Good afternoon, ladies and gentlemen and welcome to the Ardelyx Third Quarter 2024 Earnings Call. Our host for today's call is Caitlin Lowie, Vice President of Corporate Communications and Investor Relations at Ardelyx. [Operator Instructions] I would now like to turn the call over to your host, Caitlin, you may begin.

Thank you. Good afternoon and welcome to our third quarter 2024 financial results call. During this call, we will refer to the press release issued earlier today which is available on the Investors section of the company's website at ardelyx.com. During this call, we will be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ materially from those described. We encourage you to review the risk factors in our most recent quarterly report on Form 10-Q that was filed today and can be found on our website at ardelyx.com. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change. Our President and CEO, Mike Raab; Chief Commercial Officer, Eric Foster; and Chief Financial and Operations Officer, Justin Renz, will share prepared remarks before we open the call to questions. I will now hand the call over to Mike.

Good afternoon, everyone and thank you for spending part of your Halloween with us this year. It was a busy third quarter and Eric, Justin and I, will bring you up to speed on the latest developments and provide some insight into what you can expect in the months ahead. IBSRELA is making a difference. We continue to hear from treating health care providers and patients that IBSRELA delivering meaningful and important benefits to IBS-C patients who, despite treatment with established therapies have continued to suffer from the symptoms of this debilitating condition. As you can see from the performance this quarter, demand for this effective first-in-class therapy continues to grow. We are excited about the future of IBSRELA and with the latest expansion of our field force complete, our confidence that IBSRELA is a billion-dollar drug before patent expiry is as strong as ever. XPHOZAH's launch continues at a phenomenal pace, demonstrating the clear unmet medical need among dialysis patients. We have said it before and it continues to be true. There is a dire need for innovative therapies like XPHOZAH for dialysis patients. For almost 50 years, binders have been the only prescription therapy available to lower phosphorus levels. In under a year since launch, XPHOZAH is demonstrating the critical role it has in helping patients manage their hyperphosphatemia. Physicians are prescribing XPHOZAH because it works and it is helping patients achieve serum phosphorus levels that have previously been unattainable. The positive results they see in our patients drives this adoption. We, along with you, recognize that there is uncertainty around coverage for XPHOZAH for Medicare patients. This is why we've deployed multiple strategies with a goal to provide uninterrupted access to XPHOZAH for all patients. Please allow me a moment to discuss how we got here. With…

Thanks, Mike, for that kind introduction. I'm thrilled to join you all today and to be a part of Ardelyx and the remarkable growth story that I see ahead. Before I speak to the successes from the quarter, I'd like to share a patient story like so many that we hear every day that reinforces why we do what we do. Recently, a patient's caregiver contacted us because her mother, a long-time IBS-C suffer had been given a sample of IBSRELA. This patient had suffered with the symptoms of IBS-C for a long time and had tried many treatment options. She spoke about how her mother wanted to live a full life but our GI issues continue to take over. They were excited about IBSRELA because they heard it was a different option and they were eager to get started on treatment. It's stories like this 1 that attracted me to Ardelyx. IBSRELA is a unique and different option for patients suffering from IBS-C and we are deeply committed to supporting patients to access therapy. For nearly 25 years, I have dedicated my career to bringing meaningful medicines to patients and I have seen firsthand how innovative therapies can dramatically improve patients' lives. And it is evident that IBSRELA and XPHOZAH medicines discovered and developed by Ardelyx, offer much needed and truly different options for patients. After spending time recently in the field and engaging directly with providers as well as working closely with the commercial leadership team, it is clear that we have a solid foundation in place. First, there are so many patients with IBS-C and hyperphosphatemia, these conditions are not well managed and now have different options with IBSRELA and XPHOZAH. Second, patients have a defined path to access, they are receiving treatment and they are having…

Thank you, Eric and it's great to have you on these calls and at Ardelyx. We recorded an exceptionally strong performance during the third quarter, focusing on driving our top line growth, managing our expenses and adding to our cash position. We entered the fourth quarter with positive momentum and expectations of continued growth and a strong balance sheet to support future opportunities. Now let's walk through the financials, starting with revenue. We reported $98.2 million in total revenue during the third quarter compared to $56.4 million in total revenue during the same period in 2023, driven by significant growth in net product sales for both products. For the third quarter of 2024, net product sales revenue for IBSRELA was $40.6 million, nearly double our revenue from the same period of 2023 and 15% quarter-over-quarter growth compared to the second quarter of this year, driven by strong demand. Our third quarter gross to net deduction for IBSRELA was 30.0%, consistent with our prior quarter. As a result of the strong performance in the third quarter as well as the expected impact of the expanded sales force, we are narrowing our guidance and expect full year 2024 IBSRELA U.S. net product sales revenue to be between $145 million and $150 million. Now turning to XPHOZAH. XPHOZAH continued its exceptional launch, reporting $51.5 million in third quarter net product sales revenue, up from $37.1 million we reported in the second quarter of 2024. This was driven by strong demand from health care providers, who clearly need a new and different option for dialysis patients to help them achieve target phosphorus levels. In addition to strong demand for XPHOZAH, our gross to net deduction improved from 21.4% in the second quarter to 19.3% for the third quarter. We are pleased with our top…

Thank you, Justin and Eric. The third quarter was another exceptional one. We focused on executing our key priorities, including maintaining our commercial momentum, supporting efforts to preserve patient access to XPHOZAH, strengthen our cash position and envision the next phase of growth for the company. The result is another quarter of excellent progress, consistent growth and most importantly, doing what is right for the patients we serve. Because we believe that if we serve patients, we will serve shareholders. Before I open the call to questions, I want to thank our shareholders who have followed and supported us on this journey. We will learn much in the weeks and months ahead together. You have our commitment that we will continue to make decisions that are in the best interest of patients, employees and you, our shareholders. And as always, I want to express a special thanks to team Ardelyx and the patients and physicians we serve. You are the driving force behind what we do. I will now open the call to questions. Operator?

[Operator Instructions] And our first question comes from Louise Chen from Cantor Fitzgerald.

Congratulations on the quarter. So I had a few for you. I wanted to ask you what percent of XPHOZAH sales are not part of the Medicare bundle. And then how do you think about expanding your product portfolio? You talked about that a few times today. And last question I had for you was the peak sales for IBSRELA being $1 billion plus, how long do you think it will take to achieve that?

Louise, great questions. So first, in terms of percentages, I think what we've shared in the past is the general numbers of 60% Medicare, 40% non-Medicare. And that moves around a little bit but that's a good general way to think about it. In terms of your second question of how we expand beyond. Now that's the reason that we brought on Mike Kelliher and those efforts are beginning now and ongoing. We now have the luxury of the strong balance sheet that we've been able to build and continue to doing that going forward. So more news I expect coming from those efforts in the future. And I'm sorry, the third question.

The third question was just on your peak sales for IBSRELA?

Yes. I mean, I think at this stage, it's probably a little bit too early to give a specific number on that. We just finished the expansion. And as Eric mentioned in his comments, they're trained in the field, ACG was a phenomenal turn out for that team and let's hold off on that until we see the performance with the addition.

Our next question comes from Dennis Ding of Jefferies.

Few from me. So for XPHOZAH in 2025, given it's been a few months since you announced you guys won't apply for TDAPA, like what are the different options on the table in terms of commercial strategy? And if you could be a little bit lower more granular. And then on IBSRELA, just talk on the pushes and pulls on the guidance. It seems a little bit conservative. Was there anything one-timer or anything that you see on the ground?

Yes. So let me address the second one first. As you've heard me say probably too many times, I don't want to get over my skis. And we just finished the expansion with the additional adds to the IBSRELA team. So I'm very encouraged by what we see. And I think narrowing the guidance gives you some sense in terms of our confidence. So there's not there, there that's negative. I see only positives in terms of the expansion of what we saw in ACG. In terms of what it looks like going forward, I think we really pay attention to what Eric said. The objective here is for physicians not to change what they're doing today. This is a coverage issue is the way to simply think about it. And our objective is clearly with everything that we do and have done is to ensure the opportunity for access for all patients which we believe we're doing with the 3 approaches I described.

Our next question comes from Roanna Ruiz of Leerink Partners.

So a couple for me. I was curious if you could elaborate a bit more on your plans around possible education and outreach to prescribers of XPHOZAH ahead of January 1. And I know there's a lot of moving pieces but I was also curious if what you're thinking about in terms of engaging with different payers, particularly the non-Medicare side as well?

Yes. So I'll ask Eric to comment a little bit on that but it's really kind of a simple message. Don't change what you're doing, right? And going into next year, if we aren't successful with that third leg of the stool in the strategy, is that they continue doing what they're doing. And I think as the message is beginning to resonate, I'll ask Eric to comment on his experiences at ASN which just happened as well as this message began to percolate.

Yes. Thanks, Mike. So what we know physicians are very interested in XPHOZAH and this treatment to address the unmet need that's out there. Just like we're thinking for 2025, physicians don't differentiate between the Medicare population and the non-Medicare population. So we're going to continue to message the clinical benefits today as well as access to therapy and continue that in 2025, keeping the nephrologist at the center of the decision making. And I can tell you, just coming off of ASN, there continues to be a tremendous amount of excitement on XPHOZAH and the opportunity ahead. And like I said, the physicians aren't really differentiating between Medicare and non-Medicare. So we need to continue to be steadfast in our execution in delivering those clinical messages, so that physicians can make the best choice for their patients based on clinical needs.

And to your -- the latter part of your question is there's nothing unique in any communication that we have with payers, right? It is status quo in the way that we're operating through our ArdelyxAssist to have those patients go through the prior authorization process. So we don't have -- I mean it sounds funny but it's keep doing what you've been doing which the decisions we've made allows that to occur.

Our next question comes from Yigal from Citigroup.

This is Reena [ph] on for Yigal. I was just wondering if you've made any progress with regard to the injection to temporarily hold implementation of including orals in the dialysis bundle in 2025. Like any additional color there would be much appreciated.

Yes. I think as you heard in my opening comments, we hope that there would be some action on that before the end of the year. Otherwise, there's not really any additional insight that we can provide.

Our next question comes from Laura Chico from Wedbush Securities.

Just one, Justin, I think I missed what you said on the gross to net improvement in the quarter for XPHOZAH and then with respect to IBSRELA, what would be appropriate timing for 2025 guidance?

Yes. So Laura, is -- the latter part first. As we look at the performance of the addition of the sales force and new ABDs, let's let that settle in a bit before we give guidance but it will be in the early part of the next year. We won't leave you hanging too long. Justin?

Thank you, Laura. In the third quarter, our gross to net deduction improved from 21.4% to 19.3% in the third quarter. So this improvement was primarily dependent on our patient payer mix. The utilization of our commercial co-pay and mild changes there. As you might imagine, we're pleased with the results to date. And as we learn more about this -- the patient mix and the co-pay claims and the amount of the claims will give you more guidance going forward like we do for IBSRELA, where we mentioned 30 plus or minus 5% is the general role.

Our next question comes from Joseph Thome from TD Cowen.

Maybe just going into the fourth quarter, do you expect any differing dynamics in terms of stocking of XPHOZAH or any pull forward of prescriptions or anything that might be possible, I guess, for either the patients or the physicians to almost prepare for a potential bundle scenario -- or you -- do you think there will be anything to point out there? And then second, just on the XPHOZAH court case, obviously, the legislation side is a little bit more maybe straightforward if that's able to go through. But if the injunction is granted by the end of the year, what's the next step then kind of how much visibility would you have after that standpoint on next steps?

Joe, thanks. I think if that were to occur, we'll provide more perspective what that then means if we get that. It's premature at this point to give any more information than that. As it relates to pulling things forward. What I would say is what the team has put in place is a continuity of care program which I think is very important to not have stuff like that occur, where if you are prescribing for a Medicare patient, you can come into a continuative -- continuity of care program until things resolved. So I wouldn't anticipate that. I don't know, Eric, any comments that you would like to share on that?

No, I agree. I think we've got a great program with continuity of care and we've got really good relationships with wholesalers and distributors and there really hasn't been any conversations about that.

Great. And then maybe just one more question for me. I guess, does it seem like the dialysis centers are even preparing, I guess, for this change January 1. It seems like this would be a big change for just like a light switch on and off. I guess, are you seeing anything at the dialysis centers themselves that would indicate that -- they're preparing or not preparing one way or the other?

No. I think, Joe, one of the biggest challenges for all dialysis providers. And certainly, the independents, the rural and the small and nonprofits is the infrastructure that must be put in place to manage pills and everything that's going to come from this is going to be debilitating for many. And that is one of the fundamental risks honestly, of what this policy is ultimately going to do is further make dialysis a difficult thing for patients to get access to. We certainly know rural communities where people 3 times a week are having to drive hours to be dialyzed. They need that to live. So yes, there are efforts they have to underway which is the basis of an awful lot of those providers supporting the Kidney Patient Act. It's a catastrophe and its bad policy and it's bad for patients which is why we're working so diligently both on the Patient Act and the legal front.

Our next question comes from Ryan Deschner of Raymond James.

Congrats on another strong quarter for both IBSRELA and XPHOZAH. My question is, how much of the uptick we are seeing in IBSRELA scripts over the past few months? Are you directly attributing to getting the expanded sales team online versus other factors? Is every member of this team now up fully trained and deployed? And then also a follow-up question.

Sure. Let me just briefly address the first question and I'll ask Eric to comment on it, too. In Eric's comments, you heard him say that we're beginning to see some impact from those who came on early in the expansion but likely not the majority that came on and are now in the field and trained. So I don't know, Eric, any color you want to add to that?

No, I think that's right. We started the expansion a little bit earlier in the year and we certainly have seen impact from those individuals that have come up. And that's what gives me confidence as we move forward now having a full team in place, completely trained and in the field. So plenty of opportunity that's out there and looking forward to having a full team in place for fourth quarter.

Fantastic. And just a quick follow-up. Do you have any updates on partnerships in Europe or Rest of the World for XPHOZAH or a time line with more resolution on the approval of the Chinese market?

Yes. So for the Chinese approval, we still anticipate that will be before the end of the year. And no updates or news on other partnering.

Our next question comes from Ed Arce of H.C. Wainwright.

This is Thomas asking a couple of questions for Ed. Perhaps first question is for Justin. Can you give the -- can you discuss the latest burosumab for IBSRELA? And then also how much improvement can we expect from current level? And what will it take?

So for IBSRELA, as we've said before, our gross net deduction is around 30%, plus or minus 5% and so our third quarter was in line with that precisely. And then again, going forward, we'll give updates obviously in the early part of the year. As a general premise in the first quarter of 2025, our gross send us higher when plans reset, insurance policies reset some folks get new coverages and there may be new Medicare rebates taking effect in January '25 as well.

Got it. And then I guess for XPHOZAH, you mentioned earlier, IBSRELA sales guidance kind of expected in early next year. Can you also expect XPHOZAH sales guide for next year around the same time frame?

Well, with all the moving parts with XPHOZAH, I think it would be premature for me to say when we would give guidance. It would be nice to have steady state predictable things. So if we're able to, we'll do as soon as we can. But I think expecting it at the beginning of next year, maybe a little bit premature.

Got it. And then one final question, perhaps this one is for Eric. You mentioned earlier in the call, you're really seeing early impacts especially from the sales rep that are earlier on in the expansion process. What metrics can we focus on the near and long-term. And what we consider to be a successful expansion?

Yes. So for me, what I look at is with the increased individuals in the field, they continue to have an increase in their call activity. We certainly are seeing that simply which is having more representatives out there in the field. And I'm very proud of the team this year to be able to show an increase in new and -- new and total writers as well as new and total refill prescription. So for me, those are the indicators that we're focused on and we've shown good growth this quarter versus last quarter. So continuing to have that solid quarter-over-quarter growth.

Our next question comes from Matt Kaplan of Ladenburg Thalmann.

Congrats on the really strong quarter. Just to dig in a little bit more to what you're seeing or what you're hearing in terms of the progress and moving forward with the Kidney Care Act. Any detail you can share on what you're hearing on the legislative front?

Yes. I mean, if you do what I do and watch Congress.gov, you can see all the cosponsors that are signing up in the house, right? As I said in my opening statement, we now have 38, 2 in the companion bill in the Senate. So it is progress and exciting progress at that plus all of the coalition has been built around the Patient Act. So it is we're punching above our weight class. I don't know what other kind of analogies that you can use or metaphors but we have a lot of attention. Now our system needs to work to get the bill approved passed.

That's good. And then with respect to the APA lawsuit and CMS, are there any specific time lines that the court asked to get back to you and with respect to issuing a potential preliminary injunction?

Yes. I mean, so that needs to occur before the end of the year. So that's why we're hopeful that we will all know something more before that.

Okay. The court must decide by the end of the year.

Yes.

Okay. And then, I guess, lastly on XPHOZAH, I guess, you guys recently, I guess, got back from the ASN meeting. Any feedback that you're hearing from doctors out there with respect to they're -- how they're utilizing XPHOZAH right now in the -- to treat their patients?

Yes, thanks for that. Listen, I was incredibly impressed with the team this year at ASN. And in talking with physicians, they're using it on label in addition to the binders and they're really seeing significant results with these patients out there that aren't well managed on their phosphate binders. So it continues to give me confidence in the direction that we're headed and most importantly, the opportunity in front of us.

Next question comes from Chris Raymond of Piper Sandler.

I know this question has been asked a couple of ways already and I know you're not guiding on XPHOZAH. And Mike, I heard what you said about your messaging to nephrologists to just keep doing what you're doing. But I have to ask, if 60% of your patient base is likely to not be covered come January 1, again, without any legislative or legal progress on your part. How do docs not start to pull back use? And in particular, I think there could be an argument for this. I mean, we did a KOL call earlier this month where the KOL was kind of resisting the notion that there would be a bifurcated treatment that they had find a way to get to keep patients on therapy. And I'm kind of flummoxed as to how that could be. Any sort of thinking there that you could help maybe align this?

Very simply, this is about access, not reimbursement. So what does that mean is if you, as a nephrologist continue doing what you're doing and you send prescriptions into our ArdelyxAssist, it will be adjudicated whether or not it is a prescription that has reimbursement. And if it doesn't, you're -- as it is today, your patient will be able to potentially meet the benefit requirements of our patient assistance program. So the objective, as I said in my opening statement was that our objective is to make sure our patients have access to the drugs that we've created. And -- that's why the message to nephrologist is keep doing what you're doing. We don't anticipate or expect them to determine and bifurcate. That's absolutely what we're trying to avoid. That's not their job. Let us do it on the back end with ArdelyxAssist and identify those that are -- that still have reimbursement. And for those that qualify, they could have access to the patient systems program.

Okay. So then the way it would show up then, I guess, on the P&L would be, again, barring any sort of progress on all the efforts that you guys have would just be this large free drug expense. Is that a fair statement?

There would be a free drug expense in marketing as there is now.

This concludes our question-and-answer session. I would like to turn the conference back over to President and CEO, Mike Raab, for any closing remarks.

And thank you, everyone, for joining us this evening. As always, we remain focused on our priorities and we'll provide information updates when we can. In the meantime, we remain steadfast in our commitment to patients and to maintaining our commercial momentum. With that, we can close the call. Thank you, operator.