Welcome to the Ardelyx Third Quarter 2022 Earnings Conference Call. My name is Sean. I will be your operator for today’s call. [Operator Instructions] As a reminder, this conference call is being recorded. I will now turn the call over to Kimia Keshtbod of Ardelyx. You may begin.

Thank you and good afternoon, everyone and welcome to our third quarter financial results call. During this call, we will refer to the press release issued earlier today, which is available in the Investors section of the company’s website at ardelyx.com. On the call with me today are Justin Renz, Chief Financial Officer; and Susan Rodriguez, Chief Commercial Officer with prepared remarks. Dr. Laura Williams, Chief Medical Officer; Dr. David Rosenbaum, Chief Development Officer; and Rob Blanks, Chief Regulatory Affairs and Quality Assurance Officer will join us for the question-and-answer period. Our CEO, Mike Raab, won’t be on this call as he is doing well, recovering from a recent surgery and will be back soon. During this call, we will be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ materially from those described. We encourage you to review our risk factors in our quarterly report on Form 10-Q filed today, which can also 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. With that, let me pass the call over to Justin for opening remarks.

Thank you, Kimia, and good afternoon, everyone. It is with great pleasure that I provide you an update on our progress since our last call. We are in a notable position to be a stand-alone drug innovator in the midst of commercializing our first-in-class drug discovered and developed by Ardelyx and generating revenue while advancing our pipeline. We are now 6 months into launch, and we’re pleased to report that IBSRELA is resonating with prescribers and patients as an important new treatment option for IBS-C. We are clearly gaining traction and building momentum in this marketplace. These early days have given us confidence that both patients and prescribers are embracing IBSRELA, and they are having a positive experience with the drug. As we noted on our last call, we are seeing an excellent response to our sales and marketing efforts where feedback indicates significant and growing enthusiasm for IBSRELA. We have an important upcoming regulatory milestone in 2 weeks when on November 16, the Cardiovascular and Renal Advisory Committee will review and discuss XPHOZAH, our novel treatment for controlling serum phosphorus in adult patients with CKD on dialysis. We look forward to presenting our data and rationale to the Committee and updating you afterwards. Now, turning to our Japanese partner, Kyowa Kirin Corporation, or KKC, and their progress with hyperphosphatemia in Japan. On Monday, we announced that KKC has submitted a new drug application, or NDA, for tenapanor to the Japan Ministry of Health and Wealth there. Importantly, we strengthened our balance sheet with $35 million as expected this quarter based upon this recent submission. This is an exciting collaborative milestone achievement that demonstrates the commitment to the program, and further reinforces the drugs promise to address the needs of patients with hyperphosphatemia. As Mike often comments, Ardelyx is uniquely positioned in the final pharmaceutical industry as a company with a proven track record from an internally discovered therapeutic pipeline. We created tenapanor in our research laboratories and successfully advanced IBSRELA through all aspects of development, culminating and building a commercial organization to establish this medicine in a market with a high unmet need in IBS-C. Further, we are privileged to have our Japanese partner pursue approval in their territory for tenapanor for hyperphosphatemia, while we continue to pursue approval in this indication in the United States under the brand name XPHOZAH. We take great pride in our accomplishments across our programs, which we attribute to our dedicated, tenacious and talented teams across the company. Now I’d like to pass the call to Susan to provide more details on the building momentum for IBSRELA and the important role it will play in agreement of IBS-C. Susan?

Thanks, Justin. I will touch on several topics today. First, that our IBSRELA launch strategy is working. We are gaining traction and are well positioned to continue to build market share. Next, I will review market response to the four core elements of our strategy, critical to driving update. And lastly, I will review our judicious approach to investing in opportunities to accelerate future growth. As Justin mentioned, we are 6 months into our launch, and I’m pleased to report that IBSRELA is rapidly becoming established as an important new treatment for IBS-C. Net product sales of IBSRELA were approximately $4.9 million for the second quarter of our launch and nearly $7 million from launch to the end of the third quarter of this year. HCPs are enthusiastically adopting IBSRELA because of its novel mechanism of action and robust clinical data. They are viewing IBSRELA as an accessible new therapy and are integrating IBSRELA into the office practices they have in place to manage specialty drugs. Offices are submitting prior authorizations and experiencing favorable approval rate, since most of their patients have been treated with the limited option, which is the criteria in place across most payers. Early reports of patient treatment experience have been positive, driving interest and expanded use to the sizable pool of patients under their care who continue to suffer with persistent symptoms despite treatment with a GC-C agonist. Our strategy is working. When we announced the launch of IBSRELA earlier this year, we emphasized four core elements of our strategy that were innovative and not seen before across the IBS-C therapeutic space. These strategies were designed to disrupt the market with a novel first-in-class mechanism therapy and capitalize on the opportunity existing within what is now an established uncluttered IBS-C Rx market with limited treatment…

Thank you, Susan. As of September 30, 2022, we had total cash, cash equivalents and short-term investments of $90.6 million. As Susan mentioned, our third quarter net product sales of IBSRELA were approximately $4.9 million, and we had total revenue of approximately $5 million. R&D expenses were $7.5 million for the third quarter of 2022, a decrease of $16.2 million or 68.5% compared to $23.7 million for the same quarter in 2021. R&D expenses included non-cash stock compensation expense of approximately $0.5 million and $0.7 million in the quarters ended September 30, 2022 and 2021, respectively. The decrease in R&D expenses is primarily the result of lower clinical study costs as a result of the completion of the OPTIMIZE study, lower tenapanor manufacturing expenses due to the capitalization of costs associated with the production of IBSRELA into inventory and lower expenses from research in general, following the significant reduction of our research function in the fourth quarter of 2021. SG&A expenses were approximately $18.7 million for the third quarter of 2022, a decrease of $1 million or 5.3% compared to $19.7 million for the same quarter in 2021. SG&A included non-cash stock compensation expense of approximately $1.4 million and $1.5 million in the quarters ended September 30, 2022 and 2021 respectively. The decrease in SG&A was primarily due to a reduction in both our ongoing expenditures as well as onetime costs as a result of restructuring actions we carried out during the third quarter of 2021, offset by increased costs associated with the continuing commercial launch of IBSRELA during the third quarter of 2022. Our net loss for the quarter was $22.9 million or $0.14 per share compared to $43.6 million or $0.42 per share for the same quarter in 2021. It is very important for us to maintain a…

Thank you. [Operator Instructions] Our first question comes from Yigal Nochomovitz from Citigroup. Your line is now open.

Hi, Justin and team, thanks. Obviously, I’m getting a lot of questions about the upcoming AdCom. I know you probably can’t say very much, but are you able to just actually say whether this will be an AdCom, where there’ll be a yes-no vote at the end of the day? Or is it just going to be more qualitative commentary?

Thank you, Yigal, for asking that question. I’m going to turn that to our head of quality and regulatory, Rob Blanks.

Yes. Yigal, Obviously, we’re not going to speak to details about that. But to the questions and discussion areas and the voting questions will – if they come, will come 2 days before the actual meeting, so 2 business days.

Got it. Okay. Alright. Well, let’s turn to IBSRELA and the launch. So can you give us some thoughts as far as how you think the cadence of the launch is going to go for the rest of the year and for 2023? What sort of revenue momentum are you expecting? And what’s going to drive that? Thank you.

Sure. Thank you, Yigal. I’m going to ask Susan, our Chief Commercial Officer, to answer your question.

Thank you, Yigal for the question. Yes. So as we mentioned talking about our first 6 months of experience, we’re seeing consistent growth across – a nice growth profile, growth both in new writers, increases amongst existing writers. Looking at the growth momentum reflected today, we expect it to continue and accelerate. We’re really not in a position to provide any guidance at this time beyond that. We really need to see how things progress through the end of the year, may have a view forward towards giving you some guidance sometime in 2023.

Alright. Thank you.

Thank you. Our next question comes from Laura Chico from Wedbush Securities. Your line is now open.

Hi, thank you very much for taking the question and best wishes to Mike on a healthy recovery. Likewise, getting a lot of questions just with respect to the upcoming Advisory Committee panel. Maybe I’ll ask this a little bit differently. Can you remind us of some examples that have gone through the FDR process in which resolution has been identified that did not require additional clinical studies. Is that something that you have any examples that you could point to there?

Thank you, Laura, for asking. Our situation, as you might imagine, is somewhat unique, and we really look forward to making our case to the AdCom with our treatment data that we have compiled over the years and our very thorough program that was conducted by David Rosenbaum, Laura Williams and our team. I don’t want to comment on and compare ourselves to prior because each situation is different. And so I don’t think that would be fair to do. So again, we prefer to not comment on other situations because we believe we’re in a unique situation.

Okay. Understood. I might ask one follow-up. So we’re at the ASN meeting and saw some of the poster presentations you have for tenapanor or Kyowa Kirin has. Any commentary just with respect to, I guess, kind of physician awareness still around tenapanor and just how has this possibly changed over the past couple of years?

Yes, thank you for asking Laura. That’s an excellent question. I’m going to turn that over to Susan to give an update on her recent experience with this.

Yes. Thanks, Laura, for the question. Actually, we, with the very comprehensive clinical development program, executed to support the NDA for tenapanor for hyperphosphatemia for XPHOZAH. As a result, the presence we’ve had at all the medical meetings over the last several years, involvement with all of the treating nephrologists involved in our clinical programs, presentation of our data as well as the launch of a very comprehensive disease awareness campaign throughout 2021, we had a very high level of awareness of XPHOZAH across the country, across the nephrology treating community. The Spherix data – actually, the Spherix reports have been tracking the interest in novel mechanism drug for hyperphosphatemia, the awareness level of XPHOZAH persistently over the last several years, and the very last data point published, I think it was second quarter 2022, reflects the persistent interest across the nephrology-treating community for a novel mechanism drug, for new options to address the significant challenges that they put forward in the management of hyperphosphatemia and a high level of awareness and interest in XPHOZAH. So we are quite encouraged that the awareness and the support across the treating nephrology community is quite high, and we will be prepared to be able to mobilize and bring XPHOZAH forward in the event of a positive scenario where we can bring XPHOZAH to patients.

Thanks, guys.

Thank you. Our next question comes from Joseph Thome from Cowen and Company. Your line is now open.

Hi, there. Good evening and thank you for taking our questions. Maybe right to IBSRELA, in terms of patient numbers, are you going to guide in terms of how many patients are on therapy? Or can you give us a general idea of what this revenue number represents in terms of patients on therapy? And do you have a set of patients that are currently have done the referral process and they are just waiting to kind of go through the prior authorization and get therapy? And maybe what’s the size of that patient population, if you can provide us some information?

Sure.

Go ahead, Justin.

No, I was just going to say on the first part of your question, Joe, thank you for asking, we’re not going to give specific guidance on numbers yet. It’s still too early for us to give you specifics and guidance. But we will – we are absolutely, as a company, compiling metrics regularly and trying to be in a position as the launch progresses. And again, Susan can give you more examples of the progress we made in our outreach in general, but we’re low to give specifics right now because we’re only 7 months into our launch, but we are really encouraged by what we see so far. So we’re not going to give specifics yet, but I’m going to give Susan the opportunity to expand on that.

So what I can comment on is information that we have shared publicly as a part of our communication around the launch of IBSRELA and the opportunity for IBSRELA. So it is – overall, the script market for IBS-C-indicated drugs is about 5 million scripts. Based on our assessment of the unmet clinical need across the marketplace based on all of our market research, we see a path forward and believe it’s quite achievable to achieve high single-digit share position at peak. And everything that we’re seeing in the first 6 months of launch, as I reported in my narrative in terms of interest, adoption, intent to expand use, is all in their path to access, of course, further supports that statement that we made at our launch. So that’s what I wanted to share with you.

Perfect. And then I know in the prepared remarks, you mentioned that there are some proportion of physicians that indicated they would like to use over the next 6 months. I guess, what is sort of the gating factor to them using it? Is it just the patients coming in? Is it getting, I guess, better reimbursement? Or I guess, what’s stopping them from saying, tomorrow I’m going to write a script, versus kind of over the next several months?

Yes. What we’re seeing in terms of the whole adoption cycle, again, just early, the first 6 months, is our reps getting in just – it’s really just getting the story out, our message is resonating quite effectively. We get a favorable response and interest to use IBSRELA. There is time to work with the office required to make sure that they integrate IBSRELA as a specialty drug to be able to be prepared to submit the prior auth. There is the initiation of the early patients they are trying. And we’re kind of at the state right now where we have a nice user base where we have gone through that process. They have had favorable treatment experience as I reported in the narrative. So now we’re embarking on this expanded use phase for the product. Timing on that, we just – we need more data to see the cadence on how we can drive that growth accelerating, building on the strong user base that we have in place as of today.

Okay, great. Thank you very much.

Thank you. Our next question comes from Matt Kaplan from Ladenburg Thalmann. Your line is now open.

Hi, good afternoon.

Hi, Matt.

Hey, Justin. Hi, Susan. Just to focus on IBSRELA launch. Congrats on the initial progress there. What are you seeing in terms of how IBSRELA is being used in the real world? Can you talk a little bit about the duration of therapy and how they are incorporating it into their treatment regimen?

Thanks for your question, Matt. Yes, I think what we’re seeing is – what we’re seeing in the real world is exactly what we had gleaned from all of our comprehensive market work done prior to launch. And that is that they are currently treated patients that they see on a regular basis. Many of them have had persistent symptoms, but prior to the launch of IBSRELA, there were no additional alternatives. So what we’re finding is when we present the profile of IBSRELA, physicians immediately have many patients in mind. And really, it’s the process of activating the interest into behavior is around integrating it into their daily practice once they see that the path to access is clear, they understand administrative process they have to go through to – for the patient to access IBSRELA. So that’s what we’re seeing out in the marketplace. It’s really the patients that they see on a regular basis that prior to the launch, there were no other alternatives for them.

Okay. And then you mentioned that you expect continued growth of momentum and you expect it to accelerate potentially. What do you – are there certain things you need to accomplish with respect to access and payers to see that acceleration and growth momentum to continue?

From a payer standpoint, as we stand here 6 months into the launch, the majority of major payers have evaluated IBSRELA and have put forth policies to access IBSRELA, and we’re seeing that very favorable prior auth rate as a result. So our access path, as of today, is really one more positive growth driver for the product. And what we’re seeing in the marketplace is that increasingly offices are seeing, as they gain experience of IBSRELA, that patients, in fact, do have access to IBSRELA as long as the office submits the prior authorization with the proper information included. Because they are finding that the patients they see every day already meet the payer criteria because since there is limited options and they have been managing these patients with those options, these patients meet the criteria. So the access profile is becoming quite clear moving forward. Where we will drive growth is just continuing to expand use across our users and continuing to build a new user base and continuing to reach all of these high-writing HCPs who have the potential to use IBSRELA.

Okay. That’s helpful, thank you. And then just on XPHOZAH and the upcoming panel, AdCom, assuming a positive outcome of the AdCom, what are the next steps towards the resubmission of the NDA?

Yes. Thanks, Matt. So in short, it depends on what comes out of the Advisory Committee. So we are under the formal dispute resolution process under the Office of New Drugs, led by Dr. Peter Stein himself. So we will have to see what comes of the vote and Dr. Stein with his office’s decision. He has said he has a 30-day period to respond post the Advisory Committee to give us an update on our appeal and we will take that information and then react. We will do our best, should it be favorable, to resubmit as soon as possible. We do need to resubmit an NDA as we are not on file. But we don’t know until this all happens what our next steps are. So I assure you we will keep everyone informed as soon as we possibly can on our path forward and timing.

Okay, great. Thanks, Justin, and good luck on the 16th.

Thank you.

Thank you. [Operator Instructions] Our next question comes from Chris Howerton from Jefferies. Your line is now open.

Hey, everybody. Thanks so much for taking the question. I had a couple on the IBSRELA launch, excuse me. One part of that was, if you could just help us understand how we should be modeling and understanding the impact of stocking and inventory? And then the second part of the IBSRELA launch to ask was on next year for plan resets, do you expect that to be material in terms of impact to the first quarter sales? And then third question I had just is a very minor clarification with respect to the Advisory Committee. Do you – could you give us your latest understanding with respect to the time lines of when the roster will be made publicly available as well as when the documents will be made available? Thank you.

Sure. We will do our best. We might go in backwards order, Chris. So there is a standing Cardiovascular and Renal Drug Advisory Committee roster that is posted on their website. So there is a group of individuals who are seated, if you will, and Dr. Stein may or may not augment that. We believe he will. But – and that will be made known 2 days before the typical cadence is for the FDA to post documents 2 days before. So we don’t know any more than that right now. And so we’re – we will see.

Okay. Yes, sure.

Next, going to IBSRELA. So, so far, we have been selling through the wholesalers and then on to specialty pharmaceutical companies. And so there has not been a lot of stocking. So there is not a lot of a drug in the channel. I don’t – we can’t give specifics on that at all, but we are not seeing excessive stocking in the channel at all, which is helpful. We’re seeing a real nice flow of inventory moving out of our, if you will, supply of inventory and then through those channels and out to the patients. So we’re encouraged by that. We don’t have specifics yet. And hopefully, we will be in a position to give more metrics, if you will, in Q1 of next year or something like that. It’s just too early to tell. Susan, do you want to comment any more on that?

No, Justin, that was excellent. I mean, in this day and age, the capabilities to be able to get product to locations to be able to dispense product, it’s an extremely fast process. So our entire supply process is really quite harmonious in terms of what we sell in is really based on what they are selling out as Justin mentioned.

And Chris, did we not answer your first question particularly.

No, no. I think I was just – the only other question was on kind of the potential impact of plan resets in the first quarter of next year?

Plan resets. So Susan, that’s a question on our customer base. And obviously, their coverage and gaps they may or may not have in their coverage of insurance?

Yes. Thank you for the question, Chris. Thank you, Justin. Yes. So we really – again, based – if you look at the whole go-to-market approach and where IBSRELA fits in the treatment paradigm, the patients that are candidates for IBSRELA are the patients that have persistent symptoms despite use with existing treatments. And the payer policies are in place that state that the drug is accessible if a prior auth is submitted and its documentation of the patient. So we see that as relatively stable. What’s important around that is that the offices increasingly get comfortable with that process. From an affordability standpoint, for the commercial segment of our business, we have our commercial co-pay program that’s been very effective. We have nice high redemption rates. And as a result, a nice profile of commercial patients as part of our IBSRELA patient base. But we’re also finding, Chris, that the government payer segments, Medicare, Medicaid, we are drawing patients from those segments as well. The patients who have pretty low co-pay requirements, largely because they are either Medicaid patients or dual-eligible Medicare patients. So we’re really not dependent, at this point, our base of business on the standard D patient, which is the group that may fluctuate to some extent based on plan resets.

Yes, sure. Okay, well, I appreciate it. I offer my best of luck to the panel community.

Thanks, Chris. And I just want to make sure I clarify for you, and Yigal from Citi had an earlier similar question. So after the process and Dr. Stein, should he render a favorable appeal, which, again, he has said he would render within 30 calendar days of the Advisory Committee meeting, we would seek to resubmit the NDA as soon as we possibly can, and all depends on what comes out of Dr. Stein’s response to us. But I would want everyone to know that should we resubmit the NDA and is going to be either a 2 or a 6-month review, it would not be a 12-month typical NDA cycle. Rob Blanks, can you clarify that or perhaps augment that?

Thanks, Justin. Yes, I mean I think you spoke to that perfectly. Obviously, they – once you submit, they determine whether it’s a 2-month review or a 6-month review. And obviously, it will be dependent on what we hear from Dr. Stein 30 days after the Advisory Committee meeting.

Thank you, Rob.

And we have no further questions in queue at this time. I would like to turn the call back to Justin for closing comments.

Thank you all for joining our call. We look forward to keeping you apprised of our progress, which you can tell we’re really excited about, the commercial advancement of IBSRELA, our next steps for XPHOZAH. We have a lot going on in the next few months, and we look forward to keeping you apprised of our progress. Thank you all for joining us today. Operator, you may now end the call.

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for your participation. You may now disconnect.