Ardelyx Inc (ARDX) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by and welcome to Ardelyx's Fourth Quarter and Year-End 2014 Earnings Conference Call. (Operator Instructions). As a reminder, today's call is being recorded.

It is now my pleasure to turn the floor over to Kimberly Minarovich, Vice President of Investor Relations at Burns McClellan, who will make introductory comments.

Thank you, Ben. Good afternoon and welcome to Ardelyx's Fourth Quarter and Year-End 2014 Earnings Conference Call. Earlier we issued a press release providing the details of the company's fourth quarter and year-ended 2014 financial results as well as a corporate and clinical update. The press release is available in the Investor Relations section of the website at ir.ardelyx.com.

Joining today's call will be Mike Raab, President and Chief Executive Officer, Jeremy Caldwell, Executive Vice President and Chief Scientific Officer, David Rosenbaum, Senior Vice President of Drug Development, and Mark Kaufmann, Chief Financial Officer.

As a reminder during today's call, Ardelyx will be making forward-looking statements. To the extent that the statements contained in this press release are not descriptions of historical facts regarding Ardelyx, they are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor of the Private Securities Reform Act of 1995, including statements regarding our intentions to provide updates regarding progress on our proprietary pipeline and the timing thereof; the availability and timing of data from the ongoing Phase 2a clinical trial evaluating tenapanor in chronic kidney disease patients; the timing of AstraZeneca's decision regarding future development plans for tenapanor; the potential for tenapanor in treating IBS-C patients; the potential for tenapanor in treating hyperphosphatemia in patients with end-stage renal disease on dialysis; and the potential of our drug discovery and design platform.

Such forward-looking statements involve substantial risks and uncertainties that could cause the development of tenapanor or Ardelyx's future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Such risks and uncertainties include among others the uncertainties inherent in the clinical development process, Ardelyx's reliance upon AstraZeneca for the development of tenapanor, AstraZeneca's right under the licensing agreement to choose which indication or indications for which tenapanor will be developed, and AstraZeneca's right under the license agreement to terminate the agreement upon written notice to Ardelyx. Ardelyx undertakes no obligation to update or revise any forward-looking statements.

For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks related to Ardelyx's business in general, please refer to our Ardelyx's third quarter report filed on Form 10-Q with the Securities and Exchange Commission on November 7, 2014, and its future periodic reports to be filed with the Securities and Exchange Commission.

At this time it is my pleasure to turn the call over to Ardelyx's President and Chief Executive Officer, Mike Raab. Mike?

Thank you, Kimberly. Good afternoon, everyone, and thank you all for joining us. On today's call I'd like to review our key achievements from 2014, share some recent clinical progress, and also discuss some important clinical milestones that we expect in the coming months. Mark Kaufmann, our Chief Financial Officer, will then discuss our fourth quarter and year-end 2014 financial results.

We're very pleased with the significant amount of progress that we made in 2014, including a successful $61.2 million IPO that we accomplished in June; the completion of two Phase 2b clinical trials from our tenapanor program that we partnered with AstraZeneca in IBS-C and CKD-5D, also known as ESRD; and the addition of our new Chief Scientific Officer, Jeremy Caldwell.

In October we reported positive Phase 2b data for tenapanor to treat constipation predominant irritable bowel syndrome, or IBS-C. In a double-blind, placebo controlled 371-patient trial, tenapanor at 15mg twice daily met its primary efficiency endpoint of an increase in the complete spontaneous bowel movement respond rate; and tenapanor at the same dose also produced statistically significant effects on abdominal pain and overall responder rates.

Most secondary endpoints, including abdominal pain and other abdominal and IBS-C symptoms, demonstrated statistically significant and clinically meaningful improvements, also at the 15mg twice daily dose. Earlier this month we reported results from our 161 patient Phase 2b trial evaluating tenapanor in hyperphosphatemic patients with chronic kidney disease who are on hemodialysis.

This study met its primary endpoint with tenapanor-treated patients, demonstrating a dose related decrease in serum phosphate levels compared to patients receiving placebo, a statistically significant difference with p-value of 0.012. The most frequently observed adverse event was diarrhea, with rate of diarrhea and a discontinuation rate due to diarrhea higher than observed in previous tenapanor trials.

Higher discontinuation rates due to diarrhea were observed primarily with the 30mg once daily and the 30mg twice daily dose groups. Additional details on the trial design of these studies can be found on clintrials.gov, and additional information related to clinical outcomes is available in our periodic reports filed with the SEC.

Finally, in December, we welcomed Dr. Jeremy Caldwell to the team as Executive Vice President and Chief Scientific Officer. Jeremy brings over 20 years of experience leading science-driven research organizations within large pharmaceutical companies, research institutes and biotechnology companies.

And we're very excited to have him join us to lead the development of the company's proprietary research and development efforts. We expect that at our upcoming R&D Day, to be scheduled for midyear, Jeremy will be able to update you about our research pipeline and plans for our proprietary technology that we use to develop minimally systemic small molecule therapeutics that work exclusively in the gastrointestinal tract to treat cardio-renal, gastrointestinal and metabolic diseases.

Looking ahead at upcoming clinical milestones for 2015, we expect to release the results from our Phase 2a trial evaluating tenapanor in 154 patients with chronic kidney disease in the second quarter of this year. We currently expect that AstraZeneca will determine its future development plans for tenapanor after it has received all of the Phase 2 data.

I will now turn the call to Mark Kaufmann, Ardelyx's CFO, who will review the fourth quarter and year-end 2014 financials.

Thanks, Mike. Rather than run through all of the information disclosed in the press release, I'd like to focus on a few highlights from our financials. We had cash and cash equivalents of $107.3 million as of December 31, 2014, as compared to $34.4 million as of December 31, 2013. This was primarily due to receipt of the milestone payments from AstraZeneca and completion of the company's initial public offering in June 2014.

As Mike pointed out, we've been working under our license agreement with AstraZeneca for the past two years on development of tenapanor and have received several milestones to date. And there are two line items on our financial statement that reflect the operational aspects of this work: the AZ collaboration development expense line in our R&D expenses, which represents the work that we are doing on behalf of AstraZeneca; and the collaborative development revenue line, which represent the 100% reimbursement we received from AZ for that work.

Both amounts in the fourth quarter and the full year of 2014 have decreased since 2013, reflecting the decreased development activity performed by us under the AstraZeneca agreement. And these two lines nearly net zero given the full reimbursement from AZ for this work. There's another line on our financial statement that reflects our agreement with AstraZeneca: the licensing revenue line, which represents the amortization of deferred revenues from milestone payments received from AstraZeneca.

There is also about $1 million in this line reflecting the upfront payment from Sanofi in connection with the agreement we entered into with Sanofi in February of 2014 for our NaP2b inhibitor program. From AZ we've received $75 million in upfront and milestone payments to date; and as of December 31, 2014, the company had a total deferred revenue of $47.1 million related to the AstraZeneca license agreement.

Our internal cash burn can be thought of roughly as the sum of our discovery research expense and our G&A expense. These amounts in 2014 -- $12.7 million and $7.3 million, respectively, totaling $20 million -- increased from $7.7 million and $3.7 million, respectively, totaling $11.4 million in 2013. The increase in G&A expense was primarily due to higher personnel-related costs, public company expenses and additional costs to support the company's infrastructure. The increase in R&D expense was primarily related to increased headcount, consultant service fees, and lab supply expenses resulting from increased research activities for non-partnered programs.

We have discussed in the past our intent to increase our funding of our discovery and development efforts for our preclinical product candidates and to advance and expand the development of APECCS. As Mike noted, Jeremy Caldwell will update you at our R&D Day midyear regarding the progress we've made towards these goals.

Thank you, Mark. With that, we'd now like to take any questions you may have. And as a reminder, we're also joined today by Jeremy Caldwell, Executive Vice President and Chief Scientific Officer, David Rosenbaum, Senior Vice President of Drug Development, if you have any questions related to our clinical programs. Operator, we're now ready to take any questions.

(Operator Instructions)

Our first question comes from the line of Jason Gerberry of Leerink Partners. Your line is open. Please go ahead.

Hi. Thanks for taking the question. This first question is on the milestone payment for the Phase 2 hyperphosphatemia study. Could you comment on what that was predicated on? Was that just predicated on completing the study, hitting statistical significance on the efficacy or achieving a positive dose response? Just kind of curious if you can provide a little more color on what the milestone was predicated on.

And then second question is on the Phase 2a CKD trial. Is that a fixed dose trial? I know you mentioned the starting dose would be 15 mg b.i.d., but just kind of curious if there is a dose titration that maybe would help mitigate some of the diarrhea in that trial. And then my third question, just stepping back -- I mean, now that you have more data on hand, I'm just curious how you think about tenapanor more broadly, if you're -- how are you thinking about which indications look most promising to you? Thanks.

Sure, Jason, thanks for the questions. Let me address the first and third. There isn't a milestone related to the completion of hyperphosphatemia trial. What we've disclosed is -- two things -- is if AZ decides to move forward in any clinical trial that is not currently ongoing, that would trigger a $20 million milestone. If that were only IBS-C, as we released in the prior press release, that would be $10 million rather than $20 million. So there isn't a specific milestone related to the completion data or anything related to hyperphosphatemia trial.

As it relates to your third question in terms of which is most interesting, I think as we shared with you at your meeting in New York a couple of weeks ago, is that were this our drug, we would find all these indications appealing. The nature of the relationship that we have with AstraZeneca, and as we have said in both this release and previous ones, is they're going to wait for the totality of the data once the Phase 2a is completed and make their decisions on when to move forward with one, two, three, or none of the indications. I think once we've got that in sight, that's something clearly that we will disclose.

Now, I'll pass it on to David for your second question.

Yes. And as far as the CKD clinical trial, everybody starts at 15 mg b.i.d., and they're able to either escalate up to 30 mgs or 60 mgs b.i.d., or down-titrate to 5 mgs b.i.d.

Okay. Great. And if I can just squeeze in a follow-up, has Astra communicated exactly how and when they'll provide an update, or are you guys just operating on your own internal assumptions regarding when you'll get an update on the development plans for each of their respective indications? Thanks.

Sure. Well, Jason, I think as we shared as well, we continue with ongoing dialogue on a frequent basis about the programs, everything that's ongoing. So it isn't radio silence. There is no decision that has yet been made. So we're continuing to work collaboratively with them as we look at the opportunities going forward.

Okay. Great. Thanks.

Thanks, Jason.

Operator: Thank you. (Operator Instructions). Our next question comes from the line of David Nierengarten from Wedbush Securities. Your line is open. Please go ahead.

Hi, thanks. This is Dilip sitting in for David. Just had a question for the ESRD study. Is there any data available on the actual frequency of bowel movements that you've seen on a weekly basis?

No, there actually isn't. We didn't collect that. So there were no daily diary information on that clinical trial.

Okay. So in terms of -- well, then moving to the CKD study then. Can you talk about a little bit how the baseline diarrhea levels in those patients compares with that of the ESRD population?

So that's an interesting question. So the ESRD patient population is a more constipated patient population due to fluid restriction and high amounts of calcium that they ingest. So it does have a slightly more constipated baseline than the CKD patient population.

All right. So in terms of the reported diarrhea rate in ESRD, it's more just patient, I guess, responses in terms of how they felt?

What was that?

He said it's a perception?

Yes, yes. So it's -- each time they visit the clinic, they're asked about their experiences during the previous week. And they report based on their own personal perception. And since there's such a heterogeneity in bowel function -- and as you know, normal bowel function is from three times per week, three times per day. So each individual has a slightly different perception of what is loose stools or diarrhea to them.

For the CKD study, I assume that there is -- weekly stool frequency is measured, right? So it's sort of --

Yes, so -- yes.

Okay.

That is right.

Okay. Yes. I'm just wondering why there was such a difference, I guess, in the design of the study, and going forward. I assume if you do go into Phase 3, the design of the ESRD study would be more reflective of sort of the measures used in CKD, where you measure the actual frequency, and you incorporate more flexible dosing?

Yes, I think it's an excellent point. This is a first-in-class drug. We're exploring how to dose and where to dose. And that was really designed in Phase 2b is understanding the kind of dosages one would see efficacy in, and those are learnings that you just described that come in to doing that kind of work.

Yes, and I just wanted to add -- so on the ESRD study, it was set up with six different dose levels to try to pinpoint where the drug works, at which levels it works. Clearly, if you look at the space of phosphate lowering drugs, they're all used in a titration regimen. So we would envision, if and when we move forward, that it would be that type of way.

Thanks for taking my questions.

Sure thing.

Thank you. (Operator Instructions). And I'm showing no additional questions. I'd like to turn the conference back over to Mr. Mike Raab for any closing remarks.

Thank you, Ben. 2014 was undoubtedly an exciting and successful year for Ardelyx. We look forward to continued progress in 2015. On behalf of the entire Ardelyx team, we appreciate your support and look forward to continuing our dialogue with all of you.

Thanks again for joining us. And Ben, you may now disconnect.

Ladies and gentlemen, thank you for your participation. You may all disconnect. Have a great rest of your day.