What changed in this filing

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Item 9A. Controls and Procedures

2021-03-08 compared with 2020-03-06 · 43 added, 95 removed, 139 unchanged (50% of the section changed)

2 unchanged sentences

As of December 31, 2020, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

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● Provide reasonable assurances regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material adverse effect on our financial statements.

Our management assessed our internal control over financial reporting as of December 31, 2019, the end the period covered by this Annual Report on Form 10‑K.

Management based its assessment on criteria established in “Internal Control—Integrated Framework (2013)”

issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on management’s assessment of our internal control over financial reporting, management concluded that, as of December 31, 2019, our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by an independent registered public accounting firm, as stated in their report, which is included under “Item 8.

Financial Statements and Supplementary Data”

of this Annual Report on Form 10-K.

Our management assessed our internal control over financial reporting as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K.

Management based its assessment on criteria established in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on management’s assessment of our internal control over financial reporting, management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

Internal control over financial reporting has inherent limitations.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2019, identified in connection with the evaluation required by Rule 13a‑15(d) and 15d‑15(d) of the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting other than completion of the actions taken to remediate the material weakness identified as of June 30, 2019 .

Remediation of Material Weakness

As disclosed in Item 4 in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2019 and September 30, 2019, we identified a material weakness in our internal control over financial reporting due to a failure in the design and implementation of controls over the evaluation of the terms of our clinical trial contracts for inclusion into our clinical financial model which estimates clinical trial expenses.

Specifically, we had failed to properly interpret an expense in our clinical trial contracts which resulted in the over accrual of our clinical trial expenses.

During 2019, we executed our remediation plan for this material weakness.

Our remediation activities included:

Designing and implementing an effective internal control related to internal communication and joint review between the clinical, legal and accounting groups in the establishment of new clinical financial models when clinical contracts are executed to ensure that clinical contracts are properly interpreted and that estimates of clinical expenses are based on appropriate drivers;

Enhancing the precision of an internal control related to the tracking of invoices and comparison to the clinical financial model to assure that clinical expenses within the clinical financial model are appropriately included and estimated;

Implementing an ongoing review of the accrual models where assumptions and estimates built into the models are reassessed for reasonableness, considering any new information known as of that date that would challenge the initial considerations made when the model was set up.

We tested such newly established policies, procedures, and control activities designed to address the above-described material weakness.

As a result, we believe that this material weakness was remediated as of December 31, 2019.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Ardelyx, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Ardelyx, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“the COSO criteria”).

In our opinion, Ardelyx, Inc.

(“the Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheets of the Company as of December 31, 2019 and 2018, the related statements of operations and comprehensive loss, stockholders’

equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and our report dated March 6, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Redwood City, California

March 6, 2020

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission on Schedule 14A in connection with our 2020 Annual Meeting of Stockholders (the “Proxy Statement”), which will be filed not later than 120 days after the end of our fiscal year ended December 31, 2019, under the headings “Executive Officers,”

“Election of Directors,”

“Corporate Governance,”

Section 16(a) Beneficial Ownership Reporting Compliance,”

and is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics that applies to our officers, directors and employees which is available on our website at www.ardelyx.com.

The Code of Business Conduct and Ethics is intended to qualify as a “code of ethics”

within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K.

The Code of Business Conduct and Ethics is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K.

In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.

EXECUTIVE COMPENSATION

The information required by this item regarding executive compensation will be incorporated by reference to the information set forth in the sections titled “Executive Compensation”

in our Proxy Statement.

The information required by this item regarding executive compensation will be incorporated by reference to the information set forth in the sections titled “Executive Compensation” in our Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item regarding security ownership of certain beneficial owners and management will be incorporated by reference to the information set forth in the section titled “Security Ownership of Certain Beneficial Owners and Management”

and “Equity Compensation Plan Information”

in our Proxy Statement.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item regarding certain relationships and related transactions and director independence will be incorporated by reference to the information set forth in the sections titled “Certain Relationships and Related Party Transactions”

and “Election of Directors”, respectively, in our Proxy Statement.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item regarding principal accountant fees and services will be incorporated by reference to the information set forth in the section titled “Principal Accountant Fees and Services”

in our Proxy Statement.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(a) The following documents are filed as part of this report:

Financial Statements

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and the purchasers signatory thereto, dated June 2, 2015

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

Termination Agreement, dated June 2, 2015, by and between AstraZeneca AB and Ardelyx, Inc.

19 unchanged sentences

Amended and Restated Change in Control Severance Agreement, dated June 6, 2014, by and between Ardelyx, Inc.

and Mark Kaufmann

Amended and Restated Change in Control Severance Agreement, dated June 6, 2014, by and between Ardelyx, Inc.

and Jeffrey Jacobs, Ph.D.

Incorporated by Reference

Exhibit Description

Offer Letter, dated August 11, 2011, by and between Ardelyx, Inc.

and Mark Kaufmann

Offer Letter, dated May 2, 2008, by and between Ardelyx, Inc.

and Jeff Jacobs, Ph.D.

Incorporated by Reference

Exhibit Description

Offer Letter, dated December 28, 2009, by and between Ardelyx, Inc.

6 unchanged sentences

Description of amendments to Non-Employee Director Compensation Program

Securities Purchase Agreement by and among Ardelyx, Inc.

and the purchasers signatory thereto, dated June 2, 2015

Registration Rights Agreement by and among Ardelyx, Inc.

and the investors signatory thereto, dated June 2, 2015

Securities Purchase Agreement by and among Ardelyx, Inc.

and the purchasers signatory thereto, dated July 14, 2016

Registration Rights Agreement by and among Ardelyx, Inc.

5 unchanged sentences

Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under the 2016 Employment Commencement Incentive Plan

Transition and Separation Agreement dated August 21, 2017, by and between the Company and Dr.

10.22††

License Agreement, dated November 27, 2017, by and between Kyowa Hakko Kirin Co., Ltd.

License Agreement, dated November 27, 2017, by and between Kyowa Hakko Kirin Co.

and Ardelyx, Inc.

10.23††

License Agreement, dated December 11, 2017, by and between Shanghai Fosun Pharmaceutical Industrial Development Co.

6 unchanged sentences

and Western Alliance Bank.

Incorporated by Reference

Exhibit Description

Exit Fee Agreement, dated May 16, 2018, by and between the Company and Solar Capital Ltd.

3 unchanged sentences

Transition and Separation Agreement dated November 25, 2019, by and between the Company and Mark Kaufmann.

Subsidiaries of the Registrant

Offer Letter, dated April 27, 2020, by and between Ardelyx, Inc.

and Susan Rodriguez

Incorporated by Reference

Exhibit Description

Change in Control Severance Agreement dated June 2, 2020, by and between Ardelyx, Inc.

and Susan Rodriguez

Offer Letter, dated June 2, 2020, by and between Ardelyx, Inc.

and Justin Renz

Change in Control Severance Agreement, dated June 8, 2020, by and between Ardelyx, Inc.

and Justin Renz

Manufacturing Services Agreement, dated May 18, 2020, between Ardelyx, Inc.

and Patheon Pharmaceuticals Inc.

Lease Agreement, dated December 30, 2020, by and between Ardelyx, Inc.

and Prospect Fifth Ave, LLC.

Consent of Independent Registered Public Accounting Firm

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Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a‑14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C §1350

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a ‑ 14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C §1350

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File

Confidential treatment granted as to portions of this Exhibit.

The confidential portions of this Exhibit have been omitted and are marked by asterisks.

††

Certain portions have been omitted pursuant to a confidential treatment request.

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POWER OF ATTORNEY

Each person whose individual signature appears below hereby authorizes and appoints Michael Raab and Mark Kaufmann, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10‑K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Each person whose individual signature appears below hereby authorizes and appoints Michael Raab and Justin Renz, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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(Principal Executive Officer)

/s/ Mark Kaufmann

/s/ Justin Renz

Chief Financial Officer

March 8, 2021

Mark Kaufmann

(Principal Financial and Accounting Officer)

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March 8, 2021

/s/ Annalisa Jenkins

/s/ Onaiza Cadoret-Manier

March 8, 2021

Annalisa Jenkins, MBBS, FRCP

Onaiza Cadoret-Manier

March 8, 2021

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures