ARDELYX, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed financial statements and notes thereto included elsewhere in this report and with the audited financial statements and related notes thereto included as part of our 2024 Form 10-K. This discussion and analysis and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason. Unless the context requires otherwise, the terms “Ardelyx,” “Company,” “we,” “us” and “our” refer to Ardelyx, Inc. 18 Table of Contents EXECUTIVE SUMMARY We are a biopharmaceutical company founded with a mission to discover, develop and commercialize innovative, first-in-class medicines that meet significant unmet medical needs. We developed a unique and innovative platform that enabled the discovery of new biological mechanisms and pathways to develop potent and efficacious therapies that minimize the side effects and drug-drug interactions frequently encountered with traditional, systemically absorbed medicines. The first molecule we discovered and developed was tenapanor, a minimally absorbed, first-in-class, oral, small molecule therapy. Tenapanor, branded as IBSRELA ® , is approved in the U.S. for the treatment of adults with IBS-C. Tenapanor, branded as XPHOZAH ® , is approved in the U.S. to reduce serum phosphorus in adults with CKD on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for definitions of terms used throughout the document. We are committed to our mission of discovering, developing and commercializing first-in-class medicines that address unmet patient needs. Our principal strategy is to maintain our commercial momentum with our current products while identifying additional assets that leverage our core capabilities, including clinical, developmental and regulatory expertise and commercial excellence while maintaining a solid financial foundation, to support our future growth. Our priorities include: (i) accelerating IBSRELA growth momentum; (ii) executing our XPHOZAH strategy to grow utilization; (iii) building a pipeline focused on areas of unmet patient need; and (iv) continuing to deliver strong commercial and financial performance. In February 2025, we announced the approval of an NDA for tenapanor for the control of hyperphosphatemia in adult patients with CKD undergoing hemodialysis by China’s Center for Drug Evaluation of the NMPA. This approval triggered a $5.0 million milestone to us under the terms of the Fosun Agreement, which was recorded as licensing revenue on our condensed statement of operations and comprehensive loss when earned during the 2025 first quarter and was received in April 2025. As of the 2025 second quarter, we had fully recognized the $75.0 million royalty obligation, which had been fully remitted as of September 30, 2025 under the AstraZeneca Termination Agreement. On June 30, 2025, we entered into an amendment to our 2022 Loan Agreement (the Fifth Amendment), by and among the Company, as borrower, SLR, as collateral agent and the lenders party thereto. The Fifth Amendment, among other things, (1) provided for the immediate draw of the principal amount of $50.0 million (the Term E Loan) on the closing date of the Fifth Amendment and (2) provides us with the option to draw an additional $100.0 million of committed senior secured term loans, consisting of two separate term loans, each in a principal amount of $50.0 million: (a) the first of which is available at the Company’s election through June 30, 2026 (the Term F Loan) and (b) the second of which is available at the Company’s election through December 20, 2026 (the Term G Loan and, together with the Term F Loan, the Incremental Term Loans). The interest rate for the Term E Loan is 4.00% plus a rate equal to 0.022% plus 1-month SOFR reference rate, subject to a SOFR floor of 4.7%. The interest rate for each of the Incremental Term Loans, if drawn, will be 4.95% plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website, subject to a SOFR floor of 3.50%. On the closing date of the Fifth Amendment, we paid (i) a fee of $0.3 million in connection with the funding of the Term E Loan, and (ii) a facility fee of $1.0 million with respect to the Incremental Term Loans. On October 30, 2025, we announced that a development program had been initiated for RDX10531, a next-generation NHE3 inhibitor with potential application across multiple therapeutic areas. NHE3 is an antiporter expressed on the apical surface of the small and large intestines and is responsible for absorbing the majority of ingested sodium. The Company plans to submit an IND in 2026. RESULTS OF OPERATIONS The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of results to be expected for the entire year ending December 31, 2025, or for any other interim period or future year. See Part II, Item 7, 19 Table of Contents “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Form 10-K to enhance the understanding of our financial metrics below. Revenues Below is a summary of our total revenues: Three Months Ended September 30, Change 2025 vs. 2024 Nine Months Ended September 30, Change 2025 vs. 2024 ($ in thousands) 2025 2024 $ % 2025 2024 $ % Product sales, net $ 105,515 $ 92,090 $ 13,425 15 % $ 263,406 $ 208,193 $ 55,213 27 % Product supply revenue — 5,322 (5,322) (100) % 6,439 7,461 (1,022) (14) % Licensing revenue 25 20 5 25 % 5,065 56 5,009 (a) Non-cash royalty revenue related to the sale of future royalties 4,789 809 3,980 492 % 7,195 1,776 5,419 305 % Total revenues $ 110,329 $ 98,241 $ 12,088 12 % $ 282,105 $ 217,486 $ 64,619 30 % (a) Percent change is not meaningful. Below is a summary of our product sales, net by product: Three Months Ended September 30, Change 2025 vs. 2024 Nine Months Ended September 30, Change 2025 vs. 2024 ($ in thousands) 2025 2024 $ % 2025 2024 $ % Product sales, net IBSRELA $ 78,158 $ 40,638 $ 37,520 92 % $ 187,606 $ 104,444 $ 83,162 80 % XPHOZAH 27,357 51,452 (24,095) (47) % 75,800 103,749 (27,949) (27) % Total product sales, net $ 105,515 $ 92,090 $ 13,425 15 % $ 263,406 $ 208,193 $ 55,213 27 % Product sales, net: The increase in IBSRELA product sales, net in the three and nine months ended September 30, 2025 primarily reflected higher demand, driven by continued increase in awareness and prescriber experience, and to a lesser extent, higher net price. The decrease in XPHOZAH product sales, net in the three and nine months ended September 30, 2025 primarily reflected lower demand and lower net price, both driven by the loss of XPHOZAH Medicare Part D reimbursement. As of January 1, 2025, the Centers for Medicare and Medicaid Services officially transitioned oral only therapies for ESRD patients on dialysis, including XPHOZAH, into the ESRD Prospective Payment System. This decrease was partially offset by continued growth in other channels. The decrease in XPHOZAH product sales, net in the nine months ended September 30, 2025 included the release of $3.8 million of prior periods’ estimated product returns for XPHOZAH in the 2025 first quarter. Product supply revenue: Product supply revenue is primarily impacted by the timing of product supply shipments to our collaboration partners under our product supply agreements in support of non-U.S. launches. The product supply revenue was primarily attributable to Kyowa Kirin in the nine months ended September 30, 2025 and 2024. Licensing revenue: Licensing revenue is primarily impacted by the timing of regulatory and commercialization milestone achievements from our collaboration partners, as well as sales-based royalties received from Knight. The licensing revenue in the nine months ended September 30, 2025 was primarily attributable to a $5.0 million milestone earned during the 2025 first quarter under the terms of the Fosun Agreement, following approval of an NDA for tenapanor for the control of hyperphosphatemia in adult patients with CKD undergoing hemodialysis by China’s Center for Drug Evaluation of the NMPA. 20 Table of Contents Non-cash royalty revenue: Non-cash royalty revenue reflects royalties and commercialization milestones from Kyowa Kirin for sales of PHOZEVEL in Japan, which was launched in February 2024. The increase in non-cash royalty revenue in the three and nine months ended September 30, 2025 included approximately $3.4 million related to a commercialization milestone earned during the 2025 third quarter under the terms of the Kyowa Kirin Agreement. The payment will be remitted to HCR upon receipt in accordance with the HCR Agreement. GTN Adjustments Reconciliation of gross product sales to product sales, net is as follows: Three Months Ended September 30, Change 2025 vs. 2024 Nine Months Ended September 30, Change 2025 vs. 2024 ($ in thousands) 2025 2024 $ % 2025 2024 $ % Gross product sales $ 152,137 $ 121,828 $ 30,309 25 % $ 380,056 $ 282,055 $ 98,001 35 % GTN adjustments (46,622) (29,738) (16,884) 57 % (116,650) (73,862) (42,788) 58 % Product sales, net $ 105,515 $ 92,090 $ 13,425 15 % $ 263,406 $ 208,193 $ 55,213 27 % GTN adjustment percentage 30.6 % 24.4 % 30.7 % 26.2 % The increase in GTN adjustment percentage in the three and nine months ended September 30, 2025 reflected the unfavorable payor mix shifts, primarily associated with loss of XPHOZAH Medicare Part D reimbursement. The increase in GTN adjustment percentage in the nine months ended September 30, 2025 included the favorable impact of a change in prior periods’ estimate of expected returns of XPHOZAH, which occurred in the 2025 first quarter. The activities and ending reserve balances for each significant category of GTN adjustments on product sales, net, which constitute variable consideration, were as follows: (in thousands) Discounts and Chargebacks Rebates, Wholesaler and GPO Fees Copay Assistance and Returns Total Balance as of December 31, 2024 $ 1,643 $ 14,475 $ 11,170 $ 27,288 Provisions (1) 15,826 74,895 25,929 116,650 Credits/payments (15,615) (59,740) (25,390) (100,745) Balance as of September 30, 2025 $ 1,854 $ 29,630 $ 11,709 $ 43,193 (1) Provisions included approximately $3.8 million of favorable adjustment in the 2025 first quarter, resulting from changes in prior periods’ estimated product returns for XPHOZAH. 21 Table of Contents Expenses Below is a summary of our cost of goods sold, operating expenses, interest expense, non-cash interest expense related to the sale of future royalties and other income, net: Three Months Ended September 30, Change 2025 vs. 2024 Nine Months Ended September 30, Change 2025 vs. 2024 ($ in thousands) 2025 2024 $ % 2025 2024 $ % Cost of product sales $ 2,662 $ 1,715 $ 947 55 % $ 8,247 $ 4,133 $ 4,114 100 % Other cost of revenue 1,320 14,013 (12,693) (91) % 20,441 28,159 (7,718) (27) % Total cost of goods sold $ 3,982 $ 15,728 $ (11,746) (75) % $ 28,688 $ 32,292 $ (3,604) (11) % Research and development $ 18,067 $ 15,310 $ 2,757 18 % $ 48,671 $ 38,651 $ 10,020 26 % Selling, general and administrative 83,612 64,970 18,642 29 % 250,822 182,618 68,204 37 % Total operating expenses $ 101,679 $ 80,280 $ 21,399 27 % $ 299,493 $ 221,269 $ 78,224 35 % Interest expense $ (5,796) $ (3,357) $ (2,439) 73 % $ (14,343) $ (9,039) $ (5,304) 59 % Non-cash interest expense related to the sale of future royalties $ (2,188) $ (1,924) $ (264) 14 % $ (6,478) $ (5,202) $ (1,276) 25 % Other income, net $ 2,449 $ 2,282 $ 167 7 % $ 6,667 $ 6,766 $ (99) (1) % Cost of Goods Sold Cost of product sales: The increase in cost of product sales in the three and nine months ended September 30, 2025 reflected higher product sales. A portion of the costs of IBSRELA and XPHOZAH units recognized as revenue during the three and nine months ended September 30, 2025 was expensed as research and development expense in periods prior to the commencement of capitalization of inventory costs for each respective product. The cost associated with inventory sold but previously expensed as research and development was $0.3 million and $2.0 million for the three and nine months ended September 30, 2025, and $2.2 million and $4.6 million for the three and nine months ended September 30, 2024, respectively. The value of inventory on hand as of September 30, 2025 and December 31, 2024 that was previously expensed as research and development was approximately $12.3 million and $15.6 million, respectively. Other cost of revenue: The decrease in other cost of revenue in the three and nine months ended September 30, 2025 primarily reflected the full recognition of the $75.0 million royalty obligation under the AstraZeneca Termination Agreement as of the 2025 second quarter, partially offset by costs related to product supply revenue. Other cost of revenue related to the AstraZeneca Termination Agreement was zero and $12.7 million for the three and nine months ended September 30, 2025, and $10.0 million and $22.7 million for the three and nine months ended September 30, 2024, respectively. 22 Table of Contents Research and Development Below is a summary of our research and development expenses: Three Months Ended September 30, Change 2025 vs. 2024 Nine Months Ended September 30, Change 2025 vs. 2024 ($ in thousands) 2025 2024 $ % 2025 2024 $ % External R&D and other expenses $ 8,996 $ 7,130 $ 1,866 26 % $ 19,805 $ 15,955 $ 3,850 24 % Employee-related expenses 8,050 7,100 950 13 % 25,502 19,751 5,751 29 % Facilities, equipment, depreciation and other expenses 1,021 1,080 (59) (5) % 3,364 2,945 419 14 % Total research and development expenses $ 18,067 $ 15,310 $ 2,757 18 % $ 48,671 $ 38,651 $ 10,020 26 % The increase in R&D expenses in the three and nine months ended September 30, 2025 primarily reflected higher external R&D and other expenses associated with life cycle management, as well as the increase in employee-related expenses, driven by higher headcount to support medical engagement with scientific communities in the areas of gastroenterology and nephrology related to our marketed products. The employee-related expenses included stock-based compensation expense, which decreased by $0.6 million in the three months ended September 30, 2025 and increased by $1.1 million in the nine months ended September 30, 2025. Selling, General and Administrative The increase in selling, general and administrative expenses in the three and nine months ended September 30, 2025 primarily reflected increased commercialization and administrative costs to support net sales growth of IBSRELA and XPHOZAH. The increases consisted of spending for disease awareness initiatives, patient affordability, access support and related patient awareness, as well as increased commercial infrastructure. In addition, these increases were attributable to increased headcount, including incremental stock-based compensation expenses of $4.2 million and $7.9 million in the three and nine months ended September 30, 2025, respectively. Interest Expense The increase in interest expense in the three and nine months ended September 30, 2025 primarily reflected a higher outstanding loan balance resulting from the Term D Loan and the Term E Loan draws in October 2024 and June 2025, respectively. Non-Cash Interest Expense Related to the Sale of Future Royalties The increase in non-cash interest expense related to the sale of future royalties in the three and nine months ended September 30, 2025 primarily reflected the increasing outstanding balance of the deferred royalty obligation attributable to the imputed interest accrued on the outstanding balance, partially offset by royalties received from Kyowa Kirin related to the sale of PHOZEVEL, which were remitted to HCR. Other Income, Net Other income, net consists of interest income earned on our cash, cash equivalents and short-term investments and currency exchange gains and losses. In the three and nine months ended September 30, 2024, other income, net also included the periodic revaluation of our previously outstanding 2022 Exit Fee related to our 2022 Loan Agreement that was settled in October 2024. 23 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Below is a summary of our cash, cash equivalents and short-term investments: ($ in thousands) September 30, 2025 December 31, 2024 Change $ Change % Cash and cash equivalents $ 42,715 $ 64,932 $ (22,217) (34) % Short-term investments 199,990 185,168 14,822 8 % Total liquid funds $ 242,705 $ 250,100 $ (7,395) (3) % We regularly assess our cash position and our working capital needs to execute our strategy. We have historically funded our operations primarily from the sale of common stock, product sales, funds from our collaboration partnerships, funds from our loan agreements with SLR, as well as sale of future royalties to HCR. We expect that we will increasingly rely on cash generated from operations to fund our operating plan while maintaining financial flexibility from our ability to source cash from future equity sales and debt financing. In January 2023, we filed a registration statement on Form S-3, which became effective in January 2023, containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings; and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies, deemed to be “at-the-market offerings” (2023 Open Market Sales Agreement). Pursuant to the 2023 Open Market Sales Agreement, Jefferies, as sales agent, may receive a commission of up to 3.0% of the gross sales price for shares of common stock sold under the 2023 Open Market Sales Agreement. In the nine months ended September 30, 2025, we completed no sales pursuant to the 2023 Open Market Sales Agreement. As of September 30, 2025, we have completed sales pursuant to the 2023 Open Market Sales Agreement, resulting in the issuance of 16.8 million shares of our common stock and receipt of gross proceeds of $70.0 million at a weighted average sales price of approximately $4.17. We have a loan and security agreement (as amended, the 2022 Loan Agreement) with SLR. The 2022 Loan Agreement provides a total of $300.0 million, of which $200.0 million has been drawn and outstanding as of September 30, 2025, including $50.0 million of the Term E Loan drawn during the 2025 second quarter. The additional available borrowings of $100.0 million consist of the Term F Loan and the Term G Loan, each in the amount of $50.0 million. The Term F Loan and the Term G Loan may be drawn at the Company’s election by June 30, 2026 and December 20, 2026, respectively. See Note 9. Borrowing of our 2024 Form 10-K and Note 8. Borrowing of this Quarterly Report on Form 10-Q for further discussion. We believe our available cash, cash equivalents and short-term investments as of September 30, 2025 will be sufficient to fund our planned operations for at least a period of one year from the issuance of these financial statements. We have based this estimate on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect. In particular, our operating plan may change and we may require significant additional capital to fund our operations. There are no assurances that our efforts to meet our operating cash flow requirements will be successful. If our current cash, cash equivalents and short-term investments as well as our plans to meet our operating cash flow requirements are not sufficient to fund necessary expenditures and meet our obligations following the issuance of these financial statements, our liquidity, financial condition and business prospects will be materially affected. Our future funding requirements will depend on many factors as described in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q. CASH FLOW ACTIVITIES The following table summarizes our cash flows: Nine Months Ended September 30, Change 2025 vs. 2024 ($ in thousands) 2025 2024 $ % Net cash used in operating activities $ (63,434) $ (54,619) $ (8,815) 16 % Net cash (used in) provided by investing activities (12,735) 23,302 (36,037) (155) % Net cash provided by financing activities 53,952 57,276 (3,324) (6) % Net (decrease) increase in cash and cash equivalents $ (22,217) $ 25,959 $ (48,176) (186) % 24 Table of Contents Cash Flows from Operating Activities Net cash used in operating activities increased in the nine months ended September 30, 2025 primarily due to higher expenses to support our commercial growth, as well as higher disbursements for previously accrued royalties under the AstraZeneca Termination Agreement, pursuant to which the maximum royalty obligation of $75.0 million had been fully remitted as of September 30, 2025. This increase was partially offset by cash inflows from higher product sales, net and timing of collection of our accounts receivable. Cash Flows from Investing Activities Net cash used in investing activities increased in the nine months ended September 30, 2025 primarily due to the timing of our investment maturities and purchases. Cash Flows from Financing Activities Net cash provided by financing activities decreased in the nine months ended September 30, 2025 due to receipts from the Term E Loan, net of costs ($48.7 million) and the issuance of common stock under our equity incentive and stock purchase plans, which were lower than receipts from the Term C Loan, net of costs ($49.8 million) and the issuance of common stock under our equity incentive and stock purchase plans in the nine months ended September 30, 2024.