All right. Welcome, everyone, to day two of Cantor's Global Healthcare Conference. My name is Prakhar Agrawal. I'm a biotech analyst at Cantor, and for the next session, we have the pleasure of hosting the Ardelyx team. From Ardelyx, we have Mike Raab, CEO, and Sue, CFO. Thank you for joining us today.
Thank you.
Thank you.
Maybe we can start off with an overview of the key priorities for the company over the next one to two years and take it from there.
Sure. Prakhar, thank you, and thank you for Cantor for inviting us. We are at an important juncture for the company. If you look at our guide for IBSRELA this year and XPHOZAH, it gets us to a place where we are on the cusp of profitability, which we have guided to in 2027. The business has continued to grow, contribute, and provide the benefit that we have always expected out of both of these indications, and excited for what we will accomplish this year as we enter 2027. Sue, anything?
Yeah, the one thing I would like to talk to is, with our company, we have put out our capital allocation priorities because, as Mike said, we are on the verge of profitability, so we want to make sure everybody is clear on where we are going to spend that money. When you think about our currently marketed products, IBSRELA and XPHOZAH, spending money behind them and really trying to ensure that we continue to grow. Also importantly, our pipeline, so both our internal assets that we have announced are preclinical and are phase III, as well as pediatric trials, and then opportunistic M&A. And then finally, just the work we do around the financial discipline, whether it is refinancing and just doing the right uses with all the cash that we have.
Okay.
Okay.
Maybe we can touch on this IBSRELA first.
Sure.
I guess coming out of 2Q, there were a lot of puts and takes. Maybe just at a high level, provide your perspective on what happened.
Sure. Well, the simple answer is we got noticed. I think the success that we've seen with IBSRELA, where we grew 73+% , 2025 over 2024, $274 million that we generated last year, moving into the guidance that we had of roughly 50% growth this year. The attention was being paid by the payers. As we saw dynamics beginning to change a bit in retrospect in Q4, we recognized the hurdles that payers were putting in place for our patients as they went through from the top of the funnel to ultimately getting a prescription fulfilled.
When we changed our guide during the second quarter earnings, it was based upon those frictions that we were seeing and the beginning of conversations that we're having with the payers to do what we can to lessen the burden of what both the patients and the healthcare practitioners have to go through in order to get a prescription filled.
Okay. I guess what specific steps these payers were taking in terms of step edits or prior authorization, and what are you doing right now to mitigate some of these?
Sure.
Yeah, I think it's both. We have seen step edits a lot of times going from LINZESS and having to then go back onto a generic lubiprostone, was one thing that we saw. Then also instead of a prior authorization, more of an easy access to a checkbox, it was, let's see your chart notes, and things like that. We heard that from the physician offices through our reps and everything else. Certainly being able to hear that then gives us the opportunity to act. That's what we're doing right now to help alleviate that as we go forward.
One of the things that we had actually started last year, which is helping with this, is the doubling of our field reimbursement managers. If you think about the journey that patients go through, I go to you as my physician saying with all my complaints, you say I have IBS-C. You prescribe IBSRELA for me, and that's the top of the funnel. Then ultimately the step edits, the pressures on prior authorizations that go through will determine how many actually come through the bottom. So we had doubled the number of people in the field helping with field reimbursement efforts to educate the offices on what it actually takes, and then other support that we have to help facilitate that. A really important one is the attempt to move, and we will over time, the prescriptions to go through our specialty pharmacy network called the IBSRELA Pharmacy Network.
Because what we know with that higher touch, the better understanding of the processes that one has to go through for a prior authorization, that that will result in the greater likelihood of a script getting filled faster. Then for refills, on average, you're going to see one or two additional scripts that come from patients through that IBSRELA Pharmacy Network. So it is a very good thing to do. But changing the habits of the prescribers to take those prescriptions through the IPN is a big part of the work that we're doing now as well.
The only thing I'd add, too, is knowing that the physicians really like the drug, know it works, and it's a great drug. That gives them some of that will to fight some of these barriers that they're seeing and also then trying to ensure that the patient gets on the product.
Okay. Maybe on the IBSRELA Pharmacy Network, and maybe it's a naive question because we don't know the nitty-gritties, but why aren't more patients through that channel? Why don't you put majority of the patients through that channel?
If you could snap your fingers and do that, it would be the best thing to do. I think the dynamics are, some of which I am about to describe, if I were a physician prescribing drugs for IBS-C, I would be accustomed to going through retail. I have habits and I am familiar with the process. Even though those same offices may be working with biologics, and you see Crohn's and other things like that, IBS-C is considered a bit differently, is our assessment.
Changing that habit, changing the experiences that they have had to say, "No, for your patients with IBS-C, put them through the IPN." How you look at the drop-down menu in the EMR, all those sorts of things factor in, and those are the ways you get rid of friction with the IPN is making sure that all those things are tied together. I wish it were as direct, it would be so much better because we know it is better for everyone to go through the IPN. But breaking habits is what we are in the midst of trying to do.
Got it. In terms of helping physicians with the prior auth, you mentioned about the field members expansion. How much was that expansion, and what other steps could you have physicians navigate this more paperwork that they are facing right now?
We ended last year with 20 FRMs. Not necessarily knowing that we were going to be hitting the headwinds of the payer issues. But we had made the decision then, knowing what we want to do with the IPN, to double it, and we added actually an additional 20 field people. It was 144 salespeople, we call them ABDs, and field reimbursement managers, now 40, all on the ground and running July 1st.
Okay, got it. You also talked about doing a little bit more contracting with the payers, just to manage the step edits. What would that entail over the next couple of years or so?
Yeah, it's a good question. We're engaging with them now, so that's always a process. It takes a little bit of time, and obviously, when you think about the renewal cycles, they usually are January 1st. So we're in that process now, and really what it looks like for us is helping the patient eliminate those barriers that we've been talking about that we saw. So that's the end goal for us is to make it easier for the patients, easier for the physicians, to get on IBSRELA.
Prakhar, I think one of the things that we've talked about in the past, which is an important thing to understand about the company, is when we launched our drugs, we said we're not going to negotiate.
Right.
We wanted to see how far we could go without having to give things away, without getting a return for it. So you all know our gross net is on a blended basis, roughly 34%. That means we keep 66%, and that allows us then to use that room that we have created to have these discussions. It is, I think, a unique way. It is hard for people to necessarily understand because the vast majority of companies do begin negotiations out the gate.
Right.
For us, knowing what we need to do, having the IPN in place, the FRMs, starting these negotiations, it is not a one size fits all.
There are going to be different things that our market access team are doing with different relationships and payers that they are negotiating with.
Got it. Maybe, on payer contracting and where the gross to net could evolve, I think maybe some investors still have memory or bad memory of LINZESS and how that gross to net evolved over time. I guess, how will contracting take place? Is it a lot of contracting from the get-go and 2027 could be a more steeper increase in gross to net discount, or it will be gradual increase, which is fine because you will make some of that with the volume numbers as well.
Yeah, I think whatever we do, we're aiming for cash flow or positivity or ROI positivity there. We are not going in to fight for first line access. Obviously, we're indicated there, but that's not the position we're in. Getting the failures from LINZESS has worked great for us over the past few years and will continue to. For us, it's not about going in there with 70% and 80% discounts because as we said, you can never go backwards. You can't put the toothpaste back in that tube, and we've got a very long runway in terms of our patents and everything. We've got to look at this over the long game.
Got it.
I think what Sue just said is probably one of the most important things that we ground ourselves in these negotiations. Our IP with the 299 patent goes out to 2042, and preserving the business as long as we can for that is critical. We could give every penny away right now and not have a better position.
Right.
Okay.
Right? There is a thoughtful, measured way that we do these things. It's not a one size fits all, and we will do it measured and slowly to make sure that we don't give away too much.
Okay. We're in 3Q right now. It's been a month since you announced 2Q. We checked the scripts before coming here. Looks fine to us.
Yep.
Both on TRx as well as NRx. You feel the steps that you are taking are helping already in mitigating these hurdles?
Sue should address on this as well, is that when we guided, we said there was going to be no change to the payer world, right? That's a January implementation date.
Right.
The guide that we have assumes the friction that we're currently experiencing.
Yep, that's pretty much what I would say, too. The new guide, the $350 million to $370 million is kind of business as usual, seeing the same hurdles we see, and very confident in the guide that we have for the year.
Okay. You also talked about expanding direct-to-consumer outreach as well. What does it entail? Is it more digital? Is it TV ads?
It's digital. It's not linear TV, which is Super Bowl ads, things like that.
Yeah.
This is what you can now do with connected TV is very targeted to socioeconomics, demographics, territories that you want to get the message out there. The reason it is so important is, as a patient if I was going to use my physician and ask for IBSRELA, the chance of you granting it is upwards of 80%. The engagement on the part of patients is very important, but it is also a very measured way that we do it. It is not broad sweeping massive expense for doing it. Connected TV and other digital means is extremely effective.
Yep, and we just started running the ad early September, so it is out there for everybody to see.
Okay, that is great. Yeah.
Love it.
Then maybe on the market, the IBS-C market is still growing. One thing that we've been trying to figure out is how does LINZESS going generic impact the market dynamics? Is it helpful to you or?
How have you landed on that? I'm kidding. It is for me, you can look at it two ways. One, we know in the fourth quarter of last year, the WAC was cut in half from $500 to $250.
Okay.
We know from IRA, they've announced the price is closer to $100. It is basically a generic. Does that facilitate more people coming in? It's a good argument to think that it would, because there are clearly a lot of patients that are yet to be treated. The average timeframe in the vast majority of these patients, roughly 80%, are women of childbearing years. If you look at the history of the journey that they've been on, it takes six to eight years on average before you get diagnosed. Imagine the journey that these patients have been on, and there's many of whom are still on that journey that have yet to be diagnosed, that presumably, that's an opportunity.
Got it. You still maintain your long-term guide of $1 billion?
Yep.
I know there was an update in terms of the year where you might reach, but I guess what gives you confidence on that $1 billion-
Yeah, I think
Number as well, how do you get there?
Absolutely. For me, and for all of us, the guide of a billion is still, we are very confident in that. What we do know is that with the compound growth rate needed to get there would have been about 38%. With the guide that we did this year, at the midpoint is about 31%. For us, it just was prudent to pull the timing there. We still believe in it. We know it is going to be there. It is just a matter of when, not if.
I think another way to think about it is, as you noted, the IBS-C market continues to grow.
Sure. Yep.
Yep.
When we guided originally to that billion, it was roughly a 10% market share With a market that is continuing to grow, there is an awful lot of opportunity out there for us to get to that number.
Got it. On the IP front and IBSRELA, I guess one thing that I did not fully appreciate is how tough it is to make a generic product for IBSRELA. Maybe can you expand on that?
Sure.
What do the generics need to show to make an IBSRELA generic?
There is a couple of things. We have been Paragraph IV eligible since 2024, right? We have not had that occur yet, right? For a drug like this where PK/PD is not possible, this is a non-absorbed molecule, so you do not have blood levels to compare to the innovator. There are product specific guidance out there from the FDA that tells you how to get this approved. For IBSRELA, it includes a clinical trial. For XPHOZAH, it is an in vitro assay, but knowing this molecule, it is a pretty hard assay to do. Whether or not that has factored into potential generics, either participating and looking at an ANDA filing or not, we have not seen it yet. I think that is important. It is also important to note, to make this product is a 24-month process.
If you wanted to order a bunch of tenapanor today, and I need to start the process, it is a 2-year period for me to make it. It is a hard molecule to make. It is amorphous, it needs special handling for spray drying, all those things. All just challenges for anyone who is going to make it. Is it going to happen? Yes. Given success, it will happen. When it happens, we will all know when it does.
Got it.
The patent is a really important thing.
Yeah
The 299 patent is a formulation patent in manufacturing of the formulation, which one would generally think, well, that is not a big deal. This patent getting issued says it was innovative and non-obvious. It says something about it. There is also additional intellectual property that we have filed and will continue to work on to strengthen that position. But the 2042 is a very real date. Given where we are now and the growth that we see, the opportunity for this product, both products, to that timeframe is significant. As you know, we are also running pediatric trials, which would add additional six months at the end of that 2042.
Right. I know previously you used to provide some guidance on LOE assumptions. What are your expectations internally on the LOE now, given that you have this IP pattern like-
For us, it's 2042.
2042.
Given the strength of this IP and all what hasn't happened, frankly, says that it's a hard drug to make. Success is going to be you beget others getting into it. We do anticipate it'll occur. But these are very powerful sets of IP.
Right. And you were ANDA eligible since 2024?
Okay.
We were approved in 2019.
Right.
Five years after.
Got it. If, given the time needed to make the product, and once you have an ANDA file, you have the litigation as well. I guess, what is the worst case outcome? It seems that even on the IP front.
I cannot speculate on that. Just having been in this business as long as I have, the strength of this IP, our confidence of 2042 is where we anchor.
Okay. All right. Maybe we can move on to XPHOZAH as well.
Yeah.
You pulled the guidance for XPHOZAH on the long-term peak.
The long-term, yep.
Yeah.
Maintaining the 2026 guidance. I think investors probably were already had lower, I guess, more conservative on XPHOZAH peak sales. Maybe why did you decide to do now?
I think a couple of things. One is the disconnect that you just described. There is a different view of what this looks like. As you know, we only sell to Medicaid and commercial. That is 220,000 people. That disconnect is certainly part of our thinking. The other is in the current draft prospective payment system, there is, for the first time that I have been involved in the dialysis business for creating medicines for these patients, better part of 20, 25 years, it is the first time there has been a quality measure for serum phosphorus, which is critical. It begins to be enacted in 2029, but there is a look back to 2027. The target in the QIP is 6.5 mgs per deciliter.
It is a very high number, but it means that the dialysis organizations are going to have to do 6.5 mgs or better in order to get the full payment from CMS. That could be a tailwind. That could be very helpful. How does that then work within the process and the system? We want to see how that is. There is the potential of another binder getting approved. That company has had some challenges, and that TDAPA period that that binder would go through could likely be a headwind. We do not know when and if that is going to happen.
Right.
That uncertainty also factors into it. We thought, frankly, even with the discussions we were having internally about IBSRELA, that it was prudent to do the same thing for XPHOZAH. We reiterated our guide of $110 million-$120 million for this year, and said, "Let's take a step back and make sure that we are all in sync as to what the ultimate potential is for XPHOZAH.
Right. Maybe in terms of how the drug is performing, seems like there is more stabilization this year. Scripts look fine. I guess, what are you seeing in the market right now, and what steps can you take to further increase the volume growth?
I guess the way I think about it is, let's get past this TDAPA period.
Right.
In 2026, it comes to an end, and let's see how things stabilize into 2027. From my perspective, knowing how XPHOZAH helps these patients get to goal, which they've never been able previously to do, is still our true north and drives us with what we're doing. It is a confusing part of the business right now. Many people struggle with understanding what TDAPA is.
Yeah
How reimbursement happens in the dialysis field. All those things factor into the way we think about it. It continues to contribute, and it will. That's our driving assumption, is what we're building here will continue to contribute, and we expect to contribute more and more over time.
Right.
Yeah, I would only add, paid prescriptions grew 25% in the second quarter, so again, really encouraging. The team's doing a great job in terms of continuing to keep that momentum.
Right. I guess in terms of the level of investments. That's behind IBSRELA versus XPHOZAH, is XPHOZAH still an NP-positive drug for you?
Yeah, it's a contributor, as Mike said. We obviously look across, even when we look at the capital allocate, just to ensure that we're doing the right thing and we're making the right ROI. Yeah, absolutely.
Got it.
That'll be the same way in the future as we're profitable next year. We're going to be balancing the investment across both products.
Okay. Just one touch on the pipeline as well. You have the CIC indication that has a phase III readout next year. I guess, why did you decide to move into this indication and some of the data points that give you conviction on success?
Sure. If you look at our competition, they have both indications.
Yeah.
And right now, if Sue and I were patients going into your practice, and I had IBS-C, and Sue had chronic constipation, to prescribe IBSRELA, you could only give it to me. If you wrote down CIC for Sue, you would have to fight the insurers for prior authorization, which for a non-indication is even more of a challenge. So eliminating that friction was a really important part of it, so that we come into your office and you say, "Mike has pain, Sue doesn't. Okay, IBSRELA is fine." So that was a big part of it. There is a lift that will come from it. If you look at the population from an epi perspective, it is about 30 million people, is what people believe with CIC, the vast majority of whom are treated well with over-the-counter medications.
Those that aren't make their way into the offices, and they end up being roughly the same size generally, as IBS-C. So to eliminate the friction to allow you as a physician to prescribe irrespective of indication is really what the objective is there.
Got it.
Our confidence in it is we're already treating constipation.
Yep.
IBS-C is a composite of constipation and pain. For us to use those data to size this trial has been very helpful. The way that this is enrolled, which is on target with what we've guided to, and the enthusiasm we hear from the treating physicians out there-
Got it.
Their excitement for it is significant.
Got it. I guess if you get approval for CIC, should there be a halo effect on IBS-C as well, given you have one drug that is just. You can use it for. It is a seamless transition.
Rising tides raise all ships, right?
Yeah.
It would be that sort of thing for sure, because that friction is gone.
Okay. In terms of how big this indication could be, since you have a long patent life, I think you do not get credit for the CIC indication at all. Is this enough? I know the addressable market is a little bit different, maybe, but at the lower end, that goes through the funnel in terms of the severity, roughly similar size. So why couldn't this be as big as IBS-C right now or
That is one of the things we all need to see with the data.
Okay.
The data driving off a lot of that. If you look at the other indications, if you look at LINZESS, as example, two lower doses are indicated for CIC, higher dose is IBS-C. We know there is interchangeability. From the treating physician. You can't necessarily say that the lower doses are predictive of the CIC indication.
Okay.
It's the best proxy that's out there.
What's good data in phase III?
Yeah.
What's good data in phase III for CIC?
You hit the primary, which is both an increase in complete spontaneous bowel movements and a durable response. One of the things with CIC is you have to show in three of the last four weeks, a durable response is one of the more important parts of it.
Okay, got it. I guess once you have the CIC indication, would you need more investments in terms of the sales force expansion, or is the indication mostly solved with the current?
There's probably on the edge some optimization to do, but it's not a doubling of the organization. Because if you look at those physicians that write for IBS-C and CIC-indicated drugs, we call on 50% of them, which is 14,000 HCPs. The other 50% is 182,000.
Right.
We're not going to optimize 182,000, right? It's looking at these 14,000, and are there additional deciles we might want to put in around the edges, would be.
Okay. You have an earlier-stage asset as well, the next gen NHE3 inhibitor. I guess, how are you thinking about Well, first of all, what are the next steps there, and how are you thinking about the different indications that you go after?
Well, it is in preclinical, and the science will lead us to making the decisions that we see. What is interesting about the molecule, it is about 10 times more potent, 30 times more soluble, and solubility matters. If you look at the pH gradient in the GI tract, as you get to lower GI, tenapanor may precipitate where this potentially wouldn't. So what does that mean? 10 times more potent and soluble, maybe once a day, lower doses. Other indications we might pursue, we'll look at the preclinical models to tell us that as we progress.
Okay, got it. Maybe in terms of the hiring of the Chief Commercial Officer. Internal, external, timing of it, if you can provide more color.
Yeah, all of the above. We have started search. It is always good to get fresh eyes, but we also have some remarkable internal people. So, we have continued on seamlessly and things are progressing well. There are always challenges when people leave. I wish Eric the best in his endeavors, but we have built a phenomenal business and team here, so the excitement we have and their enthusiasm for progressing is clear.
They have stepped up really well in the absence, so it has been great.
Got it. Great. And maybe in terms of capital allocation. I think you have mentioned BD as one of the priorities as well. I guess, what therapeutic categories, what asset, I guess what stage of asset, clinical, commercial, which could make sense for the companies in terms of synergies?
Yeah, I think I talked in the beginning about our capital allocation priorities, so BD is squarely in that. We have about $282 million of cash on the balance sheet as of the end of June. So we do have a lot of cash to be utilizing in any search that we do, and so we're looking a little more on the early side at this point, preclinical, phase I. Some of the things, obviously affordability is what we're going with right now as well. So it's got to be a good area. Is it adjacent or somewhat adjacent to what we do today, might be where we're looking, but we're really keeping the aperture open. We have a great team that's looking at it, going across the globe as well as in different indications and areas.
In terms of the therapeutic area, GI seems like a natural.
Natural.
Yep.
Cardio, renal, GI hepatology is adjacency. We'll look at all those things, but the history of our industry is opportunism, right? And you look at the vast majority of the team at Ardelyx has been in multiple therapeutic areas. We're excited about looking at other things, but obviously our therapeutic areas are important ones to focus on.
I even think too, with being able to, say, profitability next year and really generate a lot more cash flow. What we will be able to afford in the future is going to be a lot different even than what we are now. We are looking now, but we are going to be able to look even more later.
Got it. Maybe, can you talk about the profitability?
Yep.
I think you mentioned that 2027 you do expect profitability. That obviously assumes some of the assumptions around revenue growth as well that we can back into, and some of the contracting stuff that you will do as well. Profitability, how important is that given your investments in the pipeline as well?
Yeah, absolutely. We declared profitability. It is the right time to do it. We have been on the market a few years now, and I think just given the fact that OpEx is really leveling out, as Mike said, we are not seeing any wholesale changes to the workforce, the sales force. We put those changes in place here. So by next year, it will be a leveling off where we expect top line to continue to grow at a much faster clip. So that is why, mathematically, you would say that is profitability, and that is really what we are going for as well. It is time. I think when we look at any potential contracting, that is an investment. The gross to net is an investment just like OpEx is.
We really have to balance what we are ultimately going to do from potentially a contracting perspective versus what we do to further the business from an investment.
You look at the foundation from where we are doing that.
We are a 98% gross profit molecule.
Yep.
Our ability to generate cash and significant amounts of cash allows us even to scale into the clinical development, presuming some of these earlier programs are successful. Both with things that we would in-license now, presumably 531, we can scale into affording that. As the years go by, and it is not that long, our ability to do more significant transactions are there.
Got it. Maybe just last question from my side, what do you think people are missing on Ardelyx's story right now?
A lot. We are a story that is uncommon.
Yeah.
If you look at where we are in our evolution, of all the questions you asked and the answers that we gave you, not a lot of companies, I think, are coming to the fore saying we are going to be profitable and generating a lot of cash. It does not fit squarely in traditional ways of looking at it. I think that is being missed, and the amount of cash that we can generate, what we can do with it, and the strength of this team, and our commitment to grow that top line more than expenses, given what we have established, is true leverage. The ability that we have to leverage, the ability that we have to generate our own cash, to define our own future, I think is being missed quite a bit.
Okay. I know we are out of time, but thank you so much, Mike and Sue, for joining us. Great discussion, and looking forward to the next updates.
All right, thank you.
Thanks, Prakhar.
Appreciate the time.