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 Annual Report on Form 10-K for the year ended December 31, 2020. 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. OVERVIEW We are a specialized biopharmaceutical company focused on discovering, developing and commercializing innovative first-in-class medicines to enhance the lives of patients with kidney and cardiorenal diseases. This includes patients with chronic kidney disease ("CKD") on dialysis suffering from elevated serum phosphorus, or hyperphosphatemia; and CKD patients and/or heart failure patients with elevated serum potassium, or hyperkalemia. Tenapanor has a unique mechanism of action and acts locally in the gut to inhibit the sodium hydrogen exchanger 3, or NHE3. This results in the tightening of the epithelial cell junctions, thereby significantly reducing paracellular uptake of phosphate, the primary pathway of phosphate absorption. 16 Table of Contents OUR PRODUCT PIPELINE Tenapanor: A New Approach for The Control of Serum Phosphorus in CKD Patients on Dialysis Our portfolio is led by the development of tenapanor, a first-in-class medicine for the control of serum phosphorus in adult patients with CKD on dialysis. Tenapanor for the control of serum phosphorus has a unique mechanism of action and acts locally in the gut to inhibit the sodium hydrogen exchanger 3 (“NHE3”). This results in the tightening of the epithelial cell junctions, thereby significantly reducing paracellular uptake of phosphate, the primary pathway of phosphate absorption. On April 29, 2021, the U.S. Food and Drug Administration (“FDA”) determined that a submission we made in response to an information request from the FDA constituted a major amendment to our New Drug Application (“NDA”) for tenapanor for the control of serum phosphorus, resulting in a three-month extension of the PDUFA date to July 29, 2021. The FDA’s information request included a request for additional analyses of our clinical data. We have exclusive rights to tenapanor in the U.S. and we have established agreements with Kyowa Kirin Co., Ltd. (“KKC”) in Japan, Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun Pharma”) in China and Knight Therapeutics, Inc. (“Knight“) in Canada for the development and commercialization of tenapanor for certain indications in their respective territories. In December 2019, we reported statistically significant topline efficacy results from our second monotherapy Phase 3 clinical trial, the PHREEDOM trial, which evaluated tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. The PHREEDOM trial followed a successful monotherapy Phase 3 clinical trial completed in 2017, the BLOCK trial, which achieved statistical significance for the primary endpoint. The only adverse event reported in these Phase 3 trials in less than 5% of patients was diarrhea, with an incidence rate of 52% in the PHREEDOM trial and 39% in the BLOCK trial, with most incidences in each trial being mild to moderate in nature. PHREEDOM is a one-year study with a 26-week open-label treatment period and a 12-week double-blind, placebo-controlled randomized withdrawal period followed by a 14-week open-label safety extension period. An active safety control group, for safety analysis only, received sevelamer, open-label, for the entire 52-week study period. Patients completing the PHREEDOM trial from both the tenapanor arm and the sevelamer active safety control arm had the option to participate in NORMALIZE, an ongoing open-label 18-month extension study. In June 2020, we announced positive results from a planned interim data analysis from our ongoing NORMALIZE extension study evaluating tenapanor, as monotherapy or in combination with sevelamer, to achieve serum phosphorus levels in the normal range (2.5 – 4.5 mg/dL) in patients with CKD on dialysis. The NORMALIZE extension study allowed patients from our PHREEDOM study to continue therapy with tenapanor and enabled those patients in the PHREEDOM safety control arm receiving sevelamer carbonate to transition to tenapanor. The data from the planned interim analysis demonstrated that the use of tenapanor as monotherapy or in combination with sevelamer carbonate produces a significant phosphorus-lowering effect with a mean serum phosphorous reduction of 2.33 mg/dL, from a mean baseline phosphorus of 7.27 mg/dL at the beginning of the PHREEDOM trial to a mean of 4.94 mg/dL at the time of this analysis. Of the 171 patients in this interim analysis who completed up to 9 months of treatment in this extension study, up to 47.4% achieved a normal serum phosphorus level, and of those, the majority were on tenapanor alone or tenapanor with low dose sevelamer of three or fewer sevelamer tablets per day. These data represent a 58% improvement in the rate of patients who achieve a normal serum phosphorus level, as compared to current treatment practice data as reported in the April 2020 Dialysis Outcomes Practice Patterns Study (“DOPPS”) Practice Monitor. The DOPPS data demonstrate that, with currently available treatments, only 30% of patients have serum phosphorous levels less than 4.6 mg/dL. The only adverse event reported in greater than 5% of patients in NORMALIZE was diarrhea, with an incidence rate of 23.3%. In September 2019, we reported positive results from the AMPLIFY trial, a Phase 3 study evaluating tenapanor in patients with CKD on dialysis who had uncontrolled hyperphosphatemia despite phosphate binder treatment. In this trial, approximately twice the number of patients achieved the serum phosphorus treatment goal of less than 5.5 mg/dL with tenapanor and phosphate binders versus phosphate binders alone. The only adverse event with a placebo-adjusted rate greater than 3% was diarrhea, with an incidence rate of 43%, with most being mild to moderate in nature. In June 2020, our partner KKC, a Japan-based global specialty pharmaceutical company exclusively developing tenapanor in Japan, presented results from a Phase 2 trial of tenapanor at the European Renal Association-European Dialysis and Transplant Association annual meeting (“ERA-EDTA 2020”). The trial was designed to evaluate if, with tenapanor, patients with hyperphosphatemia undergoing hemodialysis could achieve at least a 30% decrease in mean pill burden while maintaining their serum phosphorus level. The study results were statistically significant, with 71.6% (p<0.001) of patients achieving at least a 30% reduction in mean pill burden. The overall mean reduction in phosphate binder usage was 80% (reduction from 14.7 to 3.0 pills per day), while maintaining serum phosphorus control. The mean phosphorus level of patients entering the study on treatment with binders was 5.2 mg/dL at baseline and 4.7 mg/dL at the end of the 26-week study. 17 Table of Contents Tenapanor is the first therapy for phosphate management that blocks phosphorus absorption at the primary pathway of uptake. It is not a phosphate binder. Tenapanor is a novel, potent, small molecule, that has been shown in phase 3 studies to treat hyperphosphatemia as monotherapy and as a dual mechanism approach. IBSRELA® (tenapanor) for Irritable Bowel Syndrome with Constipation (IBS-C) In addition to the development of tenapanor for hyperphosphatemia, we have developed tenapanor for the treatment of patients with irritable bowel syndrome with constipation (“IBS-C”). In September 2019, we received FDA approval of IBSRELA® (tenapanor) for the treatment of IBS-C in adults. IBS-C is a burdensome gastrointestinal (“GI”) disorder. It is characterized by significant abdominal pain, constipation, straining during bowel movements, bloating and/or gas. RDX013 Program: Small Molecule for Treating Hyperkalemia We are also advancing a small molecule potassium secretagogue program, RDX013, for the potential treatment of hyperkalemia. Hyperkalemia is a common problem in patients with heart and kidney disease, particularly in patients taking common blood pressure medications known as renin-angiotensin-aldosterone system (“RAAS”) inhibitors. Similar to what we have done with tenapanor in developing a non-binder approach for the treatment of elevated serum phosphate levels, RDX013 is designed to target the underlying biological mechanisms of potassium secretion to lower elevated potassium. While currently available therapies are all ion exchange agents, RDX013 is a first in class approach that exerts its effects by amplifying the underlying pathways of potassium secretion in the colon. Since commencing operations in October 2007, substantially all our efforts have been dedicated to our research and development (“R&D”) activities, including developing our clinical product candidate tenapanor and developing our proprietary drug discovery and design platform. We have not generated any revenues from product sales. As of March 31, 2021, we had an accumulated deficit of $587.9 million. We expect to continue to incur substantial operating losses for the foreseeable future as a result of costs associated with the following activities: our continued development of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis; our preparations for, and if approved, the commercialization of tenapanor in the United States for the control of serum phosphorus in adult patients with CKD on dialysis, or for any related indication, including significantly increased personnel costs associated with our commercial team; the performance of certain activities required as a result of our NDA approval of tenapanor for IBS-C; the continued development of RDX013 and the advancement of our research programs into the preclinical stage. To date, we have funded our operations from the sale and issuance of common stock and convertible preferred stock, funds from our collaboration partnerships, which includes license fees, milestones and product supply revenue, as well as funds from our Loan Agreement with Solar Capital Ltd. and Western Alliance Bank. RDX020 Program: Small molecule for Treating Metabolic Acidosis We have an ongoing discovery program targeting the inhibition of bicarbonate exchange inhibitor for the treatment of metabolic acidosis, a highly prevalent comorbidity in CKD patients that is strongly correlated with disease progression and adverse outcomes. We have identified lead compounds that are potent, selective and proprietary inhibitors of bicarbonate secretion. Impact of COVID-19 The global COVID-19 pandemic has impacted the operational decisions of companies worldwide. It also has created and may continue to create significant uncertainty in the global economy. We have undertaken measures to protect our employees, partners, collaborators, and vendors, some of which impact our normal operations. To date, we have been able to continue our operations with our workforce, most of whom are working remotely, and our pre-existing infrastructure that supports secure access to our internal systems. If, however, the COVID-19 pandemic has a substantial impact on the productivity of our employees, our ability to successfully prepare for the commercial launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis, including our ability to hire and successfully integrate into the company the new personnel required to prepare for such launch, or our ability to progress our research and development efforts, the results of our operations and overall financial performance may be adversely impacted. The extent of the impact from the COVID-19 pandemic on our business will depend largely on future developments that are highly uncertain and cannot be predicted. For a discussion of risks of COVID-19 relating to our business, see “Part II: Other Information-Item 1A.- Risk Factors- Risks Related to Our Business- The ongoing COVID-19 pandemic, or any other outbreak of epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows .” As of the date of issuance of this financial report, we are not aware of any specific event or circumstance that would require updates to our estimates and 18 Table of Contents judgments or revisions to the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained. Critical Accounting Policies and Significant Judgments and Estimates Our discussion and analysis of financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Critical accounting policies are those that require significant judgment and/or estimates by management at the time that financial statements are prepared such that materially different results might have been reported if other assumptions had been made. These estimates form the basis for making judgments about the carrying values of assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates. The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our financial statements presented in this report are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K filed with the SEC on March 8, 2021. There have been no significant changes to our critical accounting policies as disclosed in our most recently filed Annual Report on Form 10-K during the three months ended March 31, 2021. Recent Accounting Pronouncements A summary of recent accounting pronouncements that we have adopted or may expect to adopt is included in Note 1 – Organization and Basis of Presentation to our condensed financial statements (see Part I, Item 1 Notes to Condensed Financial Statements , of this Quarterly Report on Form 10-Q). Financial Operations Overview Revenue Our revenue to date has been generated primarily through license, research and development collaborative agreements with various collaboration partners. We have not generated any revenue from commercial product sales. In the future, we may generate revenue from a combination of our own product sales, if regulatory approval is received, and payments in connection with our current or future collaborative partnerships, including license fees, other upfront payments, milestone payments, royalties and payments for drug product and/or drug substance. We expect that any revenue we generate will fluctuate in future periods as a result of, among other factors: whether we receive regulatory approval for tenapanor for the control of serum phosphorus in CDK patients on dialysis, and if such approval is received, the timing of such approval and the extent to which we are successful in our efforts to commercialize tenapanor for such indication; the timing and progress of goods and services provided pursuant to our current or future collaborative partnerships; our or our collaborators’ achievement of preclinical, clinical, regulatory or commercialization milestones, to the extent achieved; the timing and amount of any payments to us relating to the aforementioned milestones; and the extent to which any of our product candidates are approved and successfully commercialized by a collaboration partner. If our current collaboration partners or any future collaboration partners fail to obtain regulatory approval for tenapanor, our ability to generate future revenue from our product sales or from our collaborative arrangements, and our results of operations and financial position, would be materially and adversely affected. Our past revenue performance is not necessarily indicative of results to be expected in future periods. Cost of Revenue Cost of revenue currently represents payments due to AstraZeneca, which under the terms of a termination agreement entered into in 2015 is entitled to (i) future royalties at a rate of 10% of net sales of tenapanor or other NHE3 products by us or our licensees, and (ii) 20% of non-royalty revenue received from our collaboration partners should we elect to which we provide rights to develop and commercialize tenapanor or certain other NHE3 inhibitors. We have agreed to pay AstraZeneca up to a maximum of $75.0 million in the aggregate for (i) and (ii). We recognize these expenses as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to AstraZeneca. To date, we have recognized an aggregate of $11.6 million as cost of revenue under the AZ Termination Agreement since 2017. Research and Development 19 Table of Contents We recognize all research and development expenses as they are incurred to support the discovery, research, development and manufacturing of our product candidates. Research and development expenses include, but are not limited to, the following: • external research and development expenses incurred under agreements with consultants, third-party contract research organizations ("CROs") and investigative sites where a substantial portion of our clinical studies are conducted, and with contract manufacturing organizations where our clinical supplies are produced; • expenses associated with supplies and materials consumed in connection with our research operations; • expenses associated with producing tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis prior to FDA approval; • other costs associated with research, clinical development and regulatory activities; and • employee-related expenses, which include salaries, bonuses, benefits, travel and stock-based compensation; • facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization expense, information technology expense and other supplies. We expect to continue to make substantial investments in research and development activities as we further progress the development of tenapanor, particularly if the FDA should require additional clinical trials in connection with our NDA for the control of serum phosphorus in adult patients with CKD on dialysis, RDX013 and our other product candidates, as we advance our research programs into the preclinical stage and as we continue our early stage research. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. On April 29, 2021, the FDA determined that a submission we made in response to an information request from the FDA constituted a major amendment to our NDA for tenapanor for the control of serum phosphorus, resulting in a three-month extension of the PDUFA date to July 29, 2021. The FDA’s information request included a request for additional analyses of our clinical data. The FDA may act on our application either by issuing an approval letter or by issuing a Complete Response Letter (“CRL”). Should we wish to pursue our application after receiving a CRL, we can, if possible, resubmit the application with information that addresses the questions or issues identified by the FDA in order to support approval. Resubmissions are subject to review period targets, which vary depending on the underlying submission type and the content of the resubmission. We may not succeed in achieving marketing approval for our product candidates, including tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. The probability of success of each of the product candidates may be affected by numerous factors, including preclinical data, clinical data, the regulatory process, market acceptance, sufficient third-party coverage or reimbursement, our ability to access capital on acceptable terms, competition, manufacturing capability and commercial viability. We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, ongoing assessment as to each product candidate’s commercial potential, and our ability to access capital on acceptable terms. We will need to raise additional capital to complete the development and commercialization of tenapanor. If we are unable to access capital on a timely basis and on terms that are acceptable to us, we may be forced to restructure certain aspects of our business or identify and complete one or more strategic collaborations or other transactions in order to fund the development or commercialization of tenapanor, the development of RDX013 or certain of our product candidates through the use of alternative structures. General and Administrative General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, for certain of our executives, our board members, and our finance, legal, business development, market development, commercial and support staff. Other general and administrative expenses include facility related costs and professional fees for legal, accounting and audit, investor relations, other consulting services and allocated facility-related costs not otherwise included in research and development expenses. We anticipate that our general and administrative expenses will increase in the future primarily because of increased pre-commercial and commercial activities, personnel costs and professional fees for services to support the potential launch and commercialization of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. Interest Expense 20 Table of Contents Interest expense represents the interest paid on our loan payable. Other Income, net Other income, net consists of interest income earned on our cash and cash equivalents and available-for-sale investments, the periodic revaluation of the exit fee related to our loan and currency exchange gains and losses. RESULTS OF OPERATIONS The results of operations are not necessarily indicative of the results to be expected for the year ending December 31, 2021, for any other interim period, or for any other future year. Comparison of the three months ended March 31, 2021 and 2020 Revenue Below is a summary of our total revenue (dollar amounts in thousands): Three Months Ended March 31, Change 2021 2020 $ % Collaborative development revenue $ 1,454 $ 1,175 $ 279 23.7 % Product supply revenue 126 38 88 231.6 % Licensing revenue 5,002 — 5,002 (a) Total revenues $ 6,582 $ 1,213 $ 5,369 442.6 % (a) Percent change is not meaningful. The increase to total revenues during the three months ended March 31, 2021 as compared to the same period in 2020 is primarily attributable to a $5.0 million development milestone which we earned upon the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia. There was no comparable revenue during the three months ended March 31, 2020. Operating Expenses Below is a summary of our operating expenses (dollars in thousands): Three Months Ended March 31, Change 2021 2020 $ % Cost of revenue $ 1,000 $ — $ 1,000 (a) Research and development 20,456 15,844 4,612 29.1 % General and administrative 17,131 7,138 9,993 140.0 % Total operating expenses $ 38,587 $ 22,982 $ 15,605 67.9 % (a) Percent change is not meaningful. Cost of revenue The increase in cost of revenue for the three months ended March 31, 2021 was for payment due to AstraZeneca under the AZ Termination Agreement related to the development milestone we earned upon the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia. 21 Table of Contents Research and Development Below is a summary of our research and development expenses (dollars in thousands): Three Months Ended March 31, Change 2021 2020 $ % External R&D expenses $ 11,508 $ 9,197 $ 2,311 25.1 % Employee-related expenses 7,220 4,994 2,226 44.6 % Facilities, equipment and depreciation expenses 1,284 1,593 (309) (19.4) % Other 444 60 384 640.0 % Total research and development expenses $ 20,456 $ 15,844 $ 4,612 29.1 % The increase in our external R&D expenses for the three months ended March 31, 2021 is primarily the result of clinical study costs from the advancement of our OPTIMIZE study which were partially offset by lower costs for the PHREEDOM clinical study. The increase in our employee-related expenses for the three months ended March 31, 2021 is related to recruiting, compensation and benefits expenses for our research and development workforce. General and Administrative The increase in general and administrative expenses for the three months ended March 31, 2021 was primarily due to an increase in costs associated with building and staffing our commercial infrastructure and teams as we prepare for the U.S. launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. The increase consisted of headcount and related personnel costs and an increase in external spending for disease awareness initiatives, commercial infrastructure and strategy, partially offset by a decrease in stock-based compensation costs related to performance-based restricted stock units. Other Income (Expense), net Below is a summary of our other income (expense), net (dollars in thousands): Three Months Ended March 31, Change 2021 2020 $ % Interest expense $ (1,100) $ (1,357) $ 257 (18.9) % Other income (expense), net (49) 753 (802) (106.5) % Total other income (expense), net $ (1,149) $ (604) $ (545) 90.2 % Interest Expense The decrease in interest expense for the three months ended March 31, 2021 was primarily due to lower interest rates on our variable-rate term loan. Other Income, net The decrease in other income (expense), net for the three months ended March 31, 2021 was primarily due to a decrease in investment income and an increase to the exit fee accretion related to our term loan agreement. 22 Table of Contents Liquidity and Capital Resources Below is a summary of our cash, cash equivalents and marketable securities (in thousands): March 31, 2021 December 31, 2020 Cash and cash equivalents $ 84,070 $ 91,032 Marketable securities - current 94,142 95,452 Marketable securities - non-current — 2,114 Total liquid funds $ 178,256 $ 188,642 As of March 31, 2021, we had cash, cash equivalents and marketable securities totaling $178.2 million compared to $188.6 million as of December 31, 2020. In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020, 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 $100.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies LLC, deemed to be “at the market offerings.” During the three months ended March 31, 2021, we sold 4.9 million shares of our common stock for aggregate gross proceeds of $35.0 million at a weighted average price of $7.09 per share under the Open Market Sales Agreement. In aggregate during the life of the Open Market Sales Agreement, and as of March 31, 2021, we have sold 8.2 million shares of our common stock for gross proceeds of $56.7 million at a weighted average sales price of approximately $6.91 per share. Pursuant to the Open Market Sales Agreement, Jefferies, as sales agent, receives a commission of up to 3.0% of the gross sales price for shares of common stock sold under the Open Market Sales Agreement. Our primary sources of cash have been from the sale and issuance of common stock (in both public offerings and private placements) and private placements of convertible preferred stock, funds from our collaboration partnerships and funds from our loan agreement. Our primary uses of cash are to fund operating expenses, primarily research and development expenditures and pre-commercial expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Funding Requirements We believe that our existing capital resources as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months following our financial statement issuance date. 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 can change, and we may require significant additional capital to fund our operations, including to support the development, commercialization and manufacturing efforts for tenapanor. We may seek to obtain such additional capital through debt financings, credit facilities, additional equity offerings and/or strategic collaborations. We currently have no unutilized credit facility or committed sources of capital, and there can be no assurances that such sources of capital will be available to us when needed or on acceptable terms. There are numerous risks and uncertainties associated with research, development and commercialization initiatives, and actual results could vary materially as a result of a number of factors, many of which are outside of our control. Our future capital requirements are difficult to forecast and will depend on many factors, including: • the FDA’s actions and decisions with respect to the NDA submitted to the FDA on June 30, 2020 to request marketing authorization for tenapanor for the control of serum phosphorus in adult CKD patients on dialysis, including the FDA’s actions after the three-month extension of the PDUFA date to July 29, 2021; • our ability to successfully commercialize tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for another other related indication, if approved, either alone or with one or more collaboration partners; • the sales price and the availability of adequate third-party reimbursement for tenapanor, if approved; • the manufacturing costs of our product candidates, and the availability of one or more suppliers for our product candidates at reasonable costs, both for clinical and commercial supply; 23 Table of Contents • the selling and marketing costs associated with tenapanor, including the cost and timing of maintaining our sales and marketing capabilities; • our ability to maintain our existing collaboration partnerships and to establish additional collaboration partnerships, in-license/out-license, joint ventures or other similar arrangements and the financial terms of such agreements; • the timing, receipt, and amount of sales of, or royalties on, tenapanor, if any; • the cash requirements of any future acquisitions or discovery of product candidates; • the number and scope of preclinical and discovery programs that we decide to pursue or initiate, and any clinical trials we decide to pursue for other product candidates, including RDX013; • the time and cost necessary to respond to technological and market developments; • the costs of filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights, including litigation costs and the outcome of such litigation, including costs of defending any claims of infringement brought by others in connection with the development, manufacture or commercialization of tenapanor or any of our product candidates; and • the payment of interest and principal related to our loan and security agreement entered into with Solar Capital and Western Alliance Bank in May 2018, as amended in October 2020. Please see the risk factors set forth in Part II, Item 1A, Risk Factors, in this Quarterly Report on Form 10-Q for additional risks associated with our capital requirements. CASH FLOW ACTIVITIES The following table summarizes our cash flows (in thousands): Three Months Ended March 31, 2021 2020 Cash used in operating activities $ (44,217) $ (24,946) Cash (used in) provided by investing activities 2,485 (50,883) Cash provided by financing activities 34,770 591 Net decrease in cash and cash equivalents $ (6,962) $ (75,238) Cash Flows from Operating Activities Net cash used in operating activities during the three months ended March 31, 2021 increased by $19.3 million as a result of our increased net loss for the period. The increased net loss was primarily driven by costs associated with building and staffing our commercial infrastructure and teams as we prepare for the U.S. launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. An increase of $12.7 million of cash used in prepaid expenses and other assets which was primarily for prepayments for raw materials and production of tenapanor also contributed to the increase in net cash used during the three months ended March 31, 2021. Cash Flows from Investing Activities Net cash provided by investing activities increased by $53.4 million as a our investment maturities increased to fully offset the cost to purchase investments. During the three months ended March 31, 2020, investment purchases exceeded maturities by approximately $50.9 million. Cash Flows from Financing Activities Net cash provided by financing activities increased by $34.2 million due to net proceeds from issuance of our common stock pursuant to the Open Market Sales Agreement, or at-the-market offering. 24 Table of Contents Off-Balance Sheet Arrangements As of March 31, 2021 and 2020, respectively, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K as promulgated by the SEC.