Good day and welcome to the Ardelyx First Quarter 2023 Conference Call. All participants will be in listen-only mode. 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. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to our first quarter 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 our risk factors in our most recent 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. Our President and CEO, Mike Raab, will begin today's call with opening remarks and an overview of the company's progress during the first quarter of 2023. Next, Susan Rodriguez, Chief Commercial Officer, will provide an update on the launch of IBSRELA. Justin Renz, Chief Financial and Operations Officer, will conclude today's formal remarks with a review of the company's financial performance during the first quarter ended March 31st, 2023 before we open the call to questions. With that, let me pass the call over to Mike.

Thank you, Caitlin. And good afternoon, everyone. I'm excited to be here today to highlight the momentum we've created at Ardelyx as we report another quarter of consistent growth for IBSRELA and the progress we've made on our path to bring XPHOZAH to patients. In this afternoon's press release, we also announced a recent business development transaction designed to bring our novel mechanism products to patients and strengthen our cash position. What you are seeing from Ardelyx is a focus on execution. We know our priorities and the team continues to deliver. Notably, IBSRELA sales came in at $11.4 million, an increase of 31% over the fourth quarter of last year, and all indicators continue to reinforce our confidence that we are on track for IBSRELA to become an important product for patients with IBS-C. In a moment, Susan will share details on our momentum and learnings as we are now just over a year into launch. As we guided during our Q4 earnings call in March, we resubmitted the NDA for XPHOZAH on April 17, and await the goal review date from the FDA which we expect mid-month. We're now in full preparation mode for a launch in the second half of this year pending approval of the NDA. Comprehensive nephrology research conducted in the first quarter reflects a high level of awareness, interest and intent to adopt XPHOZAH, and we anticipate a strong response to the product launch. Our commercial team, led by Susan, is focused on executing a plan that will capitalize on the highly recognized unmet needs in the treatment of hyperphosphatemia and a strong nephrology interest in adopting a novel mechanism therapy as we plan for long-term success of XPHOZAH. We will share information on our go-to-market strategy as we get closer to launch. Finally, we continue to be thoughtful about how we fund the company. We're excited about the collaboration agreement with METiS Therapeutics to develop one of our earlier stage assets, our portfolio of TGR5 agonist compounds. We received an upfront payment of $750,000 in April following the signing of the agreement and have the potential to receive additional milestone payments and royalties in the future. As we look ahead to the rest of the year, we will continue to focus on execution. We are encouraged by our progress to date and the responses we hear from the market. Now, let me hand it over to Susan who will share more detail about the commercial performance of IBSRELA.

Thank you, Mike. The first quarter of 2023 marked one year since the launch of IBSRELA. We launched in a market that many thought was impenetrable for new entrants, with an innovative strategy few had seen. After 12 short months, our strategy is continuing to drive uptake, and we are increasingly gaining share in the IBS-C market. In the first quarter of this year, total net sales for IBSRELA came in at $11.4 million, reflecting a 31% increase over the fourth quarter of 2022. The drivers fueling this growth are strong and persistent, which we believe point towards continued growth for IBSRELA as we see new and refill prescriptions growing in parallel to persistent growth in both new and repeat writers. To further characterize the key growth drivers to our IBSRELA business, I'm going to briefly review the highlights of our disruptive commercial strategy and how we are performing against these key components of the plan. First and foremost, Ardelyx is a company that discovers, develops and commercializes first-in-class novel therapies to address important unmet medical needs. Physicians are choosing IBSRELA as a result of a recognized unmet need in IBS-C. Patients are responding well to IBSRELA and staying on treatment. The differentiated product profile, with a novel mechanism of action, and clinical data supporting IBSRELA's safety and efficacy resonate with the GI community. We continue to generate clinical insights with additional analyses being presented at the Annual Digestive Disease Week that will kick off Saturday in Chicago, which we expect will continue to fuel this favorable view of the IBSRELA products and clinical profile. Second, the unmet medical need in IBS-C is significant and persistent. Patient market research indicates that approximately 77% of patients with IBS-C continue to experience residual symptoms despite treatment with prescription therapy. As our launch progresses, physicians are gaining firsthand experience with IBSRELA, and the favorable results they have seen from the initial patients they've treated with IBSRELA is driving an expanded view of the patients across their practice, who they believe could benefit from the novel mechanism treatment approach provided by IBSRELA. Third, we are executing with IBSRELA by targeting a concentrated set of specialist healthcare providers that exist within what is now an established IBS-C prescription market. These top writing HCPs see patients with IBS-C every single day and commonly see that their patients continue to suffer with symptoms despite treatment with GCC agonist therapies. These HCPs have a strong interest in learning about IBSRELA and are continuously engaging with our sales force. They have established processes in place to pursue and secure the prior authorizations required for IBSRELA and are helping to ensure that patients gain access to IBSRELA therapy. Lastly, our payer strategy is uniquely designed to address the access dynamics implicit to a novel branded entrant launching into a market where patients are commonly treated with established therapies, yet persist with important unmet medical needs. Early in our launch, commercial and government payers evaluated IBSRELA and established coverage policies that grant access on the basis that a patient has been treated with, in most cases, GCC agonists. Since the patients prescribed IBSRELA are already considered by their HCP to be insufficiently treated despite GCC agonist treatment, offices are motivated to administer the prior authorizations, which demonstrate that patients meet the coverage criteria. As a result, approval rates are favorable and patients are gaining access to IBSRELA. This favorable access landscape experienced by treating HCPs is further reinforcing expanded use for those patients and their practice in need of a novel approach. Due to the limited prescription options available to treat IBS-C and the unmet need despite use of these existing options, coverage policies include a path for use of IBSRELA with prior authorization approvals achievable. Since our access strategy centers on proper patient selection and support of prior authorization procedures, we are achieving access via HCP demand, and not by unnecessary rebates to payers, resulting in a favorable dynamic for the gross to net profile of IBSRELA. Combined, these core elements of our strategy centered on targeting, positioning and access are working together and IBSRELA is increasingly making an impact on the IBS-C market at a price point aligned to its clinical value proposition. All of the uptake indicators continue to give us confidence that IBSRELA can achieve a mid to high-single digit peak market share position, which at IBSRELA's price point in this 5 million annual IBS-C prescription market would make IBSRELA a $500 million product at peak with the potential to exceed this level with additional market share gains. As I look ahead to the launch of XPHOZAH, the market dynamics in the hyperphosphatemia space are similar to the dynamics in IBS-C, an established prescription market, a concentrated group of prescribers, existing treatment options limited to one class of therapy, and patients that despite treatment are in need of a novel mechanism treatment approach. The unique clinical value proposition of XPHOZAH points to the same key strategic go-to-market elements in the areas of targeting, positioning, access and pricing that Ardelyx has successfully executed with the launch of IBSRELA and preparations are well underway. I look forward to sharing more of those details as well as updates on our continued progress with IBSRELA in the months ahead. Before I hand it to Justin, I would like to highlight that I am incredibly proud of the highly experienced, high performing team who is behind IBSRELA's disruptive commercial strategy and our success. Together, we are realizing the vision of Ardelyx.

Thank you, Susan. I'm going to walk you through our product sales, collaboration revenue and expenses before turning to our cash position and how we're thinking about 2023. As both Mike and Susan mentioned, we had net product sales of IBSRELA in the first quarter of $11.4 million, reflecting significant quarter-over-quarter growth, a 31% increase from what was reported in fourth quarter sales. It was in the first quarter of last year that we recognized our initial sales of IBSRELA of $0.5 million dollars and we had $27 million in cumulative net product sales in our first four quarters since launch. Research and development expenses were $9.1 million for the quarter ended March 31, 2023, reflecting a slight increase over $8.9 million from the same quarter last year. Selling, general and administrative expenses were $26.8 million in the first quarter of 2023, an increase of $7.5 million compared to $19.3 million in the same period of 2022. The increase was primarily due to the increased costs associated with the continued commercialization and growth of IBSRELA. For the quarter ended March 31, 2023, we had a net loss of approximately $26.8 million or $0.13 per fully diluted share compared to a net loss of $28.1 million or $0.21 per share in the first quarter of 2022. It is notable that our net loss for the first quarter included over $4 million of non-cash items, including share-based compensation expense of $2.9 million, interest expense related to the sale of future royalties of $1 million and an impairment of a lease right of use asset of approximately $429,000. As of March 31, 2023, we had total cash, cash equivalents and short-term investments of $130.4 million as compared to $123.9 million at year-end 2022. I will take a minute to walk through our cash flows for the quarter. As I said, we ended 2022 with approximately $124 million in cash. We then raised $51.9 million during the quarter through sales of our common stock under our ATM program, $20 million of which we announced on our March 2 conference call when we reported our fourth quarter results, and another $31.9 million from sales during the period from March 7 through March 27. To note, in the first quarter, we spent approximately $20 million, including inventory build, preparing for the launch of XPHOZAH and to support IBSRELA growth. Our net loss and working capital adjustments accounted for the remaining $25 million in operating cash burn. Regarding our spending requirements for the remainder of 2023, we will continue to invest in the launch of XPHOZAH in the near term as we approach the goal review date. Besides the further investments in supply, we will be expanding our commercial footprint as well as adding additional promotional spend to support the launch activities. In terms of financing the company, as Mike mentioned, we announced the licensing agreement with METiS Therapeutics, under which METiS has exclusive rights to develop and commercialize our TGR5 agonist compounds, all therapeutic areas. This agreement brings opportunities to develop one of our next generation technologies. As part of the agreement, we received an upfront payment of $750,000 from METiS in April. We have the potential for substantial clinical, regulatory and commercial milestones, as well as future product royalties. We will continue to strengthen our cash position by looking at all options available to us, including more non-equity solutions. We will make thoughtful decisions that maximize shareholder value. We are confident in our ability to continue to fund our operations. I will now turn the call back to Mike for some concluding comments.

Thanks, Justin. As you heard from Susan and Justin, our performance reflects a focus on executing on our plans. We know that we have more to do in the months ahead. And I'm confident that the team at Ardelyx is prepared and capable of delivering on the plans and missions that we collectively share. I look forward to keeping you updated on our continued progress. With that, I will now turn the call to questions.

Our first question comes from Yigal Nochomovitz from Citigroup.

Just can you help us a little bit with the math for IBSRELA for the first quarter? We were looking at the Symphony data. I don't know how accurate that is. But in any case, we did some math on that using the just over 12,000 scripts and then the WACC, which I know increased on February 1, and the using the gross-to-net from last year of 28%, you were getting a little bit of a higher number. So could you just comment as to what the actual gross-to-net was in the first quarter and any other dynamics that was driving the overall revenue picture?

Let me actually ask Susan to speak first to where we stand with IQVIA and Symphony as those data begin to mature and then ask Justin to speak to gross-to-net.

As we track both IQVIA and Symphony scripts, what we're finding is that the growth trajectories are actually quite comparable. So, directionally, it's a good indicator on the momentum we're seeing with IBSRELA uptake. Symphony, based on their projection methodology, consistently reports a slightly higher level of scripts. So I think that probably explains why maybe your math is slightly different than what we have announced as our quarterly performance for Q1 2023.

Can you provide the approximate difference? What is the inflation rate with Symphony? Do you have an estimated figure for that? How much is the discrepancy in relation to what is more accurate?

I really can't comment on that because I think in terms of – we need a few more months of accumulating this audit data to really make a determination on which is the most accurate reflection. So, I just need a few more months for me to be able to answer that question, Yigal.

I think as we've been saying consistently is that we know that neither one of the two are going to be perfectly covering some of the direct accounts that we have with specialty pharmacies. I think what we said is, it's going to be 12 to 15 months, thereabouts, before we believe that we'll be comfortable with projections there. And we will do our best to provide you what that delta looks like. But I think we're in a position right now that it's not going to be a perfect number, so we want to get a little bit better.

This is, as you know, the first time we had sales in the beginning part of the calendar year. So, it's very important for us to make sure that we have access available to all of our patients who want to have IBSRELA prescribed to them. And so, our gross-to-net profile is affected by the commercial copay, other access availabilities for our patients. In the first quarter, as you know, when copays reset whether they're a private payer, commercial payer, or government payer, there's more of a rebate possibility. Rebate is not the right word. A copay buydown, if you will, we make available. And so, we expect that to decline over the course of calendar 2023. So our gross-to-net, which is published in our external financials for Q1, was 33.7, will continue to decline over the course of the year. And we expect, to your point, it should go to the higher 20 range by the end of the year.

Yigal, if you look back over the last 10 years, the first quarter certainly has had seasonality for the IBS-C space, and obviously early for us, but we didn't suffer that same seasonality in the results that we saw. So we feel good that we're on the right track. But we'll get more insight on those numbers and provide you that guidance when we're ready to.

I know you probably can't answer this because you don't know yet, but do you have any better feeling yet as to whether – for hyperphosphatemia whether you're going to go down the two or the six month review clock? Or is it sort of the same?

I think as we've said consistently, our base case is the six month review. We will all know we expect by mid-month, and we'll certainly announce that. But I think we should all have the expectation that it'll be a six month review. It'd be nice to be surprised, but that's our base case.

Our next question comes from Laura Chico from Wedbush.

I've got two for you, I guess. First on IBSRELA, can you expand your comments a little bit on the prescribing breadth? And I guess, what metrics should we be watching for to gauge how this might be changing in terms of repeat usage among prescribers? The reason I ask is, I think your market research has shown about 50% hold favorable perceptions of the drug once they use it. So, trying to understand how that's translating to repeat utilization. And then I have one follow-up.

I think if you look at – ultimately, we'll be able to give you better direction when we give guidance on tracking new writers and then repeat writers. And we're seeing a very consistent relationship of repeat writing over the last several months as we build momentum for IBSRELA. And for now, I think really seeing as well the new and refill Rx ratio is also extremely encouraging in terms of the growth we're seeing at both levels. So patients are persisting on therapy, which is a further reflection of the favorable experience physicians are having and why we are seeing repeat writing.

Laura, just anecdotally, we're all getting out in the field now with the commercial organization. And the anecdotal stories I hear from physicians and caregivers is that – and it's been tried on the most difficult to treat patients, which is a normal tendency with a new drug with a new mechanism getting launched, and they're finding it to be what we've anticipated it would be, that they're getting a great response. And that begins to then help them say, gee, how many other patients deserve the right to try a new mechanism and that's beginning to gain traction.

I guess then, one follow-up on XPHOZAH. Can you just comment there too on incent to prescribe dynamic and how that's changed over time because this is another one where you've had market research data going back for some time. Now that we're getting closer here, just curious, I think the last metric I'd seen was around the mid-50s in terms of the percent of surveyed physicians that plan to use XPHOZAH in the first three months. How has it changed over time, gets higher or lower, any commentary there?

Laura, actually, we just completed comprehensive quantitative research on XPHOZAH the first quarter of 2023. And what we found is that all of those metrics are really quite comparable. So the market dynamics continue to indicate high level of unmet need, high level of awareness of XPHOZAH, and that intend to adopt number that you referenced is really quite comparable in the research that we just conducted.

The next question comes from Joseph Thome from TD Cowen.

Maybe the first one, I know when the process was sort of – the appeal was granted, the OND directed the division to work with you on a label, I guess have any of those communications happened pre the submission? Or is that part of the review process and kind of none of that has happened yet. And when you think about a potential label, what's sort of the scenario that you're anticipating?

I think if you consider Peter Stein's letter where he mentioned that the appeal was granted, it essentially indicates that the drug should have received approval. As you might remember, we were already in the midst of negotiating the package insert when we got the complete response letter. In Peter's letter, he noted that it would likely be appropriate for the division to collaborate with us on the labeling, particularly regarding binders that were either inadequately controlled or tolerated. This is probably in line with where we would end up from a reimbursement perspective. However, it does bolster our case and arguments with insurers to secure the necessary approvals. We have not heard anything from the FDA until we reach the goal date, so no discussions have taken place yet. We expect that those will start up as we approach the review period, which we anticipate will be six months, although it could potentially be two months.

Just as we think about the cadence of a potential launch, should we think of it similarly as what IBSRELA has done over the past kind of four quarters here? Or is there any reason why XPHOZAH, the uptake would be faster or slower for any reason. Kind of how should we think about that cadence?

I think it's a bit early for that. We certainly will get to a place around launch where we can give some perspective on that. We're not going to guide at this stage, just like we aren't with IBSRELA, until we get some experience under our feet. As we just spoke about, the anticipation for XPHOZAH has not tempered even with its two year delay, so we anticipate it's going to be well received and the commercial footprint that we'll put in place is going to be appropriate to make sure that we have feet in front of those 8,000 physicians who are going to make those prescribing decisions.

The next question comes from Chris Raymond from Piper Sandler.

I've got a couple. Maybe for Susan first, I know you guys have described a scenario of taking share, despite the typical patients being on existing therapy, but I wonder if you can maybe give a little bit more color on the prototypical patient that's new to therapy, and maybe how that's changed since launch and how you sort of aspire to see that maybe over the next year or so. And I guess what I'm asking specifically is just when or if you would expect to start to see any sort of frontline use or at least demand or expectations from docs. And then the second question, I guess, on IBSRELA, I know you guys indicated you're seeing persistency of therapy, but just any sense of average duration on therapy and how that might shake out over time?

Let me make a couple of comments and then Susan, please. I think the thing that's important to note, and we talk about this with physicians all the time, our 1,200 patients were naive to therapy. There were maybe 50, thereabouts, who had had previous exposure to GCC agonists. So it's a frontline therapy clinical study that we got approved for IBSRELA. So that's an important backstop to think about. The realities of reimbursement is that no matter what we do, the likelihood of payers saying, hey, you’ve got to fail something else is likely going to be there. That doesn't mean that there isn't interest out there for using patients, but it's a harder hurdle.

Yes. It's really important to note, Chris, following up on my comments that the – when you go and talk to physicians based on the product profile of IBSRELA and the clinical data, they see it as a drug that's quite broadly applicable to patients and are very, very pleased with how it's performing. However, the market structure is such that actual first line use before a GCC agonist is something that is a challenge to secure access for the patient. But what we're finding, keep in mind with our go-to-market strategy, concentrated on the high writing doctors, these high writing doctors, in many cases, when the patient comes to them, they're on GCC agonist therapy. So what we're finding is that, on a daily basis, these physicians are seeing their patients who have been tried on these – there are limited options. It's either Linzess or Trulance, and are persisting in their symptoms. So what we're finding is that their expanded use is really centered on – now that they have – there is another option, they’re familiar with it, their experience with it has been favorable, they're starting to actually bring this up, raise it, discuss it with their patients, get into more of a discussion around their symptomology, letting them know there's a new option, and would they like to try it. So, there is a nice opportunity for us to continue to expand use across the patients that they see daily, who already implicitly meet the criteria of having tried on GCC agonist.

Chris, I would note with that is – with what Susan just said is, if you look at the numbers that she said that we anticipate, and there certainly may be upside to it for peak revenue, that doesn't contemplate frontline. That is just those patients who are not getting the relief and improvement on GCC agonists. So that's an important thing to keep in mind.

And maybe on XPHOZAH, and this might be maybe an unfair question and one you might not want to answer or really have a sense of, but, Mike, you've said pretty clearly that you guys were in labeling discussions a couple of years ago when FDA sort of reversed field on this. Are you guys anticipating in your planning any major differences in labeling now versus what you thought you were going to have in hand two years ago?

Major differences as I think I said in my comments is that we're likely to be with some languages – our guesstimate is that after binders are ineffective or intolerable, which we know ends up being 80% of patients on binder therapy. And that's likely what we would have ended up from a payer perspective, regardless. And that's somewhat reflected in, as we shared, the appeal granted letter that we got from Dr. Stein. So I think that's what we would say that we would anticipate the label to be reflecting.

Our next question comes from Matt Kaplan from Ladenburg Thalmann.

Congrats on the IBSRELA results for the quarter. Just going back to XPHOZAH, can you give us a sense in terms of the launch prep and where you are with that? And specifically, what the commercial footprint and how it will change from what you have currently for IBSRELA to adding in XPHOZAH and what that commercial footprint will look like?

Yeah. And we certainly will get into much more specificity on that, Matt, as we get closer. But, Susan, you want to provide some sort of general comments on that, would be great.

We are mobilizing preparedness to launch XPHOZAH with our very strongly established marketing, patient services, distribution, access, payer engagement, and commercial operation that is already in place and proven and successful with IBSRELA. So we are well on our way to preparing for the launch. In terms of expanding the commercial footprint to access those 8,000 nephrologists that comprise the majority of the hyperphosphatemia scripts, as we get closer to understanding our PDUFA date, we would expand our commercial footprint to be able to access those doctors. Our whole management team is quite steeped in the renal space and nephrology experience, quite networked across the country and we're confident that we're going to be able to mobilize and put those feet out on the street quickly once we have a better understanding on the actual launch date. The rest of the launch planning is well underway.

As you can imagine, Matt, with what we're doing on IBSRELA and Susan was reflecting on there is much of that infrastructure that's requisite for a successful launch exists. So we're not rebuilding that at all. We don't have to build that from scratch. And it's the feet on the street that's been a major investment that we make as we get closer to the PDUFA today.

That really hasn't occurred yet this year. It's really kind of a second half of the year situation.

That's correct.

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

Thanks again for the questions, everyone who joined today's call. I look forward to updating you when we receive the goal date review for XPHOZAH over the next few months, sharing the details of how Susan and the team will leverage our commercial strategy that is proving successful for IBSRELA, to continue to drive growth of IBSRELA and bring XPHOZAH to patients following approval. Once again, I want to thank team Ardelyx for your commitment and dedication to our patients and to the physicians and patient communities who have continued to support Ardelyx along our journey. We look forward to sharing more in the weeks and months ahead. With that, we can close the call. Thank you, operator.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.