Ardelyx, Inc. (NASDAQ:ARDX) Q4 2023 Earnings Call Transcript
Ardelyx, Inc. (NASDAQ:ARDX) Q4 2023 Earnings Call Transcript February 22, 2024
Ardelyx, Inc. misses on earnings expectations. Reported EPS is $-0.12 EPS, expectations were $-0.09. Ardelyx, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Ardelyx Fourth Quarter and Full Year 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Caitlin Lowie, Vice President of Corporate Communications and Investor Relations at Ardelyx. Please go ahead.
Caitlin Lowie: Thank you. Good afternoon and welcome to our fourth quarter and full year 2023 financial results call. During this call, we will refer to the press release issued earlier today, which is available on the investor 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 annual report on Form 10-K that was filed today. It 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, will begin today's call with opening remarks and an overview of the company's progress during the fourth quarter of 2023 and the full year 2023. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the performance of IBSRELA and XPHOZAH. Our Chief Medical Officer, Dr. Laura Williams, will then discuss and expose the real-world evidence study announced today. Justin Renz, Chief Financial and Operations Officer, will conclude today's prepared remarks with a review of the company's financial performance during the fourth quarter and full year ended December 31, 2023, before we open the call to questions. With that, let me pass the call over to Mike.
Mike Raab: Good afternoon, everyone, and thank you for joining us on the call. I feel like I've said this every quarter, but we are really excited to be here to discuss our progress and performance. The fourth quarter was significant, as was all of 2023, as we continue our evolution as an integrated biotech company, bringing two first-in-class products to patients. IBSRELA and XPHOZAH are demonstrating favorable market response with high healthcare practitioner interest and continuously expanding adoption. In November of last year, we launched XPHOZAH, and the market response, both in terms of treatment uptake and direct feedback we've received from the field, has validated what has always been clear to us, that physicians and patients have been waiting for a novel mechanism option to help control serum phosphorus.
As you will hear from Susan, all the indicators we track early in launch point to a strong uptake. Additionally, as we announced today, as part of our commitment to continually build our understanding of the clinical utility of our products, we are conducting a real-world evidence study designed to capture the impact that an XPHOZAH-based regimen can have on the treatment of hyperphosphatemia. Laura will review more details about the study during our call today. Turning to IBSRELA. In January, we shared our enthusiasm for our commercial progress we are making, and our expectations for IBSRELA are high. We shared that we believe IBSRELA has the potential to become a $1 billion drug. The patients are there, they need relief, and many of them continue to experience symptoms despite treatment with incumbent therapies, clearly reinforcing the need for novel treatment options like IBSRELA.
IBSRELA's mechanism of action, solid clinical data, and a growing user base of positive experience is resonating, driving expanding consideration and adoption by more and more healthcare practitioners. With patients' positive experiences with IBSRELA, ACPs are beginning to change how they engage with and treat their IBS-C patients as they are expanding their use of the therapy. In addition, the path for access is established. These are the fundamentals of our commercial strategy, and they are working. As we noted in January, we will always look to expand the opportunity and to ensure our medicines get to those patients who need it. Thus, we are thoughtfully investing in expanding our commercial reach. We are also thinking about what the future of Ardelyx will look like, and we find ourselves in a unique and enviable position.
We have options. With both XPHOZAH and IBSRELA approved in the U.S. and doing well, we are engaging potential international partners to bring these products to patients in other global markets. In addition, with our established and proven commercial organization, we are emerging as a partner of choice for development stage assets in therapeutic areas where patients continue to have unmet needs. And with our successful track record of discovery, development, and regulatory approvals, we also have the opportunity to develop earlier stage assets ourselves. These activities are ongoing, and we look forward to sharing more information when appropriate. In the meantime, our top priority is to focus on sustaining the commercial momentum of IBSRELA and XPHOZAH.
I will now hand the call to Susan to share an update on our commercial performance. Susan?
Susan Rodriguez: Thank you, Mike. It is great to be here today to share a commercial update on both IBSRELA and XPHOZAH. Let me start with IBSRELA. IBSRELA has established a unique position within the IBS-C treatment paradigm and is changing the way the HCP community treats patients with IBS-C. HCPs that we have reached with our messaging are responding favorably to the differentiated mechanism of action and clinical data profile, adopting IBSRELA, and continuously expanding their use based on the patient responses they are seeing. Significant opportunity exists to continue to expand awareness, knowledge, and uptake across our target market. Our research has demonstrated that when HCPs become aware of IBSRELA and its first-in-class mechanism, they begin prescribing, and the more they see, hear, and learn about IBSRELA, the more they prescribe and expand their thinking of patients who are candidates for IBSRELA.
The fundamentals driving IBSRELA's growth momentum are strong. IBS-C is a condition of multifactorial pathophysiology, and patients need multiple mechanism therapies to improve treatment outcomes and provide additional relief. Prior to the launch of IBSRELA, there was a single class of drugs available for patients with a large unmet need across patients whose symptoms persisted despite treatment with these therapies. IBS-C prescriptions are concentrated across an accessible group of HCPs who have demonstrated to be very responsive to both our field-based sales team as well as our omni-channel digital engagement program. A favorable access profile is established. Interest is high. Response to the IBSRELA profile is driving adoption. Favorable treatment experiences are driving expanded use, which, in turn, is driving a continuously expanding view of patients who are candidates for IBSRELA therapy.
We continue to see consistent, persistent growth of IBSRELA across all key performance metrics. New prescriptions are growing. Refill prescriptions are growing. New writers are growing, and use across the existing writer base is persistently growing. These foundational elements will be leveraged and built upon as we increase our investment in IBSRELA in 2024. You can expect to see continued steady growth throughout the year. Turning to XPHOZAH. At just three months since launch in November, we are very pleased to see the market responding as we anticipated. The high level of awareness, interest, and intent to adopt has translated into strong initial product uptake. The $2.5 million in revenue we reported during the fourth quarter, but really from mid-November through the end of December, validate that there were patients and physicians who were waiting for first-in-class phosphate absorption inhibitor XPHOZAH as a much-needed option for patients who were not able to achieve target serum phosphorus levels with phosphate binders alone or who were intolerant of phosphate binders.
We are continually hearing from physicians who say that patients who are on an XPHOZAH-based regimen are experiencing positive results. Additionally, patients are responding favorably to the single-tablet, twice-daily dosing profile of XPHOZAH, both when it's being added to their binder regimen or when the HCP chooses to discontinue their binder therapy and initiate treatment with XPHOZAH. In addition to a positive therapeutic response and patient experience reported by physicians, we are rapidly establishing a favorable access landscape for XPHOZAH. Payers are establishing coverage policies which provide access to XPHOZAH via a prior authorization for patients who are not adequately responding to binder therapy or are intolerant of binder therapy.
Nephrologists report to us that a large subset of their patients meet these criteria, and nephrologists are demonstrating a willingness to engage in the administrative PA process to secure access to therapy for these patients as they believe they are in need of a novel mechanism approach. At this point, we are seeing patients access XPHOZAH across all commercial and government payers. In addition, we are seeing patients take advantage of the resources available through our patient services programs, including our copay pay down program and patient assistance program for qualifying patients. Finally, we are also seeing strong market interest and responsiveness to our in-market messaging centered on the novel phosphate blocking mechanism and clinical profile of XPHOZAH.
Our XPHOZAH-dedicated sales force of 60 are finding nephrology offices across the country welcoming and eager to learn more. Our digital and in-person educational sessions are highly attended and our various omni-channel digital communications are seeing high levels of engagement. These are all positive launch indicators that we believe will result in continued, consistent and persistent uptake. The foundational elements of the Ardelyx commercial approach are all working together and we are incredibly pleased with the performance thus far. What we see is consistent and persistent growth driven by the market need, favorable market access and key demand creation fundamentals that are delivering on the mission of Ardelyx to bring a novel mechanism therapy to patients who, despite treatment with available therapies are in great need of a new option.
It is an exciting time for our team and for Ardelyx. The growth momentum we are seeing for both IBSRELA and XPHOZAH is exciting. The team is laser-focused on sustaining this momentum with the strategic intent to reach all patients in need of our first-in-class therapies. I look forward to continuing to share updates with you in the future. With that, I will hand it to Laura.
Laura Williams: Thank you, Susan. I'm really pleased to join you today. In addition to all the great work that Susan shared with you in support of IBSRELA and XPHOZAH, we also continue to expand our medical and clinical understanding of our products. Medical education for patients and HCPs, as well as data dissemination via abstract presentations and publications, continue to provide valuable insight and enhance the science around our products and more generally within these therapeutic areas, which brings me to one of the data-gathering programs that I'm extremely excited about. Today, we announced that we will be initiating a real-world evidence study of XPHOZAH. As we know in clinical development, gaining a real-world understanding, our therapies can vastly increase our knowledge of how these drugs are impacting patients outside of the more controlled clinical setting, complementing our overall understanding of the treatment paradigms for our patients.
Real-world evidence studies can shine additional light on the safety, tolerability and effectiveness of a therapy and provide greater insight into epidemiology, disease burden, treatment patterns, treatment adherence, impact on quality of life, and importantly, how a new drug like XPHOZAH integrates into a patient's lived experience. We anticipate that these types of data will provide Ardelyx with additional insights to help us support the patient and physician communities as they integrate XPHOZAH into their treatment practices. It will also help us develop educational materials for patients to maximize their understanding of the drug and potentially enhance their experience, while continuing to highlight the favorable benefit-risk profile of XPHOZAH.
And it will also support ongoing discussions with payers. This will be a real-world, long-term, prospective observational cohort study designed to capture the impact of XPHOZAH-based regimens in patients with hyperphosphatemia on maintenance dialysis who were either not controlled on or intolerant of binder therapy. To that end, patients on the XPHOZAH-based regimen will include those who are using XPHOZAH in combination with phosphate binders, as well as those who are taking XPHOZAH as monotherapy. We will follow these patients over a period of up to three years to understand the persistence of treatment effectiveness and achieving and maintaining serum phosphorous within the guideline recommended range. This extended analysis period will allow us to also examine changes in treatment patterns, discontinuation rates across treatment regimens and the impact of an XPHOZAH-based regimen on patient satisfaction.
I am very excited about what XPHOZAH may be able to do for our patients and capturing data in a real-world setting will not only supplement the insights we've gained in our clinical trials, but more importantly will further expand our understanding and enhance our ability to support the patients and the physician communities who are constantly striving to manage serum phosphorous in the setting of end-stage kidney disease. I look forward to sharing more detail and results from this trial in the future. I will now pass it to Justin.
Justin Renz: Thank you, Laura. Earlier in January, we pre-announced our product revenue, so I'll use this as an opportunity to review that material and highlight additional key financials from the fourth quarter and full year 2023. What I believe you will hear from the information we have provided today is, we find ourselves in a strong financial position. We are well-resourced, we have multiple revenue streams and we are thoughtfully investing in continued growth. We have total revenues of $34.4 million in the fourth quarter of 2023, driven by growth in net product sales revenue. On a full-year basis, we reported total revenues of $124.5 million in 2023 compared to $52.2 million in 2022. Our significant year-over-year growth was driven primarily by the strong performance of IBSRELA.
I will now take a moment to walk through the relevant contributions of our revenue components during the fourth quarter and full year. First, we had U.S. net product sales revenue of IBSRELA in the quarter ended December 31, 2023 of $28.1 million, a 26% quarter-over-quarter increase from the $22.3 million we reported in the third quarter. On an annual basis, we recorded $80.1 million of IBSRELA, U.S. net product sales revenue in 2023 compared to $15.6 million in 2022 as a result of consistent and persistent growth in all key metrics. We also recorded $2.5 million in U.S. net product sales revenue of XPHOZAH in the fourth quarter following the launch in November. Second, we reported $3 million in licensing revenue in the fourth quarter, bringing our full-year licensing revenue total to $35.8 million, which is comparable to the $35 million in licensing revenue that we recognized in 2022.
Finally, we reported product supply revenue of approximately $800,000 in the fourth quarter and $6.1 million for the full year of 2023 compared to $1.5 million during the full year of 2022. Research and development expenses were $9.5 million in the fourth quarter of 2023 compared to $9.1 million for the same quarter of 2022. In 2023 and 2022, R&D expenses were $35.5 million and $35.2 million respectively. Selling, general and administrative expenses were $47.7 million in the fourth quarter of 2023, an increase of $28 million from the $19.7 million we reported for the same period of 2022. The increase was due to the costs associated with the continued commercialization and growth of IBSRELA, as well as the launch activities for XPHOZAH. On a full-year basis, total SG&A expenses were $134.4 million compared to $76.6 million in 2022.
We had a net loss of approximately $28.8 million or $0.12 per share in the fourth quarter of 2023 compared to net income of $10.7 million or $0.06 per fully diluted share in the same period of 2022. The net loss for the fourth quarter of 2023 includes $5 million in combined non-cash expenses from share-based compensation and non-cash interest expense related to the sale of future royalty. Our net loss for the full year of 2023 was $66.1 million or $0.30 per share, which included $17.9 million of non-cash expenses from share-based compensation, non-cash interest expense related to the sale of future royalties and impairment of a right of lease use asset. In 2022, we reported a net loss of $67.2 million or $0.42 per share for the full year. As of December 31st, 2023, we had total cash, cash equivalents and short-term investments of $184.3 million as compared to $123.9 million at the end of 2022.
This includes $22.4 million in net proceeds that we drew in mid-October from our term loan agreement with SLR Capital, which we announced following the approval of XPHOZAH. In addition to our cash as of December 31st, 2023, in January, we received a $3 million milestone payment from Fosun Pharma following the U.S. approval of XPHOZAH. We also intend to draw the next $50 million tranche from our term loan agreement with SLR prior to the expiry of this option on March 15th, 2024. Now, let me take a few minutes to give you some insights to what we currently expect for 2024. First, as it relates to IBSRELA. Our strong performance in 2023 was driven by consistent uptake for IBSRELA across each of our key measures, including new writers and repeat writers, as well as new and refilled prescriptions.
IBSRELA's performance to-date and as Susan shared earlier, the continued insight from our in-field experience has strengthened our confidence in the potential for this product. As a result, in January, we announced we currently expect IBSRELA's U.S. net product sales revenue for the full year 2024 to be between $140 million and $150 million. As a reminder, our guidance does not include any anticipated XPHOZAH, partner milestone payments or product supply revenues. As we've continually done since the launch of IBSRELA, we have thoughtfully increased our investment as our internal expectations evolved. We began additional planned investments into our sales and marketing in January, including the expansion of our field presence from 64 to 124 dedicated to IBSRELA, as well as increasing our spending in marketing initiatives, including additional engagement, product sampling, and our patient support services.
As a result, by the third quarter of 2024, we anticipate incurring incremental operating expenses, averaging approximately $20 million more per quarter when compared to our fourth quarter of 2023. We feel confident that our current cash position will support our expected spend, including these investments. We are excited about IBSRELA's performance, the early days of XPHOZAH, and the strength of our cash position. We will continue to be thoughtful with how we deploy capital while focusing on maximizing shareholder value. With that, I'll hand it back to Mike.
Mike Raab: Thanks, Justin. We accomplished a lot in 2023, and we're not yet done, and we're not looking back. 2024 is going to be yet another important and exciting year for our delegates. We are looking ahead, and our team is more aligned than ever on the company's path forward. I will now open the call to questions. Danielle?
See also Top 20 Fastest Growing Industries in the Next 5 Years: Predictions and 15 Best States to Start a Cannabis Business.
To continue reading the Q&A session, please click here.
