D and getting, we would get reimbursed for it. That's the difference. However, what I have said also is that's a free call option, right? We spent an awful lot of discussions in 2024 about both the legislative and the legal paths that we were taking. It can at times take the oxygen out of the room. What I want people to think about is focus on the 220,000, which is our total available market, our TAM, of which, as I said, 60,000 patients gets us to the $750 million.
Free call option is what it is. If we succeed with this legal effort, then 60% of the, it increases by 60%.
Yeah. Yeah. If the appeals were, did go in your favor, the implementation of that would start January 1st, 2027, assuming it does not come out in the fall.
That's what I would presume.
It's not like immediately like the day of or something like that, right?
I guess in my mind, I think of it, it would be like a new launch of a drug again, because the PPS would be out already. Remember the PPS, prospective payment system, begins mid this year to be implemented next year. It would not be immortalized in the prospective payment system, but it would be basically like launching a new drug, I would say.
Okay. With the appeals decision, is that for XPHOZAH specifically or, broadly speaking, the phosphate-lowering drugs including?
I think that's going to be up to the judges to determine.
Okay. Okay. Very helpful. In the last minute or two, maybe talk about BD, you know, because you guys have been communicating more, messaging more around doing more BD, doing clinical trials and things like that. Do you have any updates there?
Yeah. As we've talked, Dennis is, you know, my, our collective objective is to build a sustainable enterprise. We have two remarkable products with XPHOZAH and IBSRELA. We have brought on a team led by Mike Kelleher to begin looking at how we build this company beyond. You know, they kiss a lot of frogs. They look at an awful lot of opportunities that are both GI and renal and then associated spaces to make sure that we scour everywhere to find the products that we want. We will be looking across all stages of development. Our objective is to find multiple products that we can bring in to our commercialization efforts.
With this, and I guess in terms of your priority, would it be a commercial asset or are you willing to take clinical trial risk?
Generally, I think commercial assets are priced fairly in the market. So unless you truly see something that no one else sees, you're just going to pay the price that the market sees. And I don't think you would give me much credit for that. So, you know, we need to be judicious in commercial opportunities and as well with non-commercial to make sure that we're paying the right price. But commercial ones have a little bit of a different hurdle in my mind because of those dynamics.
Okay. Very good. I think that's all the time that we have, Mike, but thank you so much for.
Dennis, thank you very much.
Yeah.
Jefferies as well.
Thank you.