Ardelyx (NASDAQ:ARDX) Q2 2026 Earnings Call

0:00 Welcome to the Ardelyx Second Quarter twenty twenty six Earnings Call. All participants will be in a listen only mode. I would now like to turn the conference over to Lisa Caparelli, Senior Vice President of Investor Relations and Corporate Communications. Lisa, you may begin. Thank you, Jen. Good afternoon, everyone, and welcome to our second quarter twenty twenty six financial results and business update call. Earlier today, we issued our earnings release, which can be found on the Investors section of

0:30 our website at ardelyx.com. Slides that accompany today's call will also be found on our website. On today's call, I am joined by Mike Robb, President and CEO of Ardelyx Eric Foster, Chief Commercial Officer and Sue Hoennleitner, our Chief Financial Officer. Before we begin, I'd like to remind you that some of the statements made during the call today and forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks and uncertainties that may cause our actual results to differ materially from those expressed or implied, including those described in our annual report on Form 10 ks, our quarterly report on Form 10 Q, which was filed today, and from time to time in other documents filed with the SEC.

1:25 These forward looking statements speak only as of today's date. And 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. I will now pass the call over to Mike. Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today. This afternoon, we issued a press release announcing our Q2 financial results and a revision to our guidance. I'd like to share my perspectives on our release, drivers of those results and how we're positioning the business for future growth before I turn the call over to Eric and Sue to cover the performance in detail. In Q2, Ibsrela and Exposa generated combined revenue of $118,000,000 up 31% year over year, the largest quarterly revenue in our company's history.

2:11 This is a meaningful milestone and it is important to acknowledge. Growth in the second quarter was robust and yet performance fell short of our expectations.

2:20 To be clear, the Azorella demand is strong, physician confidence remains and our view of the long term opportunity has not wavered, including achieving $1,000,000,000 in revenue. As we anticipated with the establishment of the Azorella Pharmacy Network, our investment in the field reimbursement team and with ADRELA's continued success, payers have implemented significant hurdles that impacted new patient starts and access to ADRELA. Eric will provide further details in his commentary. The fundamentals of the Udrella business remain strong. And by staying focused on execution, improving patient access and partnering closely with providers, we are positioned to drive continued adoption and create meaningful value for both patients and shareholders. Now on Exposa, the team had an excellent quarter.

3:07 Growth continues to be driven by patient need, physician adoption, and a differentiated clinical profile. As you know, on June 26, the DC Circuit Court of Appeals affirmed the district court's dismissal of our lawsuit against CMS. As a result, orally phosphate lowering drugs remain in the bundle. With this decision, we have determined that we will no longer pursue further litigation on this matter. Now while our strategy remains, we recognize the market dynamics ahead of us present challenges to navigate. And as we have always done, we remain committed to ensuring patients in need have access to Exposa. Now taking a step back, we operate in a complex business with significant external pressures and with new ones that emerge almost daily.

3:52 Even so, we are in an enviable position. We have two first in class commercial products, both differentiated, growing quarter over quarter and year over year. Our strengthening balance sheet is driven by top line growth, disciplined expense management, and a thoughtful capital allocation strategy. We have built a solid foundation, are investing in our future by advancing tenapanor and our next generation NHG3 inhibitor and we are continuing business development activities to further expand our pipeline. We are building a robust patent estate for Tenapanor anchored by multiple Orange Book listed patents, including our two ninety nine patent. We are a well funded, self sustaining, high growth company on the path to sustain profitability in 2027 and beyond.

4:38 Our enthusiasm and belief in our business, our competitive position, our strategy and the long term value we are creating has not changed.

4:47 Now with that, I'll turn the call over to Eric. Eric? Thank you, Mike. EXPAREL revenue grew 33% year over year. And as Mike noted, we experienced significant payer hurdles that had a direct impact on access to EXPAREL. While new patient starts have been slowed by these hurdles, we continue to see strong growth in refills and total prescriptions, reaching our highest demand quarter to date. We understand the ongoing market dynamics IBSRELA is facing and are confident that the following four actions will position IBSRELA for future growth by addressing increasing payer hurdles and accelerating Ipsrela demand. One, leveraging our dedicated field reimbursement team, which we doubled in size in the first half of this year and who have all been in the field as of July 1, to help navigate HCP's cumbersome paperwork and burdensome step heads.

5:37 Two, reinforcing our continued efforts to drive more prescriptions through the ObsElla Pharmacy Network or IPN to increase fulfillment rates and improve adherence. We deployed additional resources along with our FRMs and Salesforce to provide patient focused, high touch support that improves the patient experience. Our data shows that when a prescription goes through the IPN, it results in higher fulfillment rates, faster fills, and in one additional refill per patient on an annual basis. Three, increasing the frequency of engagement with our target HCPs is one of the most important drivers of demand. In Q2, we implemented initiatives to expand our sales organization to 144 representatives to increase the frequency of engagement with our targeted high riding HCPs.

6:22 With this expanded sales force, along with our FRMs, we expect to see continued direct and measurable impact. And while early, we are encouraged by the results. Four, we are expanding our patient awareness and engagement initiatives. Alongside our partnership with the LPGA and ongoing omnichannel and digital efforts, we are initiating new direct to consumer activities during the second half of the year. Our consumer facing messaging is expected to increase brand awareness among our targeted patient population, leading to important conversations with healthcare providers, which our experience tells us leads to an Ibsrela prescription. The unmet need remains high for IBS C patients and highlights the important role IBS C plays for patients seeking treatment options. Last year, nearly 7,000,000 prescriptions were written for IBS C indicated drugs, reflecting both the large number of patients seeking relief despite existing therapies and the significant patient burden that still exists.

7:16 Although multiple treatment options are available, our internal research indicates that as many as seventy seven percent of patients on a secretagogue continue to experience persistent symptoms. The patient need is demonstrated by record highs in Q2 demand, total writers, total prescriptions per writer, and market share since launch, and further supports our conviction in Ibsrela reaching $1,000,000,000 in revenue. As we continue to work to execute on the four initiatives I just outlined, I am confident that these efforts will address the barriers identified, accelerate adoption, and enable more patients to receive the treatment they need. Moving on to Exposa. We are impressed by the resilience of Exposa as we saw strong momentum in Q2. With more than five hundred and fifty thousand adult patients with CKD on dialysis in The US, approximately eighty percent are treated with phosphate lowering therapies in an effort to achieve and maintain target phosphorus levels.

8:10 As the number of patients treated with Exposa grows, our conviction in its value is reinforced. Our priority remains clear, ensuring Exposa is available to patients who need it. In Q2, Exposa generated 27% revenue growth year over year. We saw solid growth across key metrics with notable increases in total dispenses of 33% and in paid prescriptions of 25% compared to the same quarter in 2025. In addition, Exposa reached its highest total writers and prescriptions per writer since Q1 twenty twenty five. While we are encouraged by Exposa's performance, we continue to recognize and assess the challenges ahead of

8:49 us. Our focus remains on enhancing the effectiveness of our commercial approach by refining Salesforce deployment and strengthening engagement with healthcare providers and dialysis organizations. These initiatives are designed to ensure we're reaching the physicians treating the patients most likely to benefit from EXPLOSIA while continuing to build awareness across the nephrology community. I'm confident in the team's ability to drive demand for both medicines by overcoming the access challenges for ADZRELA and maintaining disciplined execution with EXFOSA in the second half of this year. Patients need our differentiated products, as indicated by the growing demand for both Ibsrela and Exposa. And helping more patients with our medicine is our top priority. I will now turn it over to Sue. Sue? Thank you, Eric.

9:34 Our second quarter twenty twenty six financial results reflect the ongoing transformation of Ardelyx into a financially strong organization that allows us to leverage our revenue base to fund both our current commercial operations and our advancing pipeline. This quarter, we maintained our focus of turning disciplined capital allocation into a clear strategic advantage. In the second quarter, our total product revenue was $118,000,000 compared to $90,000,000 in the same period last year, representing 31% growth and demonstrating the need for our differentiated products. IZRELA is our primary growth engine. Our Q2 twenty twenty six revenues of $86,200,000 increased 33% compared to Q2 of twenty twenty five.

10:22 We are expecting sequential revenue growth in the second half of twenty twenty six, with the fourth quarter delivering the highest revenue of the year. Exposa continues to demonstrate resilience. Revenues for Exposa during the quarter was $31,900,000 an increase of 27% compared to the second quarter of twenty twenty five, driven by strong demand. Our financial strategy remains focused on driving towards sustainable profitability, which we are now projecting in 2027. We are a well funded company investing in our growth accelerators, our commercial operations, and our pipeline, all of which require high impact investments in R and D and SG and A. R and D expenses for the quarter were $26,100,000 compared to $15,700,000 for the same period in 2025.

11:14 This increase primarily reflects development activities and patient enrollment costs for the ongoing EXCELL Phase III clinical trial in CIC. SG and A expenses were $101,400,000 for the quarter compared to $84,000,000 for the same period in 2025. This increase reflects deliberate investments to address the access barriers and drive future adoption of its umbrella. Net loss for the quarter was $16,700,000 compared to a net loss of $19,100,000 for the same period in 2025. The net loss for Q2 twenty twenty six includes $15,300,000 for noncash expenses from share based compensation compared to $11,700,000 for the same period in 2025.

12:02 We ended the second quarter with $281,800,000 in cash, cash equivalents, and short term investments, and our liquidity remains robust. As previously announced, during the second quarter, we drew down $50,000,000 from our existing arrangement with SLR for general corporate purposes and to enhance flexibility to support our ongoing strategic initiatives, all in line with our capital allocation strategy. Now turning to guidance. We issue guidance based on a high degree of confidence and our ability to deliver. And if things meaningfully change, we are committed to updating those projections. Starting with 2026. For Azrilla, taking into consideration the current environment and our proactive initiatives to increase access and fulfillment, we have made the prudent decision to lower our full year 2026 guidance for ARDXRELLA to a range of $350,000,000 to $370,000,000 This revised guidance represents annual growth of more than 30% at the midpoint.

13:06 This would suggest back half sales would be roughly 60% of the full year, acknowledging increased sequential revenue growth in the upcoming quarters and in line with prior year's growth patterns. Now turning to Exposa. We are reiterating our full year 2026 revenue guidance to be between 110,000,000 and $120,000,000 Now moving on to OpEx. With the decision to modify our guidance for EXRELLA revenue, we have proactively taken additional efforts to manage spending and are revising our 2026 OpEx guidance to be below $500,000,000 We are managing the business with discipline as evidenced by these actions.

13:47 Moving on to our longer term guidance. A few things first. Let me be clear. We are still on a path to achieve $1,000,000,000 in revenue for IBSRELA. However, with the 2026 revenue revision, we are evaluating the evolving market dynamics and the impact on the timing of this achievement. For Exposa, we have been assessing market dynamics as well as future growth projections in a period of uncertainty. Therefore, it is prudent to revisit our internal assumptions and pull our $750,000,000 revenue guidance.

14:20 We believe these are the right decisions and, at this time, are the right actions to take to ensure that any forward view we provide reflects the current reality.

14:31 As we are on the cusp of profitability and transition into a more steady and measurable cash flow positivity in the near future, our financial strategy is guided by our three capital allocation priorities, which remain unchanged, accelerating ISRELa growth, actively progressing our pipeline, and maintaining financial strength.

14:51 In closing, we are funding our own operations and pipeline from our revenue base. And we remain disciplined in our spending, aggressive in our commercial pursuits, and committed to delivering value for both patients and shareholders. With that, I will hand it back to Mike. Thank you, Sue. The demand for our medicines is evident. We do understand the challenges that we are facing, and we've taken decisive action to address them. We remain focused on executing on our twenty twenty six priorities, including growing its real demand by improving patient access, maintaining Expos's momentum, building and expanding our pipeline, and delivering strong financial results. I have tremendous confidence in our team, our strategy, and our ability to execute. We are committed to our patients in creating long term value for our shareholders.

15:37 And thank you for your continued support. With that, we'll open the call for questions. Operator? Thank you. In the interest of time, we ask that you limit yourself to one question. And

16:03 our first question today will come from Ruana Ruiz with Leerink Partners. Hey guys, you have Ryan on for Ruana. Thanks for taking our question. Maybe can you just talk about the underlying demand metrics that you guys are tracking as you exited Q2 and through July and how that gives you confidence heading into your revised full year guidance?

16:26 And then maybe just quickly, can you also just talk about the pushes and pulls that are baked into this new guidance for IBERRALA?

16:33 Thanks. Sure. And so it's all from IBERRALA not exposure, correct?

16:39 Yes. Eric? Yes. Hey, Ryan. Thanks for those questions. So as we look at performance right now, as we've talked about, we continue to see really strong refills in total prescription. So we'll continue to take a look at that. Clearly, we're excited about the highest demand quarter that we've had to date. So we're going to continue to make sure that we focus on that as well as prescriptions going into the Astrolla pharmacy network. We know when that happens, we get higher fulfillment rates, faster fills, and on average, one more refill on an annual basis per patient. So those are key metrics for us that are giving us confidence as we look into the back half of this year, that we'll continue to be able to have that sequential growth that we expect. Yeah. And the only thing I would add, Ryan, is that the pushes and pulls that we talked about have all been factored in.

17:26 So we've seen the current performance in the first half of the year. We know the friction that we've seen, and we have baked that into the guidance that we have for its RELA. And we'll move next to Dennis Ding with Jefferies. Hi, thanks for taking my questions. I had two on Ipsurella. So number one, it sounds like demand is fine, but access is getting more difficult. I think that's really the new piece of info for me. Can you give more color on what those hurdles are? You know, are they you know, are these scripts still getting filled but it's taking longer, or they're just getting completely blocked? Are there more step edits?

18:08 You know, what's going on there exactly? And then number two, you know, you guys have called out many times a favorable impact from these specialty pharmacies. It's been around nine months since that got implemented, and you guys have sounded confident the last few months. So, is it possible to share a few quantitative metrics on things like how often are scripts being written as a sign of underlying demand, but then actually how many of them are actually getting filled over the last few quarters? And I'm assuming that portion or that percentage is getting better over time. Yeah, Dennis, thanks for the questions. I'll ask Eric to address most of that. One comment though is, I think what was important as we've talked about is starting the IPN back at the end of last year.

18:54 As Eric has mentioned in every call that we do see better fulfillment rates and on average one additional prescription that goes through the IPN and special network that we've established and

19:05 incredibly fortunate that we started it then. I think as I said in my comments and Eric reiterated, it is the extent of the step edits have been put in place was not something that one would anticipate with this product. We're clearly getting attention given its growth and success, but you hit the nail on the head. The demand is still there. It is just harder for patients to get through. And that's the work that Eric and the team are doing with the FRMs and IPN.

19:30 Yeah, Dennis, so giving us a little bit more color on that. So two things that we were seeing. So one, we're seeing more step edits and two, more stringent authorization. So you're exactly right. What we're seeing is more of a slowing of the new patient starts. So not a blocking, but a slowing due to those two things. So we feel confident around those four actions that we've put in place that we'll be able to accelerate demand as well as improve pull through as we go through the back half of this

19:55 year. And again, you're right, we were, as I just said, excited about first quarter being the highest sorry, second quarter about the highest demand quarter that we've had to date. So we know that those measures can work and are encouraged about some early signs that we're seeing there. Got it. Thank you. We'll move next to Chris Raymond with Raymond James. Hey, this is Sam Lucian for Chris Raymond. Thanks for taking our question. You guys have had pretty active business development efforts for a bit of time now. Can you talk about your view on the current environment for finding assets and opportunities in light of all the recent M and A activity going on in the industry? And as the business has evolved and the markets changed, has your thoughts or strategy shifted at all over time?

20:44 Thank you for the question. We are looking at opportunities every day and a substantial number of them. It certainly doesn't lack for opportunity. Think we said in previous calls, you kiss a lot of frogs before you find those things that you're going bring in. So the team is actively looking at a number of things. We prosecuted a number of them and have not gotten over other things that we find as part of the due diligence process. That's what we do. I'm very optimistic that we're going to be able to build this pipeline certainly is generating the cash that we are.

21:17 It's an exciting next step for the company and certainly with what we have with Snappinore, particularly the 299 patent gives us runway with Tinapanor alone that's really quite significant that my guess is not fully appreciated through 2042. And the '5 31 program as well, if it bears fruit, is yet another leg on the stool that I think is critical for that effort. Our next question will come from Matthew Caulfield with HC Wainwright. Hi, guys. Thanks for taking our question. Just focusing on the discussed access challenges for ADRELA, appreciated the color and the comments there so far. But are there any are these factors something that's gotten worse over the past couple quarters?

22:03 Or in other words, what if anything has changed for the access challenges over the past twelve months, for example?

22:10 Yeah, I'll ask Eric to comment on that. The thing, if you recall, when we talked about how we approach market access is we have taken a position that we wouldn't rebate, negotiate, and discount until there was a need to. And I think what we're seeing here in terms of step edits and the hurdles that patients are being forced to go through, which is frustrating for everyone, merits the kind of discussions that we're going to begin having and having already with the payer community.

22:37 This is their business. That's what they do. They put step edits and hurdles in place for patients. And ultimately, you look to manufacturer to offset those things. It's a tough business. But ultimately, what we have put in place with the FRMs, IPN and the team that Eric has built gets us through those hurdles that exist. That's why we structure it and do it the way we do.

22:57 Yeah, I would just add that when you have the success that we've had really over the past couple of years, one of the things I think that there's a key takeaway here is that payers certainly are paying attention to that. And the speed and the extent to which these more stringent PAs and step edits were put in place and the impact of those were not really anticipated that it would be as quickly as it was. But with that, we feel confident about the things that we started to put in motion late last year and early this year, and are pleased right now that we've got the additional field reimbursement managers in the field to be able to work with physicians and patients to navigate those hurdles. And then that's what we are considering as we've looked at the updated guidance that has given us confidence for the back of this year. Got it. Thank you. Appreciate that.

23:46 And we'll move next to Laura Chico with Wedbush Securities. Hi, good afternoon. Thanks for taking the questions. I guess, one, just follow-up there, Eric. If I'm doing the math right, I think the new guidance for IBSRELA implies about a 30% increase in the second half over the first half. So what you're saying is that the deployment of these new people is going to help you facilitate the appeals process and kind of get more of these scripts recovered? Or is it more of a matter more of a function of getting

24:17 new starts through the queue or just finding new patients? And then the second question just relates to the comments around IP that you made, Mike. Can you confirm if there have been any ANDA challengers thus far? And I guess, as you're expanding the patent portfolio, I'm just curious if there's other barriers to generic competition entry that we might be that we should be considering? Thanks very much.

24:41 Yeah. Thanks, Laura. Just a quick comment. I'll get to the second question first. We won't go into specifics as to whether or not we've gotten challenges at this point. But you can imagine for a product that's growing this aggressively that there's going to be interest. That's something that we certainly anticipate. What's interesting is remember, this is a nonabsorbed drug. So it is not the PKPD traditional way that you see generic drugs getting approved. And there's product specific guidance that you can find from the FDA on what it takes ultimately for those approvals. So that is a barrier in and of itself. Our two ninety nine patent, as we've talked about, is a critically important patent, albeit a formulation patent. These are complex molecules that we've designed. And it's not as straightforward as simple formulation. The formulation that we use matters and other IP that we're building around this is exactly to bolster that even further. So we have great confidence in 299 Estate and the others that are coming and that we already have to strengthen that position through 2042 and potentially beyond.

25:40 Yeah, and Laura, I would add in terms of the focus for the field reimbursement managers, it's really both, it's new patients as well as those patients that were previously identified that are working through the process. So if we think about the field reimbursement managers and they're able to focus on approval rates as well as resubmission rates, it really can address any of those hurdles if it's a new patient or someone previously identified working through the process. Thanks very much.

26:07 Our next question will come from Yigal with Citi. Hi, great. Thank you. I'm just wondering, are you seeing this payer pushback dynamic broadly across the IBS categories, so with some of the competitive products as well? And also, is it restricted to just certain plans, like an Aetna or Blue Cross or CVS? Or are you seeing it kind of broadly across all of the payers? And then on Exposa, just can you just elaborate a little bit as to why you decided to just withdraw the $7.50 as opposed to revise it down to something that you are more comfortable with? Thank you. Sure. Let me address that first, Yuval. We're coming to the end of the TDAPA period at the end of this year.

26:56 And that is certainly part of it. You look at the PPS that had come out that's currently in common phase stage, where they're putting in place a quality measure referred to as a QIP equip. And it's the first time certainly that I've seen in my career that there's a phosphorus equip there. We need to understand the implications of that QIP as well as this post ADAPA period, how the DOs are reacting to that. There are some binders in development, obviously, with some that are currently at the agency. We really want to see how that settles in. And we just thought it was a prudent approach to take a step back from the 750. We may come back with that, but I think it's going to be better informed with what we're going to see in the ensuing months with these transitions.

27:41 Yeah. And the only thing I would add is, again, as I stated in my remarks, when we're looking at this guidance, we need a high degree of confidence in our ability to deliver that. So I think it was the prudent thing to do while we're looking at this, as Mike discussed. Yes. And then with regards to, are we seeing this across the IBS C category? So just remembering that our strategy is a bit different from the others. And so just focusing on us, what we've seen is just more stringent prior authorization criteria and ensuring that HCPs are adherent to that criteria. We've seen a bit of a shift there as well as the step edits. And then in terms of how many payers we're seeing this across, it certainly is a meaningful amount to be able to influence the commercial landscape. And so for us, it was really important to dig into that to see what is the real impact to the business, do we understand it and then what are the actions we can put in place to be able to move forward and feel really good about what the team has been able to put together there and certainly leading to the revised guidance and our plan for the back half of this year.

28:40 Okay. Thank you. Our next question will come from Julian Harrison with BTIG. Hi. Thank you for taking the questions. First, with the updated guide, I'm wondering if you have any updated thoughts on the timeline to profitability. How should we be thinking about that? And then second, on CIC, I know we're around a year from top line Phase III data, but would appreciate if you could help us start framing expectations for that data event. What would maybe be a win in your mind? And is CIC addressable with your current sales force? Or are you maybe expanding into a broader call point there if the data are supportive? Yeah, I think just a little bit on the second part of the question, and I'll ask you to address the 27 guide that we've just given. Certainly, there is great synergy with the sales force that we currently have, right? Those physicians see both IBS C and CIC patients. So that makes good sense. If there's a need to optimize the sales force as Eric has done historically, that's certainly something that we would consider.

29:41 As we've talked about, all sites are up and running, enrollment's going great, and we're on track to deliver data and read that out in the timeframe that you just articulated. Yes. And in terms of the profitability guide, as I have been continuing to say throughout the year, profitability is right around the corner. And when I think about the revenue growth expected, not only through the rest of this year, but as we continue into 2027, We know that our cost structure will level out or begin to level out, so our top line will continue to grow faster than OpEx. And that's why I'm very confident in saying that we will be income positive next year. The other thing I would note is even through this year, as sales continue to grow, we are narrowing our losses in the path towards this profitability. Our Q1 loss, if you recall, was about $38,000,000 This quarter, it's 16 It's less than it was this time last year, so we're really continuing to narrow that, and you can really see that path to profitability.

30:34 Thanks for the question, Julian. And our next question will come from Caroline Palomecki with Ladenburg. Hi, thanks for taking my question. So, when thinking about coupons for discounting for product, what kind of, I mean, you implement that, what kind of impact do you anticipate will have on GTN and or does the current guidance on GTN still stands? Thanks. Yeah, so our guidance on GTN, we did take that into account in our total year guide. What I've been saying throughout the year is low to mid-30s, and that still continues to be the case. So we've taken all of the impacts into account. And when you really think about our GTN, it's impacted by mix certainly between government and commercial, as well as the IRA inflation rebates, and then our co pay and our distribution discounts and things like that. So all taken into account, Caroline.

31:33 Thanks. And this does conclude today's conference call. Thank you for joining. You may now disconnect.