Ardelyx, Inc. (ARDX) Q2 2025 Earnings Call Transcript

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Overview

The earnings call highlighted strong financial performance with a 61% revenue increase and optimistic guidance, including a $10 million increase. Despite some management evasiveness in the Q&A, the overall sentiment was confident, with expectations of continued growth and strategic market positioning. The market cap of $1.5 billion suggests moderate volatility, supporting a positive stock price reaction in the 2% to 8% range.

Key Financial Performance

Total Revenue $97.7 million, representing 33% year-over-year growth. This growth was driven by significant increases in revenue from IBSRELA and product supply sales to collaboration partners.

IBSRELA Net Sales Revenue $65 million, an increase of 84% year-over-year and 46% quarter-over-quarter. The growth was attributed to increased field activities, effective marketing, and improved prescription pull-through.

XPHOZAH Net Sales Revenue $25 million, a 7% increase compared to Q1 2025 and a 27% increase when adjusted for a one-time reserve release in Q1. Growth was driven by patient demand and improved access for patients.

R&D Expenses $15.7 million, compared to $12.8 million in the same quarter of the prior year. The increase was due to continued investment in research and development activities.

SG&A Expenses $84 million, compared to $64.7 million in the same quarter of the prior year. The increase was related to investments in commercial activities for IBSRELA and XPHOZAH, including sales force expansion and corporate infrastructure growth.

Net Loss $19.1 million or $0.08 per share, compared to $16.5 million or $0.07 per share in the same period last year. However, this was a significant improvement compared to Q1 2025, which reported a net loss of $41 million or $0.17 per share.

Cash Position $238.5 million in cash, cash equivalents, and short-term investments, including $48.7 million of incremental debt. This was aimed at strengthening the balance sheet.

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Operating Highlights

IBSRELA net sales revenue: $65 million in Q2 2025, reflecting 84% year-over-year growth and 46% quarter-over-quarter growth. Full-year guidance raised to $250-$260 million.

XPHOZAH net sales revenue: $25 million in Q2 2025, a 27% increase compared to Q1 2025 (excluding a Q1 reserve release). Expected peak sales of $750 million.

IBSRELA market expansion: Increased breadth and depth of prescribing, with record highs in new and refill prescriptions. Expanded field access manager team to improve prescription pull-through.

XPHOZAH market strategy: Focused on broad-based patient access and prescription pull-through. Growth in non-Medicare payer segments and total number of writers.

Revenue growth: Total revenue of $97.7 million in Q2 2025, a 33% year-over-year increase. Driven by IBSRELA and product supply sales to international partners.

Financial flexibility: Strengthened balance sheet with $50 million additional debt at 8.7% interest rate. Ended Q2 with $238.5 million in cash and investments.

Leadership changes: Promoted Mike Kelliher to Chief Business Officer and appointed Laura Williams as Chief Patient Officer. Added new executives including Chief Medical Officer, Chief Technical Operations Officer, and Chief Human Resources Officer.

Future growth strategy: Focused on achieving peak net sales revenue of $1.75 billion for IBSRELA and XPHOZAH combined. Continued investment in commercial activities and corporate infrastructure.

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Risk or Challenges

Loss of Medicare as a payer for XPHOZAH: The company lost its largest payer, Medicare, which could significantly impact revenue generation for XPHOZAH. This loss creates challenges in maintaining and growing sales in the phosphate management market.

Increased SG&A expenses: The company reported a significant increase in SG&A expenses, driven by investments in commercial activities and corporate infrastructure. This could pressure profitability if revenue growth does not keep pace.

Debt obligations: The company has $200 million in outstanding debt with a blended interest rate of approximately 9.67%. While the interest rate is favorable, the debt level could limit financial flexibility and increase financial risk.

Dependency on prescription pull-through: The success of IBSRELA and XPHOZAH heavily depends on improving prescription pull-through rates. Any challenges in this area could hinder revenue growth.

Market competition: The company operates in competitive markets for IBS-C and CKD therapies. Competitive pressures could impact market share and pricing power.

Regulatory and payer landscape: Changes in the regulatory and payer landscape, as evidenced by the Medicare loss, could pose risks to product access and revenue generation.

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Guidance & Outlook

IBSRELA Revenue Guidance: The company has raised its full-year 2025 net sales revenue guidance for IBSRELA to $250 million to $260 million, reflecting strong momentum and scaling opportunities for the medicine. The company expects peak sales of more than $1 billion.

XPHOZAH Revenue Guidance: XPHOZAH recorded $25 million in net sales revenue for Q2 2025, with a 27% increase in net sales revenue compared to Q1 2025 (excluding a Q1 reserve release). The company remains confident in achieving peak sales of $750 million.

Market Strategy for IBSRELA: The company plans to continue sales and marketing activities that drove increased demand in the first half of 2025, focusing on expanding both depth and breadth of the prescribing base. The expanded field access team will maintain focus on improving prescription pull-through to ensure appropriate patients prescribed IBSRELA get on treatment.

Market Strategy for XPHOZAH: The company will continue to engage and partner with leadership teams and dialysis providers to educate and support access to XPHOZAH. The strategy includes driving prescriptions to ArdelyxAssist to support patients and providers in navigating the access landscape.

Financial Flexibility: The company has strengthened its balance sheet by drawing an additional $50 million of debt at a favorable interest rate of 8.7%, bringing the total outstanding debt to $200 million with a blended interest rate of approximately 9.67%. The company also has the option for an additional $100 million in two $50 million tranches through next year.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Is there any update on a potential EU partner?

A:Management stated that they are continuing to evaluate opportunities in Europe but there is nothing substantive to discuss at this stage.

Q:How is the company thinking about getting to cash flow positive? Is it a near-term or medium-term goal?

A:Management emphasized that cash flow breakeven and free cash flow are important and suggested that based on their guidance, achieving cash flow positive is not far off.

Q:Can you explain the new guidance for IBSRELA and why it seems conservative given the demand and scripts?

A:Management stated that the $10 million increase in guidance is a meaningful step and reflects their confidence in the long-term opportunity for the business. They emphasized that they are deliberate in their projections.

Q:What was the gross-to-net percentage for XPHOZAH in Q2, and how does it compare to Q1?

A:The gross-to-net percentage for Q2 was approximately 29%, compared to 31% in Q1. The difference was attributed to product and patient mix, as well as improvements in commercial co-pay.

Q:How much of this quarter's IBSRELA sales growth can be attributed to the expanded sales team?

A:Management attributed the growth to increased call activity and the expanded sales team, which has led to more writers and increased prescriptions. They expect this trend to continue.

Q:What are the expectations for seasonality in IBSRELA sales going forward?

A:Management noted that seasonality is primarily observed in Q1 and that they are mindful of summer months when vacations and other factors may impact sales. They remain confident in their performance for the rest of the year.

Q:Was there any contribution from transitional scripts for XPHOZAH in Q2?

A:Management stated that there was an inconsequential amount of transitional scripts in Q2.

Q:How is uptake for IBSRELA in the first-line setting trending?

A:Management noted that they are aware of some first-line use and are confident in their positioning. They emphasized that IBSRELA is indicated for first-line use and are focused on ensuring patient access.

Q:What triggered the pull-down of the $50 million and what are the plans for the remaining $100 million?

A:Management cited favorable interest rate dynamics as the reason for pulling down the $50 million. They emphasized the importance of maintaining flexibility and optionality for future opportunities.

Q:Are the sales teams for XPHOZAH and IBSRELA right-sized to meet peak guidance?

A:Management believes the sales teams are appropriately sized but are always assessing opportunities to optimize their footprint. They are confident in the current team sizes for both products.

Q:Can you provide a breakdown of new versus refill prescriptions for IBSRELA?

A:Management has not provided specific details but noted an increase in refill prescriptions, which they see as a positive indicator of patient satisfaction and product effectiveness.

Q:What is the latest update on the ongoing CMS legal proceedings?

A:Management stated that arguments are scheduled for September 25, but there is no statutory requirement for when a response will be provided.

Q:What gives you confidence in the peak estimate for XPHOZAH in the current reimbursement environment?

A:Management cited the total available market of 220,000 patients and the math supporting their $750 million peak estimate. They expressed confidence in the trajectory and performance of the product.

Q:What is the average duration of treatment for IBSRELA?

A:The average duration of treatment is about 5 scripts, which is consistent with the average for IBS-C scripts.

Q:How do you see IBSRELA trends for the rest of the year?

A:Management is confident in the trends and noted that the $10 million increase in guidance reflects their optimism. They will provide more perspective as the year progresses.

Q:What are your thoughts on consensus estimates for XPHOZAH and expectations for sequential growth?

A:Management did not provide specific guidance but expressed confidence in the trajectory and modest growth for XPHOZAH.

Q:Do you think the company is undervalued, and where do you see more value – GI or renal space?

A:Management believes the company is undervalued in both the GI and renal spaces, citing the peak estimates for XPHOZAH and IBSRELA as evidence.

Q:What metrics or indicators would give you confidence to provide guidance for XPHOZAH?

A:Management is looking for consistent performance and growth before providing guidance for XPHOZAH.

Q:What is the outlook for licensing and product supply revenue in the second half of the year?

A:Management expects additional revenue from international partners in Q4, comparable to Q2 levels. They also noted that noncash royalty revenue is primarily passed through to healthcare royalty partners.

Q:What is the current prescription mix for XPHOZAH between Medicare PAP and revenue-generating non-Medicare patients?

A:Management stated that the mix between Medicaid and commercial for XPHOZAH is roughly 50-50, but they did not provide details on non-revenue prescriptions.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance for XPHOZAH despite being asked multiple times. They also did not provide detailed breakdowns for new versus refill prescriptions for IBSRELA or the exact mix of non-revenue prescriptions for XPHOZAH. Additionally, their response to the CMS legal proceedings lacked clarity on expected timelines.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The company's strong revenue guidance for IBSRELA and XPHOZAH, coupled with strategic market plans and financial flexibility, indicate positive momentum. The raised guidance for IBSRELA and the company's confidence in achieving sales targets for XPHOZAH are positive indicators. Despite a slight increase in net loss, cash reserves remain strong. The Q&A reveals confidence in market strategies and potential growth areas. The market cap suggests moderate volatility, leading to a positive prediction for stock price movement.

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