Ardelyx Inc (ARDX) 2017 Q2 法說會逐字稿

Good morning, and welcome to Ardelyx's Second Quarter Earnings and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session after the prepared remarks. As a reminder, today's call is being recorded. I would now like to turn the call over to Monique ALLAIRE OF THRUST Investor Relations. You may begin.

Thank you, and good morning, everyone. Earlier today we issued a press release on recent quarter updates and the second quarter operating result. The press release and reference slides are available in the Investor section of the company's website at ardelyx.com. On the call with me is Mike Raab, President and CEO. Additional members of the team will join us for the Q&A session. During this call, we will make forward-looking statements related to the company's current expectations and plans. These statements are subject to risks and uncertainties. Our actual results may differ materially due to various important factors including those described in the risk factor section of our Form 10-Q filed with the SEC. These statements represent our views as of this call and should not be relied upon as representing our views as of any date in the future. We undertake no obligation to update any forward-looking statements. With that, let me pass the call over to Mike.

Thank you, Monique, and good morning, everyone. 2017 has already been a year of many accomplishments focused on advancing our Phase 3 programs, tenapanor for IBS-C, tenapanor for hyperphosphatemia and RDX7675 for hyperkalemia, and reporting positive data from 2 successful pivotal studies. Looking towards 2018, we plan to submit our first NDA for tenapanor, prepare for its market launch and draw our other Phase 3 programs towards completion. And 2019 we expect will be a transformational year for the company with a launch-ready drug for IBS-C and additional NDA submissions. In order to achieve all of this and drive long-term value and growth, we undertook a comprehensive strategic review of our operation. This resulted in a prioritization of our late-stage programs and for the time being a decrease in investment in our early-stage pipeline. By aligning our resources on the execution of our later stage assets, we've improved our operating performance, extended our cash runway and optimized the company's ability to realize a number of significant opportunities. We are now focused on 3 major objectives; first, is delivering the highest quality Phase 3 clinical trial results for tenapanor and RDX7675 as efficiently as possible. Second, is creating optionality to bring our GI and cardiorenal medicines to market, which includes evaluating partnering opportunities for all our assets. And third, is maintaining a strong balance sheet by directing the majority of our resources to our high-value late-stage programs. These objectives will guide our development efforts and decision-making and have already resulted in some important choices. We had implemented a plan and an organizational structure designed to deliver our near-term clinical and regulatory milestones, including connecting patient enrollment in our second Phase 3 study of tenapanor for hyperphosphatemia in the September-October timeframe; reporting T3MPO-2 data early in the fourth quarter and completing the entire T3MPO program by the end of the year; and advancing our Phase 3 program for RDX7675 for hyperkalemia and reporting results from the onset-of-action study after the T3MPO-2 results read out. As part of our comprehensive review, we fully assessed the markets we want to serve. In order to optimize the value of our programs, we determined that seeking regional, domestic and/or global partnerships is likely the quickest path to registration and supports the need for high-quality launches and commercialization. With the shift, we made the difficult but appropriate decision to restructure our organization. As a result, we are reducing our workforce by roughly 30% primarily within our research organization and in certain of our administrative functions. I am incredibly grateful to the entire Ardelyx team and would thank each one of our employees for their innovations, achievements and dedication to our mission. For those impacted I want to express my sincerest gratitude to you and your family. We are dedicated to supporting you and all of our employees through this transition. Also, as a result of these decisions, we have meaningfully extended our operating runway. With $148.7 million at the end of the second quarter and an updated operating plan, we anticipate that we have sufficient capital till the end of 2018. Notably, this does not include any revenues from future partnerships which we are actively pursuing and we continue to evaluate all options for further strengthening our balance sheet. Since reporting the first Phase 3 hyperphosphatemia and T3MPO-1 result, 2 key questions have emerged, "Is tenapanor approvable as a treatment for both IBS-C and hyperphosphatemia, and if so, is tenapanor commercially viable for each indication?" The short answer to these questions is yes. In fact we believe that in total tenapanor represents a greater than $1 billion commercial opportunity. In IBS-C the T3MPO-1 data reported in May demonstrates statistical significance with the primary end-point and a durable response for both constipation and abdominal pain, 2 challenging symptoms for people with IBS-C. We estimate that about 11 million people in the United States have IBS-C. For those patient, a very large proportion are treated with a prescription and only 1/3rd of patients respond to the current market leader. Additionally, a 2015 AGA report indicates that just 1 in 4 patients receiving treatment is very satisfied with their therapy. Following the T3MPO-1 read out and based on those data, we conducted third-party market research among 50 healthcare practitioners assessing their view of tenapanor's profile and potential utility in their patients. The results of this work support our enthusiastic view of tenapanor and tell us that physicians are keenly interested in this novel agent. Nearly 75% of healthcare practitioners surveyed in the research said that they would prefer a new treatment with a novel mechanism of action. With a unique approach targeting NHE3, a well tolerated profile and a demonstrated ability to reduce abdominal pain and normalize bowel habits, we are highly confident in the commercial viability for tenapanor. Physicians reported that the efficacy and durable impact of tenapanor are the most important and attractive attributes. Nearly 50% think that tenapanor is different or very different from current prescription treatment and nearly 75% are interested or very interested in using tenapanor. Enrollment has been completed in the entire T3MPO program. We are on track to report data from T3MPO-2 early in the fourth quarter and complete T3MPO-3 by the end of the year. Efforts are already underway to prepare our first NDA, which we plan to submit in 2018. Pending program success we believe tenapanor can reach the market as early as 2019. With just modest penetration in this large and growing market, we think that tenapanor represents at a minimum a $400 million to $500 million commercial opportunity. Beyond that, we see potential to expand into both chronic idiopathic constipation and opioid-induced constipation, highly prevalent conditions. Both indications represent significant upside that we hope to explore in the future. Looking ahead, we now believe that the optimal way to create value for this program is through a strategic partnership. We are evaluating potential collaborations to bring tenapanor to the IBS-C market and as a clinical development for other indications. In parallel, we are executing on a registration program for tenapanor for hyperphosphatemia in end-stage renal disease patients who are on dialysis. The number of people with hyperphosphatemia have been growing as the prevalence of patients with ESRD increases. Hyperphosphatemia is currently managed, but mature markets need the new treatment mechanisms as provided by tenapanor. Having led the developments and launched as a current market leader, we know that binders are not substantially differentiated from each other and very difficult to take, the pill sizes are large and the number of pills per dose required each day is very challenging for patients. Due to this, nearly 1/2 of all patients are non-compliant with their medication and 2/3rds do not have target serum phosphorous levels. We take for granted that evaluated serum phosphorous is an independent predictor of morbidity and mortality in dialysis patients. Tenapanor, a tiny pill taken just twice a day, has the potential to offer these patients a simple and effective solution. In February, we completed the first of 2 Phase 3 registration trials. This study achieved statistical significance for its primary end-point and tenapanor was well tolerated. Following learnings from the first Phase 3 trial, we chose to seek additional feedback from the FDA on the second Phase 3 study protocol in order to ensure the best possible design with the best possible outcome. We're waiting FDA feedback and plan to begin enrolling patients in September or October. If approved, Tenapanor would be the first non-phosphate binder treatment for hyperphosphatemia, which we believe represents at a minimum a $500 million to $700 million market opportunity. Given our extensive development and commercial expertise, we have the capabilities to go it alone in the renal market in the United States. However, as with IBS-C, we will evaluate all opportunities including partnerships to optimize the development and commercialization of tenapanor for hyperphosphatemia. The third priority in our portfolio is our potassium binder RDX7675 for the treatment of patients with hyperkalemia. From our estimate there are at least 2 million people in the United States who require treatment for hyperkalemia. We believe that 7675, an easy to take and palatable treatment that does not have any added sodium or sorbitol now offer meaningful advantages over current options. Earlier this year, we announced the initiation of 2 studies for 7675. The first is an onset-of-action study to evaluate the time to response in patients. The second is a single Phase 3 trial required for registration under our 505(b)(2) strategy. Consistent with our efforts to ensure the on time delivery of T3MPO-2 results, completion of T3MPO-3 and enrollment in the second hyperphosphatemia Phase 3 study, the 7675 onset-of-action results will now follow the T3MPO-2 results in the fourth quarter of 2017. We see tremendous potential for 7675 and conservatively project a market opportunity of at least $300 million. Behind these programs we have a number of clinical and preclinical candidates discovered through our novel research platform and capabilities. This includes our TGR5 agonist for which 9(b) has been filed, as well or FXR agonist and second generation NHE3 inhibitor, both of which are ready for IND enabling studies. The development of these and other candidates will likely slow down, but we execute on key milestones in our late-stage portfolio. Our platform is a tremendous asset. The core team of researchers will continue to utilize it to its fullest to elicit first-in-class mechanism of action as with tenapanor and conduct preclinical experiments to advance our candidates. These activities further support the potential commercialization of our programs and are critical to us and future partners. We believe that our early pipeline and our platform represents additional market potential, collaborative opportunities and downstream value creation. In closing, we've prioritized our pipeline, streamlined our efforts, conserved operating capital and increased our optionality around strategic opportunities for our programs. Looking to the rest of this year, we'll be focused on completing the T3MPO program and reporting results from T3MPO-2 as well as beginning enrollment in the second Phase 3 hyperphosphatemia trial and reporting results from our onset-of-actions study for hyperkalemia. In 2018, we plan to submit our first NDA, which will lead to having a launch-ready drug in 2019, with additional NDAs submitted. This is clearly a pivotal time in our company's evolution and we look forward to keeping you updated on our progress. Thank you for joining us on the call today and we'll be happy to take your questions.

(Operator Instructions) Our first question comes from the line of Matt Kaplan with Ladenburg.

A couple of follow-up questions in terms of just want to get a sense in terms of the potential timing for the second Phase 3 hyperphosphatemia study. You indicated you commenced the study September-October. How should we think about in terms of the readout from that study and the potential filing for that indication for tenapanor?

Yes, Matt, I think -- as we've talked about in the past, you look at enrollment for year-long study, close out the study and read out the data. You look towards the end of '18, early '19 as a timeframe you have read out.

And then in terms of pursuing partnership opportunities for tenapanor and IBS-C indication, how -- I guess how would that work in terms of being able to carve out perhaps the hyperphosphatemia indication and potentially getting value for it given that you're not going to have the Phase 3 data potentially in time to -- with coordination with the IBS-C indication?

Yes, there's a couple -- a couple of items in that question, Matt, is -- obviously, that's the sticky wicket as we look at how one would carve up indications. Clearly something that has been done and can be done and what we're working on as we talk to potential partners who will be interested in either or indication or both. So there are partners across the spectrum that would be interested in one or the other or both indications. What's interesting is -- that's why I said in the prepared remarks that ideally what we would be able to do is retain cardiorenal and hyperphosphatemia [CKB] indication while organization with a larger group that would be able to do IBS-C. So I think that then makes it easier versus having to split it up between 2 separate companies. But we're evaluating all as we go forward.

And then in terms of the market assessment that you performed for tenapanor and IBS-C, can you give us a little bit more color on that and what the feedback was in terms of from physicians there?

Sure. I mean, if you download the slides that we've provided, there is a couple of slides in the deck that talks of the market research that we did. And the reason we did this was the feedback that we were getting after we read out the data, we wanted to make sure that our perspectives that we saw with the results were actually reflected in the views of physicians. So if you look at Slide 7, where you see when we ask the question of these treating physicians, they clearly see that there's a need. And this is 50 physicians who treat IBS-C that there's clearly a need for a treatment with a different mechanism and action. And if you look at the movements with the 2018, for example, Express Scripts formulary, clearly as we've talked in the past different mechanism of action for IBS-C is going to be critical. And on Slide 7, it supported data in those discussions with those clinicians. I also then think if you look at Slide 10, where we provided physicians the profile of the data that came from T3MPO-1, they are very enthusiastic of the potential for having tenapanor as one of the tools in their armamentarium for treating IBS-C. So this made us very confident and comfortable with the conclusions we were drawing. There's certainly more to the market research than these two slides, but we as of yet have not released those data.

And our next question comes from the line of Mike King with JMP Securities.

Mike, I'm just curious, what -- have you had other substantive business development discussions around tenapanor prior to today's discussion? That's question sort of part one. And then part two is, are your goals now different given the strategic realignment with your business development discussions going forward as compared to prior to this? In other words, now that you've taken a reduction in force, would future business development activities be geared towards kind of rebuilding the organization, bringing back R&D or would it be -- should be focus more on downstream, market access, commercialization, et cetera?

No, I think it's a great question, Mike. And I think 9 weeks ago prior to T3MPO-1 clearly where we were headed as an organization was building the group that we needed to from a pre-commercial offer all of those functions in order to go it alone with GI and cardiorenal. I think the reality is as we talked, as we contemplated T3MPO-1 results, the feedback that we were getting, one of the reasons we did the market research was to confirm, bolster our views or show it as a different view on part of physicians as to what the opportunity was. And as I've said on the road during MDRs is that we have no plans to raise equity prior to T3MPO-2. And in order to optimize our runway, the reduction in force, which did not eliminate R&D to make that clear. It cut it back to a 1/4 of the people that will continue to work on the platform to support the efforts that we have around our current programs. So long-term ideally the objective would be to find a strong partner for the GI indications, allowing us less or non-dilutive attention option to build our own presence in cardiorenal. As Matt pointed out, clearly there's a time separation between T3MPO outcome and hyperphosphatemia, and so that year difference would be one in which we would then -- if things turn out the way we would anticipate, rebuild and put in place the infrastructure required for the cardiorenal opportunities. Now, as I said, in terms of what we're doing in being more transparent, obviously people are interested in the cardiorenal assets as well. We ideally would like to retain those rights in the United Sates, but all of the things are open for discussion. What we have been clear on is ex-U. S. business development. Externalization efforts have been ongoing for quite a while and those are far more advanced and ones that are more interesting. I wouldn't anticipate anything to be accomplished in the United States prior to T3MPO-2. People are going to want to see those data before they would do any sort of transaction. So I think it has just been a little bit more forthright to all of you about the work that we're doing both on a domestic and a global basis, but we've always been pretty transparent about the discussions that we've had underway ex-U. S. Did I answer all your questions, Mike?

Yes, it does. The other -- well, on that -- at least on that part. And then second part, the second question I wanted to ask is, are any of the members of the C Suite departing or I don't know -- what specifics you can give us publicly? Maybe you've got to wait for [AK] to file or what?

Yeah, after the [Q] is filed. And coincidentally with this reduction in force given sort of the change in strategy, we're sad to hear that Paul Korner had tendered his resignation as our Chief Medical Officer. Much of Paul's focus was looking towards the commercialization, build up [MSOs], and that type of work that we were going to be putting in place for GI, and based upon the shift in strategy, to further externalization efforts and finding a partner domestically. Paul made the decision and it's one we're not happy with. We wish it could have been different, but understand it -- was he tendered his resignation. So that will impact NHE3.

And our next question comes from Yigal Nochomovitz with Citigroup.

You're pretty specific about some of the dollar numbers for market opportunity across the portfolio. Could you give us a little bit more granularity on the assumptions behind the numbers you cited specifically? I think you said $400 million to $500 million minimum for tenapanor and IBS-C and $500 million to $700 million for hyperphosphatemia and for hyperkalemia at least $300 million?

Sure. Our objective since T3MPO-1 came out -- one of the reasons we have put these numbers into our corporate deck, which you can now download from our website, is the people are looking across the different projections that are out there from those that cover the company and there's a wide variability in it. Obviously, you all have different opinions and what the opportunities are, how we can accomplish those revenues. So we took a very conservative view of what the opportunity might be and came up with those numbers. The specifics around how those were built, I don't think we're going to go into that level of detail. But if you look at for hyperphosphatemia alone, clearly a market I and we know extremely well. It's a very mature binder market, as you pointed out and others have pointed out, and the differences in efficacy and the differences in benefit for the patient are marginal from one binder to another. It is time and it has been a long time in coming for companies like Ardelyx to find different pharmaceutical approaches, pharmacologic approaches to managing hyperphosphatemia. We, as I said in my comments, underestimate the impact or take for granted the impact of evaluated serum phosphorus in this population. So that's what has driven us as aggressively we've been to get this product to market for hyperphosphatemia and I think some of the differences of opinions that we had about people who project the opportunity for tenapanor. I know when I launched (inaudible), had I had tenapanor, I would have thought it was greater than a $1 billion opportunity then and people have scoffed at us when we said that (inaudible) would be more than $1 billion and it is today. So I'm taking very conservative assumption in a modestly growing market where something as disruptive as tenapanor can come in at the same time that you see calcium being recommended against (inaudible) with the recent recommendation that came out. So it's a market that's right for disruption and $500 million to $700 million I think is a reasonable assumption to make for that market. The $300 million for hyperkalemia eval is -- again it's a growing market, and as we've spoken before, ramp to peak is not going to be a traditional ramp. You're going to look at a decade in a market that needs to be built. So in a market that needs to be built without having the most understood and common background polystyrene sulfonate as a binder solved the problems that most treating physicians had struggled with with the traditional polystyrene sulfonate problems like Kayexalate So again it's a modest assumption where people have projected whether it's for zirconium silicate or the specialty polymer that potash is made out of were projected to be significantly greater than the $300 million we have. And for IBS-C, that again is a conservative assumption based upon our estimates of 11 million people having the disease compared to the 600 million right now for the market leader and the growth that you see in Amitiza. So the conservative assumptions allow people to do this kind of cash flows and use at least our numbers as a way to anchor any assessments that they might make about the market opportunities.

And just a couple of other questions here on the pipeline. You gave a little bit of detail about the second Phase 3 for hyperphosphatemia. Wondering if you could provide a little bit more in terms of the size of the study, what the washout on the current binder might look like and when you're expecting the feedback from the agency?

Let me just introduce a little bit the pass over data for the specifics. The beginning of the study is no different than any other hyperphosphatemia study, where you watch people out and wait for the rise and you put them in the trial. The difference is in this trial are primarily the randomized withdrawal period and how that is projected in the 12 weeks versus the 4 that you've seen in our previous study.

Yes. And in our slide deck on Slide number 17, there's a slide that shows the whole study design and it should be around 320 to 400 patients. And as far as feedback, we submitted the protocol to the FDA and we could get feedback any time now. And based on that, that's why we kind of give ourselves a little room for when we would start the clinical trial.

And then, Mike, just on the onset-of-action moving the data into the fourth quarter, I guess could just help us understand that better because maybe I'm wrong, but assuming that's being done by an outside CRO, it's a little unclear why the cut in the organization would necessarily delay that if it's just an outside effort to generate the data?

Yes, so a couple of things, is we have a skunkworks project to clone David Rosenbaum and it's not going as well as we would like. Here's actually (inaudible). And -- so that's one of the things that we've done. The same thing with the hyperphopshatemia. We brought that inside versus doing it with a GRO to save money. So it isn't being done by an outside organization. David and his team are doing the onset-of-action study. And it's a hard study, right? I mean, these are people that need serial blood draws. The important thing of the eval is that it does not impact the timing for the Phase 3, does not impact the program overall. So what I wanted to do and ask David and actually everyone here with these cuts to give you realistic projections that doesn't sacrifice the long-term timelines of the value creating Phase 3s and moving this out just a couple of months allowed David to focus on hypephosphatemia getting off the ground in a way that it needs to as well as continued efforts on hyperkalemia, if that makes sense.

(Operator Instructions) Our next question comes from the line of Mara Goldstein with Cantor Fitzgerald.

Just initially to clarify, with respect to tenapanor and IBS-C, the company does not plan on participating in any commercial activity?

No, that's a great question, Mara. I didn't say that. Certainly, in a deal we certainly would like the opportunity to participate, but it's going to depend upon negotiations and ultimately what we put in place. But I did not say that we would not. It's going to depend upon the type of transaction we strike.

Are you able to perhaps share with us just the broad parameters, the financial parameters of what would be acceptable to you in a partnership?

No. I mean, those are sorts of details that we wouldn't share. I appreciate the desire to know, but as this stage we won't.

And if I could just ask, now that we have a little bit of distance from T3MPO-1 result, have you been able to determine from exploration of the data either the underlying cause or causes of the differences and the magnitude of effect of what was absorbed in the Phase 3 outcome versus Phase 2 and is anything there you can share with us?

No, I mean we have got all those things you can imagine one would look at and we don't see anything. We're not going to do data mining or directed dredging because I don't think we get credit for doing that either. People would say, "Well, wait a second. You didn't design the study to look at the answers that you just gave us." So we've been thoughtful, comprehensive within the parameters that one should and there is not anything obvious that will drive us to a conclusion as to why the Phase 3 is different than 2.

And just lastly, with the restructuring in place how many employees are there at the company?

76.

And our next question comes from David Nierengarten with Wedbush.

Just one kind of focused on market research and differentiation on tenapanor and IBS-C. With the -- your physician survey and discussions, there was any additional insight as to why -- what aspects of differentiations are most important or like basically how are you different from Synergy, who has made efforts to partner too, as I recall, in the space of -- basically where can you succeed where Synergy hasn't found a partner?

I think fundamentally one of the basic difference is the different mechanism of action. What you look at with the other two, is they are both GCC agonists and I think that's reflected in Express Scripts not putting the follower on to the formulary. We're living in a world where having the same mechanism of action in the formulary is no longer acceptable. You need to have a unique mechanism of action to try to capture patients that may not work in previous mechanisms. So that in and of itself -- and there's a dearth of research going on in IBS-C, CIC to find new mechanisms of action. So clinicians keenly interested in having other choices because they know GCC agonists, if you look at both clinical data and real world data and experiences, mostly don't work and finding yet another way to try to address what is the debilitating syndrome for these patients -- a new mechanism that actually gives them the opportunity to try to help patients who are getting help with current drugs.

Was there also any conversations with -- I know it's a bit early -- but with peers on that about being on formularies versus with -- versus second in class essentially or you're going to wait till the Phase 3 read out?

No, nothing that -- it's work ongoing. Nothing to share at this stage. But I think if you look at predicate examples of what's happening to formularies in 2018, I think committees are being very judicious in the way that they are looking at managing what it is that they allow or pay for a lot of physicians use and what they are willing to pay for.

And we have a follow-up question comes from the line of Mike King with JMP Securities.

I'm just wondering in terms of your ability to partner tenapanor for IBS-C, do you feel that you will need the longer term follow-up data to read out before a partner might be induced into some kind of collaboration?

You mean long-term data for IBS-C?

Yes.

Yes, so all of that will be completed by the end of this year. So we will have all those data by the end of this year. So if it's not -- that's not going to be late in [emitting].

Thank you very much. And I'm showing no further questions at this time, so I would like to return the call to Mr. Mike Raab for any closing remarks.

Thank you all for your questions. As you've heard, we have a number of important milestones in the coming months. We believe we are taking the best steps forward to execute on those milestones and we look forward to keeping you updated as we do so. Thank you again for joining us on this call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.