Ardelyx Inc (ARDX) 2016 Q1 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by and welcome to Ardelyx First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today's call is being recorded.

It is now my pleasure to turn the call over to Mr. Bill Slattery Jr., Account Manager at Burns McClellan Incorporated, who will make introductory comments.

Thank you. Good afternoon and welcome to Ardelyx's First Quarter 2016 Earnings Conference Call. This afternoon, Ardelyx issued a press release providing the details of the Company's financial results for the first quarter 2016 as well as a corporate and clinical update. The press release is available in the investor relations section of the corporate Web site at ir.ardelyx.com.

Today's call will be led by Mike Raab, Ardelyx's President and Chief Executive Officer. He will be joined by Mark Kaufmann, Chief Financial Officer; Dr. Paul Korner, Executive Vice President and Chief Medical Officer; Dr. David Rosenbaum, Senior Vice President of Drug Development; and Dr. Jeremy Caldwell, Executive Vice President and Chief Scientific Officer.

As a reminder, during today's call, Ardelyx will be making certain forward-looking statements. To the extent that statements discussed on this call 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 the potential for Tenapanor in treating patients irritable bowel syndrome with constipation, or IBS-C. The potential for Tenapanor in treating hyperphosphatemia in patients with end-stage renal disease, or ESRD, Ardelyx's future development plans for Tenapanor and the timing and cost thereof, the expected timing for the receipt of results from T3MPO-1 and T3MPO-2. The two ongoing Phase 3 clinical trials evaluating Tenapanor for the treatment of IBS-C, the expected timing for the receipt of results for the Phase 2b hyperphosphatemia clinical trial.

The potential for RDX227675 in treating hyperkalemia in kidney and heart disease patients, Ardelyx's future development plans for RDX227675, the expected for the initiation of the Phase 3 clinical trials for RDX227675, the expected timing for the filing of an IND for RDX98940, and the potential of Ardelyx's drug discovery and design platform.

Such forward-looking statements involve substantial risks and uncertainties that could cause the development of Tenapanor, RDX227675 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 research and the clinical development process and the uncertainties in the manufacture of clinical trial material, including process development, scale up and tech transfer of manufacturing processes.

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 relating to Ardelyx's business in general, please refer to Ardelyx's quarterly report on Form 10-Q, filed with the Securities and Exchange Commission on May 9, 2016 and its future current and 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.

Thank you, Bill. Good afternoon everyone and thank you for joining us. On today's call, I will review our recent clinical and corporate accomplishments and walk through Ardelyx's ongoing and planned clinical activities for the remainder of 2016 and 2017. Mark Kaufmann, our Chief Financial Officer, will then provide an overview of the financial highlights for the first quarter of 2016.

Dr. Paul Korner, Executive Vice President and Chief Medical Officer; Dr. David Rosenbaum, Senior Vice President of Drug Development; and Dr. Jeremy Caldwell, Executive Vice President and Chief Scientific Officer are also joining me today and will be available to address any questions you may have.

We continue to make excellent progress across our late stage programs and execute on our strategic objectives. We also continue to advance our preclinical programs being developed at our proprietary drug discovery and design platform. We anticipate a number of major catalysts throughout the remainder of the year and into 2017. So, this is a very exciting time for Ardelyx.

With respect to our cardio-renal franchise, we're developing Tenapanor for the treatment of hyperphosphatemia in patients with end-stage renal disease or ESRD. Hyperphosphatemia is a particularly vexing independent risk factor for cardiovascular morbidity and mortality in dialysis patients and it remains a significantly underserved market. Even with dietary restrictions and legacy therapies like phosphate binders as reported by DOPPS, we still have approximately 60% of dialysis patients in the US with elevated levels of serum phosphorus. As many of you know, one of the greatest challenges for dialysis patients is the number of pills they need to ingest every day while on a fluid restricted diet.

On average, they ingest 15 to 20 pills per day, often including multiple large pills with each meal to manage their phosphorus. This has understandably led to the primary limitation of effectively managing phosphorus, which is patient adherence to therapy regimens prescribed. If as we believe, Tenapanor is successfully commercialized for hyperphosphatemia, it will be the first non-binder agent approved for hyperphosphatemia. A fundamental shift in the paradigm for treatment of patients with hyperphosphatemia.

Tenapanor inhibits the absorption of phosphorus pharmacologically rather than physically, as is the case for binders, where large quantities of binders are required to prevent phosphorus absorption by physically binding to dietary phosphorus in the GI tract. As key opinion leaders have told us, the new mechanism of action of Tenapanor alone will provide an important new approach to the treatment of hyperphosphatemia.

Additionally, Tenapanor, a very small pill, potentially taken once in the morning and once at night, rather than a large tablet or a handful of pills prior to each meal, would represent a major advantage for dialysis patients in helping them adhere to their treatment regimens. It is for these reasons that we're excited about the prospect for Tenapanor for the treatment of hyperphosphatemia.

To remind you, in our previously completed Phase 2b trial, we found a statistically significant dose-related decrease in serum phosphorous of twice daily dosing. We designed the ongoing Phase 2b study with the goal of optimizing efficacy while identifying the best tolerability profile for our patients.

The results from this study will be extremely important in helping us to determine the design, magnitude and timing of our Phase 3 program. We expect to report data from this first Phase 2b clinical trial in the second half of this year.

Another part of our efforts to develop our cardio-renal franchise is our RDX022 program for the treatment of hyperkalemia or elevated serum potassium. Hyperkalemia is a potentially dangerous condition, prevalent in patients with chronic kidney disease and heart failure who are taking multiple drugs to manage their blood pressure.

The majority of which have the side effect to raising serum potassium. It is an important and emerging market as current agents are not used use chronically. We believe that RDX227675, our lead product candidate in the RDX022 program, if successfully developed and commercialized, will be an important entrance into this marketplace.

In January, we announced positive results with an open label clinical trial evaluating the pharmacodynamic or PD activity of RDX227675 in 60 healthy adult volunteers. RDX227675 successfully demonstrated the ability to bind potassium in the gastrointestinal tract and was generally well-tolerated at all doses administered up to 27.5 grams per day. We intend to initiate a pivotal Phase 3 clinical trial for RDX227675 in the fourth quarter of this year.

The proposed Phase 3 clinical trial for RDX227675 will enroll chronic kidney disease patients, with or without heart failure, who've been diagnosed with hyperkalemia and are being treated with drugs that inhibit the renin-angiotensin-aldosterone system or RAAS inhibitors. The key endpoints we will evaluate are change in serum potassium from baseline to the end of the four-week treatment period and a change in serum potassium versus placebo.

In relation to our GI franchise, we have, as you know, our ongoing Phase 3 program for the treatment of IBS-C as well as our RDX009 program, which has several potential indications in GI field. I'll speak about each of these briefly.

Tenapanor is being studied in two ongoing Phase 3 clinical trials, which we referred to as the T3MPO program, for the treatment of irritable bowel syndrome with constipation or IBS-C. IBS-C is a GI disorder in which abdominal pain or discomfort is associated with constipation, which significantly affects the health and quality of life of affected patients.

Our T3MPO program consists of two Phase 3 clinical trials, a 12-week study, T3MPO-1 and six-month study, T3MPO-2. The design of these trials closely matches out of our previously successful Phase 2b trial for the first 12 treatment weeks, including the same time or efficacy endpoint. Patients in both T3MPO-1 and T3MPO-2 will be eligible for a 52-week open label extension that we referred to as T3MPO-3. We currently expect data from both, T3MPO-1 and T3MPO-2 to be available in 2017. A second exciting opportunity on which we're working in the GI field is our RDX009 program.

RDX98940, our lead development candidate for the program, is a minimally systemic TGR5 agonist that stimulates local secretion of GLP-1 and GLP-2 in the gastrointestinal tract. The benefits of this approach could include treatments for inflammatory bowel disease, short bowel syndrome, chemotherapy induced diarrhea, gut motility conditions, and metabolic conditions such as diabetes, just to name a few.

Historically, the limitations for development of TGR5 agonist has been our systemic exposure, which can cause excess gallbladder filling and prevention of gallbladder emptying, both effects could increase the risk of gallstones, which is clearly something one would want to avoid.

By utilizing our approach to design small molecules that are highly restricted from the entering systemic circulation, we've been able to demonstrate that our TGR5 agonists are active in preclinical models of inflammatory bowel disease measures relevant to short bowel syndrome, model the diabetes and chemotherapy induced diarrhea while avoiding excess gallbladder filling or the prevention of gallbladder emptying.

We plan to submit an IND for RDX98940 in the fourth quarter of this year and to begin Phase 1 studies in healthy adult volunteers soon thereafter. As mentioned in the press release issued this afternoon and reiterated on today's call, we are extremely pleased with continued progress here at Ardelyx this year in both the cardio-renal and GI fields. We are looking forward to key milestones from our early and late stage assets in the second half of the year and throughout 2017.

I'll now turn the call over to Mark Kaufmann, Ardelyx's CFO, who will review first quarter 2016 financial results.

Thanks, Mike. As usual practice for the Company, rather than review all of the information disclosed in the press release, I would like to focus on a few specific financial highlights. As we've mentioned in the past, our burn rate is expected to be in the roughly $25 million to $30 million range over the next several quarters, including both R&D and G&A, resulting from our clinical programs and manufacturing activities. And this guidance has not changed.

This quarter, net loss was $23.5 million or $0.70 per basic and diluted share compared to a net loss of $3.5 million or $0.19 per basic and diluted share for the first quarter of 2015. The $23.5 million include primarily $19.3 million in R&D expense and $4.3 million in G&A expense. R&D expense for the first quarter of 2016 of $19.3 million, increased from $6.2 million for the first quarter of 2015, primarily because of clinical development activities as well as clinical manufacturing and process development activities associated with Tenapanor and RDX227675.

General and administrative expense for the first quarter of 2016 of $4.3 million, increased from $3.2 million for the first quarter of 2015, primarily because of an increase in professional services fees, personnel and public company costs.

On the revenue side, in the first quarter of 2015, total revenues were comprised of licensing revenue and collaborative development revenue, both primarily related to the AstraZeneca agreement, which as you know, was terminated in June 2015, resulting in no licensing or collaborative development revenue in first quarter 2016.

Our cash and cash equivalents as of March 31, 2016 were $171.7 million compared with $107 million as of December 31, 2015. And the increase was related primarily to the underwritten public offering of our common stock completed in January of this year that yielded approximately $80.8 million in net proceeds, offset by $16.1 million in cash required for operating and other activities.

Thank you, Mark. With that, we would like to now take any questions you may have. And as a reminder, Dr. Paul Korner, Executive Vice President and Chief Medical Officer; Dr. David Rosenbaum, Senior Vice President Drug, Development; and Dr. Jeremy Caldwell, Executive Vice President and Chief Scientific Officer have joined us on today's call if you have any questions related to our programs.

Operator, we're now ready to take questions.

(Operator Instructions) Yigal Nochomovitz of Citibank.

I guess I had sort of three. Number one, maybe you could discuss a little bit more the features of Tenapanor? Do you believe or going to create a drug with first line potential after filling laxatives and that can't be addressed Linzess and Amitiza?

And then number two, if you could comment a little bit more on your long-term strategy with 022 with regard to potential differentiation or competitive positioning versus Veltassa and ZS-9, as well as thoughts on price potentially?

And then last, just a question on whether you'd ever do a study combining Tenapanor with a phosphate binder to synergize phosphate lowering as a future development strategy?

First, let me make a couple of comments on differentiation versus laxatives and Linzess and Amitiza, their ultimate plecanatide at the custom market, is I think it's important to note that projects in particular, although constipation might be relieved, pain is not benefited by taking laxatives, right, so the pain continues. It's important to notice if you look at the overall responder rate for the GCC agonist and it's even less so for Amitiza, those drugs mostly don't work in patients, right?

And certainly for GCC agonists, it tends to be that the greatest side effect of that is diarrhea versus what we saw with ours at 11% rate. Now plecanatide certainly appears to have a similar lower diarrhea rate but there I guess by simply looking at the amount of peptide is taken 3 milligrams versus micrograms, it appears to be a less potent form of what Linzess is.

So, I think the data are going to drive us. I think the trials that I think David and Paul are running, ultimately those data will drive how we differentiate. But, we believe certainly because we're titratable, because we're an inhibitor versus an agonist that we have other benefits as compared to those molecules.

David, Paul, any additional comments?

Well, I think the other factor that you've touched on, Mike, was the fact that this is a completely different mechanism of action, whereas the plecanatide and Linzess are in the GCC agonist that leading 2/3 of the population that are going to take those, not getting a good response and then obviously requiring an alternative.

I think your second question, Yigal, was about differentiation of 022 versus other potassium binders, was that right?

Yes, exactly. And just anything you wanted to highlight on what you know so far about the profile and thoughts on price?

Yes. So, pricing, it's too early yet to talk about that. I think at least historically the way I've dealt with pricing is it's ultimately the clinical benefit that drives those kinds of strategic decisions and the dynamics of the marketplace. This undoubtedly is an emerging marketplace, and we're thrilled with AZ's acquisitions of ZS because that's clearly a group of a company that is done and we know them well, knows how to build markets as they did with PPIs and Crestor.

So, this is a market that needs to be built in. And I think as we've spoken before, Yigal, that this is going to be a modest slope in terms revenue growth, I think for all of us. I think we're fortunate to be 18 to 24 months behind both Veltassa and ZS-9. We are learning from the stumbles that they have made and will make in an emerging market, which tends to be the case when you're the first ones out, the followers learn.

What I can say is from our vantage point taking advantage of our backgrounds, the people involved in developing the 22 program have been intimately involved with successfully commercializing Sevelamer. So, we understand, both the strengths and weakness extremely well of binders. And mass and pill burden is the biggest issue and the ability to adhere and tolerate and be compliant to take what you've been prescribed when you're supposed to take it.

So, all those things together have gotten us to where we are with 22. And as we've also said, we believe what we've done, although it allows us to be within the 505 B-2 pathway, that there is a chance, with what we have filed with the PTO that there is intellectual property that could issue is that we have improved significantly the mouth feel. Because if you're swigging a bunch of sand or something that you notice in your mouth that is uncomfortable, you are not going to be prone to adhere to what your physician has told you take when you are supposed to take it.

Our particles, our spherical particles, are designed such that they're soft, but you don't feel them in your teeth. And as we said before we borrowed from food sciences to improve both the mouth feel and the taste of product. And importantly, as is emerging, when you hear people at ACC, the NKF and other places, we use calcium as a counter-ion and we obviously saw the posters released by Veltassa in terms of their benefit in phosphorus.

You see plenty of discussion around the sodium counterion and our use of calcium was intentional decision based upon certain counterintuitive nature, pun completely intended, of using sodium in a place where you're trying to optimize RAAS inhibition.

So we feel comfortable and confident, particularly given the data that we collected from both the healthy volunteers, the taste testing that we've shared and where we are with the program and ultimately will be this pivotal Phase 3 that we began this year that will give us the answers that we need to ultimately answer your question about pricing and the commercial path forward.

Remind me the final question.

Yes, I'm just curious if you would consider a future study after your Phase 2b and hyperphosphatemia, if you would think of a strategy to add a phosphate binder to Tenapanor to sort of prove the hypothesis that the synergistic effect would be really beneficial clinically.

I'll make comments first commercially and then David or Paul can chime if you have any comments. Historically, combo use of binders, although it's a logical, has been the name of the game, right. If you look at the majority of patients who are on Sevelamer plus; usually calcium whether it's Tums over the counter or Phoslo.

Large percentage of patients which doesn't make any sense, because they're just ion-exchange chromatography resins, you really want to think of it in a simple fashion, don't really have an additive or synergistic effect. They're just replacing one ion-exchange resin for another.

I think, theoretically, there's clearly the potential for some additivity work that we certainly are interested in doing but that's also something that naturally is going to occur in the marketplace. So strategically, that's something we continue to debate, so that's certainly something that we're interested in and something that our KOLs have asked the exact same questions.

David, anything to add?

Yes, I think, what you just said, the end is key. I think people will use our drug in combination with a binder. And I think, based on the results that we see, we are thinking about it, but we have to evaluate a little more but it is something that we thought about whole a lot though, Yigal.

Jason Gerberry of Leerink Partners.

Hi, this is [Etser] filling in for Jason, thanks for taking my question. Just quickly, I noticed that 022 Phase 3 pivotal refine to fourth quarter of this year, just wondered if may be there was also any updates on the timelines to file for regulatory approval and also I wondered if you could comment at all on any updates that you have been gathering from how Veltassa is performing in the market?

So, with regards to your observation about the refinement of the timing, that is something that we have done in the past and we'll continue to do as we get more comfortable with the timing of different programs, we will narrow our guidance, as we get closer to when we expect data for filings to occur.

With regard to Veltassa, I think if you look at their earnings call and what John said, I believe it was Wednesday of last week, they are making progress. And this is a market that needs to be built by any measure at any study that you look at. We are underdosing RAAS inhibitors and mineralocorticoid receptor antagonists in those patients where we know that we can help them by lowering their potassium.

Right now protocols are basically - don't include binders or potassium lowering agents. What they tell you to do is first to try a low potassium diet and then they tell you to lower your RAAS inhibitors and mineralocorticoid receptor antagonist, which is counterintuitive as well. So, I think what we're seeing is, them working extremely hard to begin building that knowledge-based in the context of both payers, market access and the physicians, between cardiologists and nephrology different uptake that you're going to see there and they're doing a yeoman's job in doing so.

I think we'll see; AZ probably come out with a similar approach and try to educate the marketplace of the importance of managing hyperkalemia aggressively and effectively with programs like we have and what they have, so it's a big market. I think our advantages, as we've spoken before, across the 3 and across the four if you include Kayexalate is mouth feel - I think we're better and will be better than all.

If you look at what is going to take to have people ingest this every single day to make it work as it should, I think our ability to mask flavors, improve flavors and taste is going to be a differentiator. And if you look at ZS-9, we use calcium; they use sodium as a counterion, and Veltassa uses some sorbitol and what they've chosen and that's something we have clearly chosen to stay far away from, given the Kayexalate package inserts.

I think we can differentiate ourselves in the market. This is a well-characterized polymer; it's been around for 60-plus years. And if we get the intellectual property that we believe we will that certainly changes the dynamics quite a bit in the marketplace.

And just quickly, is the expectation to file sometime in 2017?

We've not disclosed any filing date.

David Nierengarten of Wedbush.

Was there any more clarity on the timing for the Phase 3 for Tenapanor and IBS-C? That's my first question and the second one was, have you guys narrowed down the indications for the IND for 09?

I think it's similar to the other question, David, is that as we get more clarity on enrollment rates, all that kind of stuff, we'll be providing some more definition around the Phase 3. We're not in a position yet to do so at this stage, hope to assume. I think, Paul, if you want to address your thinking, as we look at the myriad of potential applications for TGR5, I think the Phase 1 is going to talk a lot in terms of the PD response. But, Paul, if you want to lay in a little bit in terms of your thinking as we explore this?

Well, I think as you mentioned, Mike, that the potentials you've already listed in terms of IBD, NASH, pure bowel and endocrine-diabetes side. And I think with bowel, we've not disclosed anything further beyond that point, but obviously, we're looking mechanistically towards indications that could be well-served by this type of agonist and this target.

Are you leaning towards a more PCP-directed indication or family of indications, or leaning more towards rare diseases, do you think, or somewhere between -

If you think about what we're trying to do in the intro is we're building a company that has both cardio-renal and GI franchise. But I really think as we look at the data that come out of the Phase 1 in terms of GLP-1 and GLP-2 for that program, it's going to help drive both our interest and others interest frankly in what the potential is for the program.

So we will learn a lot from this Phase 1 trial that will help drive the path that we take for the program.

Mara Goldstein of Cantor.

I wanted to ask on 675, the lead molecules that [reflected] at RDX022 program. Could you maybe just run through what you think are the differentiated features that made you select it as your lead for this program?

And just to reiterate, I think that's one of things that we went through with Yigal is I think - so first of all, this molecule is the backbone, polystyrene sulfonate, has been around since for over 60 years and it's made by the metric ton for water filtration -

No, no, I apologize, Mike; I meant within your molecules that you pick, not versus Veltassa or the ZS-9. What is it that -

No, no that what I'm getting to. But a big part of it was 505 B-2 pathway that allowed us with Kayexalate. Second was understanding within the context of 505 B-2, kind of chemistry changes that we could take advantage of to make that molecule 7675 more palatable, smaller, have better flow rates and better overall properties for the patients is what drove us to select that molecule 7675 stay forward.

Then on top of that our ability to formulate it, both the flavorings and other things that allow us to make us more palatable and easier for the patients, say how much they take, when they should take it to make the difference on the RAAS inhibitors.

And how long do you anticipate the trial will take to complete on a 505 B-2 pathway?

I don't think we disclosed specific timeframes in terms of how long it's going to take. These are pretty straightforward. We're following some previously trodden paths if you look at our design from Veltassa, I think we will continue to evaluate other types of trials, both longer and shorter depending upon what the market shows. I mean, I think it's one of the benefits of us 18 months or so behind the others with learning what market access is at and what additional data need to be generated, what's happening with the market that precedes us.

(Operator Instructions) Matt Kaplan of Ladenburg Thalmann.

I guess following up on one of the questions in terms of Tenapanor and IBS-C Phase 3 studies, can you remind us what your plans are with respect to number of sites that you'll be enrolling the study in?

Yes, so what we said is there is approximately, and you can go on to a clinicaltrials.gov website. There is around 100 sites per clinical trial.

And I agues at this point, how many sites you have open?

Yes, I mean we haven't said but it's that with level to almost fully open all the sites.

And do you anticipate opening additional sites or you're going to hold it at that level right now?

At this time, I mean, we haven't really said anything more on that, but, you know.

We will look at everything and ensure that we have all the right sites opened, closed sites that are unproductive, open other sites in due course. David travels nonstop making sure that these are working as they should. So, in the nature of these sorts of clinical trials, to that many sites, there are those that close and new ones that open as a result to make sure we stay on track.

And any comments in terms of how enrollment is going so far?

It's on track and it's early yet in the game, and we will narrow that guidance as we get more comfortable with rates of enrollment.

And then in terms during 2016, do you expect to have any presence at the upcoming DDW meeting or the ASN meeting in November with respect to data for Tenapanor or other products?

Yes, I mean, yes to both. There will be abstracts and presents both from us and AZ at both meetings.

And then just going back to RDX022 and your lead there; can you remind us again what the Phase 3 trial there will look like?

So that's a two-part clinical trial; the first part is a dose escalation for four weeks in which you allow people, of course, to escalate their does to get them into controlled potassium. Those people that respond then go on an eight-week placebo-controlled randomized with [Derarel] against placebo.

And I guess going back to the question in terms of data and upcoming meetings; do you expect to have the Phase 2 data at the ASN meeting in terms of Tenapanor and hyperphosphatemia?

We have not disclosed any timing of that yet.

And I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Mike Raab, Ardelyx's President and Chief Executive Officer for closing remarks.

Thank you. And as mentioned in the press release issued this afternoon and reiterated on today's call, we remain committed to advancing our clinical and preclinical product candidates towards registration and approval and to becoming commercial biotech company focused on gastrointestinal and cardio-renal diseases.

The remainder of 2016 and 2017 will be characterized by number of key milestones for Ardelyx, and I am confident in our team's ability to achieve our objectives. We look forward to maintaining an open dialogue with you all over the coming months and providing updates on our clinical and preclinical programs. Thanks again for joining us.

Operator, you may now disconnect this call.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.