ARDELYX, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS ARDELYX, INC. CONDENSED BALANCE SHEETS (in thousands, except share and per share amounts) September 30, 2021 December 31, 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 75,288 $ 91,032 Short-term investments 66,363 95,452 Accounts receivable 287 — Prepaid expenses and other current assets 11,441 8,202 Total current assets 153,379 194,686 Property and equipment, net 2,651 1,936 Long-term investments — 2,114 Right-of-use assets, net 13,580 2,274 Other assets 1,238 552 Total assets $ 170,848 $ 201,562 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,263 $ 5,626 Accrued compensation and benefits 4,770 5,672 Current portion of operating lease liability 3,391 2,117 Loan payable, current portion 44,444 4,167 Deferred revenue 527 4,177 Accrued expenses and other current liabilities 11,373 6,657 Total current liabilities 68,768 28,416 Operating lease liability, net of current portion 10,669 413 Loan payable, net of current portion 7,032 46,621 Deferred revenue, non-current 2,947 — Total liabilities 89,416 75,450 Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively. — — Common stock, $ 0.0001 par value; 300,000,000 shares authorized; 106,771,584 and 93,599,975 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively. 11 9 Additional paid-in capital 758,114 680,872 Accumulated deficit ( 676,696 ) ( 554,765 ) Accumulated other comprehensive income (loss) 3 ( 4 ) Total stockholders’ equity 81,432 126,112 Total liabilities and stockholders’ equity $ 170,848 $ 201,562 The accompanying notes are an integral part of these condensed financial statements. 2 Table of Contents ARDELYX, INC. CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (in thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenues: Collaborative development revenue $ 886 $ 1,356 $ 3,650 $ 3,656 Product supply revenue 285 1,357 411 1,400 Licensing revenue 2 — 5,007 706 Total revenues 1,173 2,713 9,068 5,762 Operating expenses: Cost of revenue — — 1,000 141 Research and development 23,695 12,240 70,172 46,948 General and administrative 19,714 7,634 56,969 21,810 Total operating expenses 43,409 19,874 128,141 68,899 Loss from operations ( 42,236 ) ( 17,161 ) ( 119,073 ) ( 63,137 ) Interest expense ( 1,216 ) ( 1,202 ) ( 3,518 ) ( 3,785 ) Other (expense) income, net ( 134 ) 255 664 1,485 Loss before provision for income taxes ( 43,586 ) ( 18,108 ) ( 121,927 ) ( 65,437 ) Provision for income taxes 1 — 4 — Net loss $ ( 43,587 ) $ ( 18,108 ) $ ( 121,931 ) $ ( 65,437 ) Net loss per common share - basic and diluted $ ( 0.42 ) $ ( 0.20 ) $ ( 1.21 ) $ ( 0.73 ) Shares used in computing net loss per share - basic and diluted 104,144,606 89,365,798 100,480,156 89,109,772 Comprehensive loss: Net loss $ ( 43,587 ) $ ( 18,108 ) $ ( 121,931 ) $ ( 65,437 ) Unrealized (losses) gains on available-for-sale securities ( 1 ) ( 227 ) 7 70 Comprehensive loss $ ( 43,588 ) $ ( 18,335 ) $ ( 121,924 ) $ ( 65,367 ) The accompanying notes are an integral part of these condensed financial statements. 3 Table of Contents ARDELYX, INC. CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the Three and Nine Months ended September 30, 2021 (Unaudited) (in thousands, except shares) Three Months Ended September 30, 2021 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity Shares Amount Balance as of June 30, 2021 102,967,017 $ 10 $ 750,664 $ ( 633,109 ) $ 4 $ 117,569 Issuance of common stock under employee stock purchase plan 284,456 — 341 — — 341 Issuance of common stock for services 25,989 — 190 — — 190 Issuance of common stock upon exercise of options 126,004 — 21 — — 21 Issuance of common stock upon vesting of restricted stock units 34,410 — — — — — Taxes paid related to net share settlement of equity awards — — ( 106 ) — — ( 106 ) Issuance of common stock in at-the-market offering 3,333,708 1 4,742 4,743 Stock-based compensation — — 2,262 — — 2,262 Unrealized losses on available-for-sale securities — — — — ( 1 ) ( 1 ) Net loss — — — ( 43,587 ) — ( 43,587 ) Balance as of September 30, 2021 106,771,584 $ 11 $ 758,114 $ ( 676,696 ) $ 3 $ 81,432 Nine Months Ended September 30, 2021 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity Shares Amount Balance as of December 31, 2020 93,599,975 $ 9 $ 680,872 $ ( 554,765 ) $ ( 4 ) $ 126,112 Issuance of common stock under employee stock purchase plan 386,664 — 819 — — 819 Issuance of common stock for services 25,989 — 190 — — 190 Issuance of common stock upon exercise of options 331,310 — 584 — — 584 Issuance of common stock upon vesting of restricted stock units 114,194 — — — — — Taxes paid for net share settlement of equity awards — — ( 106 ) — — ( 106 ) Issuance of common stock in at-the-market offering 12,313,452 2 67,187 — — 67,189 Stock-based compensation — — 8,568 — — 8,568 Unrealized gains on available-for-sale securities — — — — 7 7 Net loss — — — ( 121,931 ) — ( 121,931 ) Balance as of September 30, 2021 106,771,584 $ 11 $ 758,114 $ ( 676,696 ) $ 3 $ 81,432 The accompanying notes are an integral part of these condensed financial statements. 4 Table of Contents ARDELYX, INC. CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the Three and Nine Months ended September 30, 2020 (Unaudited) (in thousands, except shares) Three Months Ended September 30, 2020 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity Shares Amount Balance as of June 30, 2020 89,140,563 $ 9 $ 653,805 $ ( 507,781 ) $ 317 $ 146,350 Issuance of common stock under employee stock purchase plan 94,127 — 459 — — 459 Issuance of common stock upon exercise of options 142,191 — 339 — — 339 Issuance of common stock upon vesting of restricted stock units 866,528 — — — — — Stock-based compensation — — 2,527 — — 2,527 Unrealized losses on available-for-sale securities — — — — ( 227 ) ( 227 ) Net loss — — — ( 18,108 ) — ( 18,108 ) Balance as of September 30, 2020 90,243,409 $ 9 $ 657,130 $ ( 525,889 ) $ 90 $ 131,340 Nine Months Ended September 30, 2020 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity Shares Amount Balance as of December 31, 2019 88,817,741 $ 9 $ 647,078 $ ( 460,452 ) $ 20 $ 186,655 Issuance of common stock under employee stock purchase plan 169,931 — 834 — — 834 Issuance of common stock for services 42,403 — 310 — — 310 Issuance of common stock upon exercise of options 346,806 — 759 — — 759 Issuance of common stock upon vesting of restricted stock units 866,528 — — — — — Stock-based compensation — — 8,149 — — 8,149 Unrealized gains on available-for-sale securities — — — — 70 70 Net loss — — — ( 65,437 ) — ( 65,437 ) Balance as of September 30, 2020 90,243,409 $ 9 $ 657,130 $ ( 525,889 ) $ 90 $ 131,340 The accompanying notes are an integral part of these condensed financial statements. 5 Table of Contents ARDELYX, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 2021 2020 Operating activities Net loss $ ( 121,931 ) $ ( 65,437 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 1,247 1,399 Amortization of deferred financing costs 477 416 Amortization of deferred compensation for services 192 235 Amortization of (discount) premium on investment securities 396 ( 241 ) Non-cash lease expense 2,257 1,568 Stock-based compensation 8,568 8,149 Change in derivative liabilities ( 696 ) 290 Non-cash interest associated with debt discount accretion 212 393 Changes in operating assets and liabilities: Accounts receivable ( 287 ) — Prepaid expenses and other assets ( 3,927 ) ( 3,748 ) Accounts payable ( 1,363 ) 303 Accrued compensation and benefits ( 902 ) ( 731 ) Operating lease liabilities ( 2,033 ) ( 1,914 ) Accrued and other liabilities 5,411 ( 871 ) Deferred revenue ( 703 ) ( 3,656 ) Net cash used in operating activities ( 113,082 ) ( 63,845 ) Investing activities Proceeds from maturities and redemptions of investments 103,550 79,402 Purchases of investments ( 72,736 ) ( 107,200 ) Purchases of property and equipment ( 1,962 ) ( 74 ) Net cash provided by (used in) investing activities 28,852 ( 27,872 ) Financing activities Proceeds from issuance of common stock in at-the-market offering, net of issuance costs 67,189 — Proceeds from issuance of common stock under equity incentive and stock purchase plans 1,403 1,593 Payments for taxes related to net share settlement of equity awards ( 106 ) — Net cash provided by financing activities 68,486 1,593 Net decrease in cash and cash equivalents ( 15,744 ) ( 90,124 ) Cash and cash equivalents at beginning of period 91,032 181,133 Cash and cash equivalents at end of period $ 75,288 $ 91,009 Supplementary disclosure of cash flow information: Cash paid for interest $ 2,920 $ 3,119 Cash paid for income taxes $ 4 $ 1 Supplementary disclosure of non-cash activities: Right-of-use assets obtained in exchange for lease obligations $ 14,379 $ — Issuance of common stock for services $ 190 $ 310 The accompanying notes are an integral part of these condensed financial statements. 6 Table of Contents ARDELYX, INC . NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (amounts in thousands, except per share amounts and where otherwise noted) NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION Ardelyx, Inc. (the “Company,” “we,” “us” or “our”) is a biopharmaceutical company focused on the discovery, development, and commercialization of innovative first-in-class medicines to improve treatment for people with kidney and cardiorenal diseases. We operate in one business segment, which is the research, development and commercialization of biopharmaceutical products. Basis of Presentation These condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted. These condensed financial statements have been prepared on the same basis as our most recent annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary to present fairly our financial position, results of operations, changes in stockholders’ equity, and cash flows for the interim periods presented. The accompanying condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the entire year ending December 31, 2021, or for any other interim period or future year. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes thereto. On an ongoing basis, management evaluates its estimates, including those related to recognition of revenue, clinical trial accruals, contract manufacturing accruals, the fair value of assets and liabilities, income taxes and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could materially differ from those estimates. Liquidity As of September 30, 2021, we had cash, cash equivalents and marketable securities of approximately $ 141.7 million. We believe our current available cash, cash equivalents and marketable securities will be sufficient to fund our planned expenditures and meet our obligations for at least 12 months following the filing of this Report on Form 10-Q. On July 28, 2021, we received a Complete Response Letter ("CRL") from the U.S. Food and Drug Administration ("FDA") regarding our New Drug Application ("NDA") for the control of serum phosphorus in adult patients with chronic kidney disease ("CKD") on dialysis in which the FDA noted additional requirements would need to be met in order to obtain approval for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. On July 29, 2021 we entered into a Fourth Amendment to our Term Loan Agreement which extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021, provided, however, the amendment provided that if the FDA did not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on or before October 25, 2021, then the interest-only period would expire and principal repayments would be required to begin on November 1, 2021. Further, on July 29, 2021, our Board of Directors approved, and on August 2, 2021, we implemented a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL. On October 8, 2021, our Board of Directors approved, and on October 12, 2021 we began implementing, an additional restructuring plan to further reduce operating costs and better align our workforce with the needs of our business following the 7 Table of Contents subsequent conclusion of an End of Review Type A Meeting ("End of Review Meeting") with the FDA on October 1, 2021. The restructuring plan is expected to be completed in December 2021. During November 2021, in compliance with the terms of our Loan Agreement as discussed in Note 5, we paid the first principal repayment on the Term Loan in the amount of $ 16.7 million. For additional information see Note 13, Subsequent Events. Failure to raise sufficient capital when needed or generate product revenue will further impact our ability to pursue our business strategies and could require us to further delay, scale back or discontinue one or more of our product development programs, commercialization efforts, or other aspects of our business plans. Summary of Significant Accounting Policies There have been no changes to the significant accounting policies disclosed in our most recent Annual Report on Form 10-K other than the following: Restructuring We recognize restructuring charges related to reorganization plans that have been committed to by management and when liabilities have been incurred. In connection with these activities, we record restructuring charges at fair value for, a) contractual employee termination benefits when obligations are associated to services already rendered, rights to such benefits have vested, and payment of benefits is probable and can be reasonably estimated, b) one-time employee termination benefits when management has committed to a plan of termination, the plan identifies the employees and their expected termination dates, the details of termination benefits are complete, it is unlikely changes to the plan will be made or the plan will be withdrawn and communication to such employees has occurred, and c) contract termination costs when a contract is terminated before the end of its term. One-time employee termination benefits are recognized in their entirety when communication has occurred and future services are not required. If future services are required, the costs are recorded ratably over the remaining period of service. Contract termination costs to be incurred over the remaining contract term without economic benefit are recorded in their entirety when the contract is canceled. The recognition of restructuring charges requires us to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned reorganization plan. To the extent our actual results differ from our estimates and assumptions, we may be required to revise the estimates of future accrued restructuring liabilities, requiring the recognition of additional restructuring charges or the reduction of accrued restructuring liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated financial statements. Changes in the estimates of the restructuring charges are recorded in the period the change is determined. At the end of each reporting period, we evaluate the remaining accrued restructuring balances to ensure that no excess accruals are retained, and the utilization of the provisions are for their intended purpose in accordance with developed restructuring plans. Recent Accounting Pronouncements New Accounting Pronouncements - Recently Adopted We have adopted no new accounting pronouncements other than those disclosed in our most recent Annual Report on Form 10-K. Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , an amendment which modifies the measurement and recognition of credit losses for most financial assets and certain other instruments. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. For smaller reporting companies the 8 Table of Contents guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. On June 30, 2021, our public float exceeded $700 million and therefore, on December 31, 2021, we will no longer qualify as a “smaller reporting company” and will instead be considered a large accelerated filer. We expect to adopt Topic 326 in the fourth quarter of 2021. We do not expect the adoption of ASU 2016-13 to have a material impact on our financial statements and related disclosures. NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS Securities classified as cash, cash equivalents and investments as of September 30, 2021 and December 31, 2020 are summarized below (in thousands): September 30, 2021 Gross Unrealized Amortized Cost Gains Losses Fair Value Cash and cash equivalents: Cash $ 5,712 $ — $ — $ 5,712 Money market funds 68,326 — — 68,326 Commercial paper 1,250 — — 1,250 Total cash and cash equivalents 75,288 — — 75,288 Short-term investments Commercial paper $ 49,919 $ 3 $ — $ 49,922 Corporate bonds 11,100 3 ( 2 ) 11,101 Asset-backed securities 5,341 — ( 1 ) 5,340 Total short-term investments 66,360 6 ( 3 ) 66,363 Total cash equivalents and investments $ 141,648 $ 6 $ ( 3 ) $ 141,651 December 31, 2020 Gross Unrealized Amortized Cost Gains Losses Fair Value Cash and cash equivalents: Cash $ 781 $ — $ — $ 781 Money market funds 88,151 — — 88,151 Commercial paper 2,100 — — 2,100 Total cash and cash equivalents 91,032 — — 91,032 Short-term investments Commercial paper $ 60,631 $ 2 $ ( 4 ) $ 60,629 Corporate bonds 24,547 3 ( 6 ) 24,544 U.S. government-sponsored agency bonds 9,277 2 — 9,279 U.S. treasury notes 1,000 — — 1,000 Total short-term investments 95,455 7 ( 10 ) 95,452 Long-term investments: Corporate bonds $ 2,115 $ ( 1 ) 2,114 Total cash equivalents and investments $ 188,602 $ 7 $ ( 11 ) $ 188,598 We invest excess cash in marketable securities with high credit ratings. These securities consist primarily of money market funds, commercial paper, corporate bonds, asset-backed securities, and U.S. treasury and agency securities and are classified as “available-for-sale.” All of the available-for-sale securities that we held as of September 30, 2021 had contractual maturities of less than one year. Our available-for-sale securities are subject to a periodic impairment review. We consider a debt security to be impaired when the fair value of that security is less than its carrying cost, in which case we would further evaluate the investment to determine whether the security is other-than-temporarily impaired. When we evaluate an investment for other- 9 Table of Contents than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition or creditworthiness of the issuer and any changes thereto, intent to sell, and whether it is more likely than not we will be required to sell the investment before the recovery of its cost basis. If an investment is other-than-temporarily impaired, we write the investment down through the statement of operations to its fair value and establish that value as the new cost basis for the investment. Management has determined that none of our available-for-sale securities were other-than-temporarily impaired in any of the periods presented, and, as of September 30, 2021, no investment was in a continuous unrealized loss position for more than one year. As such, we believe that it is more likely than not that investments in a loss position will be held until maturity or a forecasted recovery of fair value. NOTE 3. FAIR VALUE MEASUREMENTS Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows: Level 1 – Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. treasuries and trading securities with quoted prices on active markets. Level 2 – Valuations based on inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. treasuries and trading securities with quoted prices on active markets. Level 3 – Valuations based on unobservable inputs for which there is little or no market data, which require us to develop our own assumptions. The following table sets forth the fair value of our financial assets and liabilities that are measured or disclosed on a recurring basis by level within the fair value hierarchy (in thousands): September 30, 2021 Total Fair Value Level 1 Level 2 Level 3 Assets: Money market funds $ 68,326 $ 68,326 $ — $ — Commercial paper 51,172 — 51,172 — Corporate bonds 11,101 — 11,101 — Asset-backed securities 5,340 — 5,340 — Total $ 135,939 $ 68,326 $ 67,613 $ — Liabilities: Derivative liability for Exit Fee $ 680 $ — $ — $ 680 Total $ 680 $ — $ — $ 680 10 Table of Contents December 31, 2020 Total Fair Value Level 1 Level 2 Level 3 Assets: Money market funds $ 88,151 $ 88,151 $ — $ — Commercial paper 62,729 — 62,729 — Corporate bonds 26,658 — 26,658 — U.S. government-sponsored agency bonds 9,279 — 9,279 — U.S. treasury notes 1,000 — 1,000 — Total $ 187,817 $ 88,151 $ 99,666 $ — Liabilities: Derivative liability for Exit Fee $ 1,376 $ — $ — $ 1,376 Total $ 1,376 $ — $ — $ 1,376 Where quoted prices are available in an active market, securities are classified as Level 1. We classify money market funds as Level 1. When quoted market prices are not available for the specific security, we estimate fair value by using benchmark yields, reported trades, broker/dealer quotes and issuer spreads. We classify U.S. government-sponsored agency bonds, U.S. treasury notes, corporate bonds, commercial paper, asset-backed securities and foreign currency derivative contracts as Level 2. In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities, such as the Exit Fee, as defined and discussed in Note 6, are classified as Level 3. The carrying amounts reflected in the balance sheets for cash equivalents, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both September 30, 2021 and December 31, 2020, due to their short-term nature. Fair Value of Debt The interest rate of our term loan facility approximates the rate at which we could obtain alternative financing. Therefore, the carrying amount of the term loan facility approximated its fair value at September 30, 2021 and December 31, 2020. NOTE 4. COLLABORATION AND LICENSING AGREEMENTS Kyowa Kirin Co., Ltd. (“KKC”) 2019 KKC Agreement In November 2019, we entered into a research collaboration and option agreement with KKC (the “2019 KKC Agreement”) for research associated with identifying two preclinical compounds that are ready for designation as development compounds (“DCs”), with one compound inhibiting the first undisclosed target (“Program 1”), and a second inhibiting the second undisclosed target (“Program 2”). Pursuant to the 2019 KKC Agreement, upon completion of the research and designation by the research steering committee of one or more DCs, KKC has the right to execute one or more separate collaborative agreements relating to the development and commercialization of one or both DCs in certain specified territories. Under the terms of the 2019 KKC Agreement, KKC paid us a non-refundable, non-creditable upfront fee of $ 10.0 million in two installments as follows: the first installment of $ 5.0 million within 30 days of November 11, 2019 (the “Effective Date”), and the second installment of $ 5.0 million on the first anniversary of the Effective Date. The term of the 2019 KKC Agreement commenced on the Effective Date and ends on the earliest of: (i) 2 years following the Effective Date, (ii) the nomination of a program DC for both programs, (iii) the nomination of one program DC and the decision by the parties to cease research for the other program, or (iv) the decision by the parties to cease research for both programs. During the three and nine months ended September 30, 2021, we recognized $ 0.9 million and $ 3.7 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss. During the three and nine months ended September 30, 2020, we recognized $ 1.4 million and $ 3.7 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss. The aggregate amount of the transaction price allocated to our 11 Table of Contents partially unsatisfied performance obligations as of September 30, 2021 and December 31, 2020 was $ 0.5 million and $ 4.2 million, respectively, which is presented in the accompanying condensed balance sheet as deferred revenue. As of September 30, 2021, we expect to recognize the remaining transaction price allocated to our partially unsatisfied performance obligations over the remaining research terms, which is currently expected to extend through the end of 2021. There were no significant changes in estimates associated with the 2019 KKC Agreement during the nine months ended September 30, 2021. 2017 KKC Agreement In November 2017, we entered into an exclusive license agreement with KKC (the “2017 KKC Agreement”), for the development, commercialization, and distribution of tenapanor in Japan for cardiorenal indications. We granted KKC an exclusive license to develop and commercialize certain sodium hydrogen exchanger 3 (“NHE3”) inhibitors including tenapanor in Japan for the treatment of cardiorenal diseases and conditions, excluding cancer. We retained the rights to tenapanor outside of Japan, and also retained the rights to tenapanor in Japan for indications other than those stated above. Pursuant to the 2017 KKC Agreement, KKC is responsible for all costs and expenses incurred in the development and commercialization of tenapanor for all licensed indications in Japan. We are responsible for supplying the tenapanor drug substance for KKC’s use in development and commercialization throughout the term of the 2017 KKC Agreement, provided that KKC may exercise an option to manufacture the tenapanor drug substance under certain conditions. We assessed these arrangements in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments (“ASC 606”) and concluded that the contract counterparty, KKC, is a customer. Under the terms of the 2017 KKC Agreement, we received $ 30.0 million in upfront license fees, which was recognized as revenue when the agreement was executed. Based on our assessment, management determined that the license and the manufacturing supply services were its material performance obligations at the inception of the 2017 KKC Agreement, and as such, each of the performance obligations is distinct. In addition to the up-front license fee received of $ 30.0 million, we may be entitled to receive up to $ 55.0 million in total development milestones, of which $ 10.0 million has been received and recognized as revenue as of September 30, 2021, and approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 76.1 million at the currency exchange rate on September 30, 2021, as well as reimbursement of costs plus a reasonable overhead for the supply of product and high-teen royalties on net sales throughout the term of the agreement. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at September 30, 2021. During the three and nine months ended September 30, 2021 we recognized zero and $ 5.0 million, respectively, as licensing revenue upon the achievement of development milestones. During the three and nine months ended September 30, 2020, we recognized no licensing revenue upon the achievement of development milestones. The $ 5.0 million development milestone recognized during the three months ended March 31, 2021 related to the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia. During the three and nine months ended September 30, 2021, we recognized $ 0.3 million and $ 0.4 million as product supply revenue related to the manufacturing supply of tenapanor and other materials to KKC pursuant to the 2017 KKC Agreement. During the three and nine months ended September 30, 2020, we recognized $ 1.4 million and $ 1.4 million as product supply revenue. During the three months ended March 31, 2021, we received a $ 2.9 million prepayment from KKC for the manufacturing of tenapanor drug substance. The prepayment is reflected within prepaid and other current assets and deferred revenue, non-current on our condensed balance sheet as of September 30, 2021. Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun Pharma”) In December 2017, we entered into an exclusive license agreement with Fosun Pharma (the “Fosun Agreement”), for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C. We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, Fosun Pharma, is a customer. Under the terms of the Fosun Agreement, we received $ 12.0 million in upfront license fees which was recognized as revenue when the agreement was executed. Based on management’s assessment, we determined that the license and the manufacturing supply services represented the material performance obligations at the inception of the agreement, and as such, each of the performance obligations is distinct. We may be entitled to additional development and commercialization milestones of up to $ 110.0 million, as well as reimbursement of cost plus a reasonable overhead for the supply of product and tiered royalties on net sales ranging from the mid-teens to 20 %. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at September 30, 2021. 12 Table of Contents We have recorded no revenue during the three and nine months ended September 30, 2021 related to the Fosun Agreement. Knight Therapeutics, Inc. (“Knight“) In March 2018, we entered into an exclusive license agreement with Knight (the “Knight Agreement”) for the development, commercialization and distribution of tenapanor in Canada for hyperphosphatemia and IBS-C. We assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Knight, is a customer. Based on management’s assessment, we determined that the license and the manufacturing supply services represented the material performance obligations at the inception of the agreement, and as such, each of the performance obligations is distinct. Under the terms of the agreement, we received a $ 2.3 million nonrefundable, one-time upfront payment in March 2018 and are eligible to receive additional development and commercialization milestone payments worth up to $ 17.5 million. We are also eligible to receive royalties throughout the term of the agreement, and a transfer price for manufacturing services. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as they were fully constrained at September 30, 2021. AstraZeneca AB (“AstraZeneca”) In June 2015, we entered into a termination agreement with AstraZeneca (the “AstraZeneca Termination Agreement”) pursuant to which we have agreed to pay AstraZeneca (i) future royalties at a royalty 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 a new collaboration partner should we elect to license, or otherwise provide rights to develop and commercialize tenapanor or another NHE3 inhibitor, up to a maximum of $ 75.0 million in aggregate for (i) and (ii). As of September 30, 2021, to date in aggregate, we have recognized $ 11.6 million of the $ 75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $ 11.6 million. For the three and nine months ended September 30, 2021 we recognized and recorded as cost of revenue zero and $ 1.0 million related to the AstraZeneca Termination Agreement. For the three and nine months ended September 30, 2020 we recognized zero and $ 0.1 million, respectively, as cost of revenue related to the AstraZeneca Termination Agreement. Deferred Revenue The following tables present changes in our current and non-current deferred revenue balances during the reporting period. The current deferred revenue balance is attributable entirely to the 2019 KKC Agreement and the non-current deferred revenue balance is attributable entirely to the 2017 KKC Agreement (in thousands): Deferred revenue - current Balance at December 31, 2020 $ 4,177 Decreases due to revenue recognized in the period for which cash has been received ( 3,650 ) Balance at September 30, 2021 $ 527 Deferred revenue - non-current Balance at December 31, 2020 $ — Increases to amounts invoiced for which cash has been received 2,947 Balance at September 30, 2021 $ 2,947 NOTE 5. BORROWING Solar Capital and Western Alliance Bank Loan Agreement On May 16, 2018, we entered into a loan and security agreement (the “Loan Agreement”), with Solar Capital Ltd. and Western Alliance Bank (collectively the “Lenders”). The Loan Agreement provides for a $ 50.0 million term loan facility with a maturity date of November 1, 2022 (the “Term Loan”). On October 9, 2020, we and the Lenders entered into an amendment to the Loan Agreement (“the 2020 Amendment”) to extend the date through which we are permitted to make interest-only payments on the Term Loan by twelve months to December 1, 2021. The 2020 amendment also required that if either the FDA does not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before May 31, 2021 or the FDA issues a CRL with 13 Table of Contents respect to our NDA Number 213931, then we are to begin principal payments on the earlier of June 1, 2021 or the first day of the month immediately following the date that the FDA issues us a CRL. On April 29, 2021, the FDA extended the Prescription Drug User Fee Act ("PDUFA") date for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis by three months to July 29, 2021, making it unlikely that the FDA would approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before May 31, 2021. In May and July 2021, we and the Lenders entered into additional amendments to the Loan Agreement (“the 2021 Amendments”) which together extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021; provided that if we have not received FDA approval for our NDA for tenapanor for the control of serum phosphorus in adult patients with CDK on dialysis on or before October 25, 2021, the interest-only period will expire and principal repayments shall be required to begin on November 1, 2021. If principal repayments are required to begin prior to December 1, 2021 under the 2021 Amendments, then the first such repayment shall include all payments that would have been due if monthly principal repayment had begun on June 1, 2021. As of September 30, 2021, we have classified our loan payable, current to include all principal payments that would have been due beginning on June 1, 2021. During November 2021, in compliance with the terms of our Loan Agreement, we paid the first principal repayment on the Term Loan in the amount of $ 16.7 million. For additional information see Note 13, Subsequent Events. We paid a closing fee of 1 % of the Term Loan, or $ 0.5 million, upon the closing of the Term Loan, $ 0.1 million upon closing of the 2020 Amendment and $ 0.1 million upon closing of the 2021 Amendments. Under the Term Loan, we are also obligated to pay a final fee equal to 4.95 % of the Term Loan upon the earliest to occur of the maturity date, the acceleration of the Term Loan, the prepayment or repayment of the Term Loan or the termination of the Loan Agreement. We may voluntarily prepay the outstanding Term Loan, subject to a prepayment premium of (i) 3 % of the principal amount of the Term Loan if prepaid prior to or on the first anniversary of the Closing Date, (ii) 2 % of the principal amount of the Term Loan if prepaid after the first anniversary of the Closing Date through and including the second anniversary of the Closing Date, or (iii) 1 % of the principal amount of the Term Loan if prepaid after the second anniversary of the Closing Date and prior to the maturity date. The Term Loan is secured by substantially all our assets, except for our intellectual property and certain other customary exclusions. Additionally, in connection with the Term Loan, we entered into the Exit Fee Agreement, as discussed in Note 6. The Loan Agreement also contains customary events of default that entitle the Lenders to cause us indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loan, including our cash. Upon the occurrence and for the duration of an event of default, an additional default interest rate equal to 4 % per annum will apply to all amounts owed under the Loan Agreement. As of September 30, 2021 and as of the date of filing this Quarterly Report on Form 10-Q, to our knowledge, there were no facts or circumstances in existence that would give rise to an event of default. As of September 30, 2021, our future payment obligations related to the Term Loan, excluding interest payments and the Exit Fee, are as follows (in thousands): Total repayment obligations $ 52,475 Less: Unamortized discount and debt issuance costs ( 307 ) Less: Unaccreted value of final fee ( 692 ) Loan payable 51,476 Less: Loan payable, current portion ( 44,444 ) Loan payable, net of current portion $ 7,032 NOTE 6. DERIVATIVE LIABILITY Exit Fee In May 2018, in connection with entering into the Loan Agreement, as defined and discussed in Note 5, we entered into an agreement pursuant to which we agreed to pay $ 1.5 million in cash (the “Exit Fee”) upon any change of control transaction in respect of the Company or if we obtain both (i) FDA approval of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis and (ii) FDA approval of tenapanor for the treatment of patients with irritable bowel syndrome with constipation (“IBS-C”), which was obtained on September 12, 2019 when the FDA approved IBSRELA® (tenapanor), a 50 milligram, twice daily oral pill for the treatment of IBS-C in adults (the “Exit Fee Agreement”). Notwithstanding the prepayment or termination of the Term Loan, as defined and discussed in Note 5, our obligation to pay the Exit Fee will expire on May 16, 2028. We concluded that the Exit Fee is a freestanding derivative which should be accounted for at fair value on a 14 Table of Contents recurring basis. The estimated fair value of the Exit Fee is recorded as a derivative liability and included in accrued expenses and other current liabilities on the accompanying condensed balance sheets. The fair value of the derivative liability was determined using a discounted cash flow analysis and is classified as a Level 3 measurement within the fair value hierarchy since our valuation utilized significant unobservable inputs. Specifically, the key assumptions included in the calculation of the estimated fair value of the derivative liability include: (i) our estimates of both the probability and timing of a potential $ 1.5 million payment to Solar Capital Ltd. and Western Alliance Bank as a result of the FDA approvals and (ii) a discount rate which was derived from our estimated cost of debt, adjusted with current LIBOR (or a comparable successor rate if LIBOR no longer exists). Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the derivative liability and it is estimated that a 10 % increase (decrease), not to exceed 100%, in the probability of occurrence would result in a fair value fluctuation of no more than $ 0.1 million. Changes in the fair value of recurring measurements included in Level 3 of the fair value hierarchy are presented as other income, net in our statements of operations and were as follows for the nine months ended September 30, 2021 and 2020 (in thousands): Nine Months Ended September 30, 2021 2020 Fair value of Exit Fee derivative liability at January 1 $ 1,376 $ 969 Change in estimated fair value of Exit Fee derivative liability ( 696 ) 290 Fair value of Exit Fee derivative liability at September 30 $ 680 $ 1,259 During the nine months ended September 30, 2021 we reduced the value of the derivative liability due the receipt of the CRL from the FDA regarding our NDA for the control of serum phosphorus in adult patients with CKD on dialysis. NOTE 7. LEASES All of our leases are operating leases and each contain customary rent escalation clauses. Certain of the leases have both lease and non-lease components. We have elected to account for each separate lease component and the non-lease components associated with that lease component as a single lease component for all classes of underlying assets. During May 2021, we entered into an amendment to the lease for our Fremont, California facility that extended the term of the lease to March 2025. The office space consists of 72,500 square feet with the lease terminating in September 2025. We increased the right-of-use asset and lease liability by $ 11.9 million for the Fremont lease upon commencement of the amendment. During April 2021 and May 2021, we recorded right-of-use operating lease assets for a new facility in Waltham, Massachusetts under a lease agreement entered into during December 2020 with lease commencement dates during April and May 2021. The office space consists of 12,864 square feet with the lease terminating in June 2026. We have an option to extend the lease term for one additional five year period. This option to extend the lease term has not been included in the calculation since currently the exercise of the option is uncertain and therefore deemed not probable. We recorded a $ 1.6 million right-of-use asset and lease liability for the Waltham lease upon commencement of the lease. 15 Table of Contents The following table provides additional details of our facility leases presented in the condensed balance sheet as of September 30, 2021 (dollars in thousands): Facilities Right-of-use assets $ 13,580 Current portion of lease liabilities 3,391 Operating lease liability, net of current portion 10,669 Total $ 14,060 Weighted-average remaining life (years) 3.70 Weighted-average discount rate 6.86 % Lease costs, which are included in operating expenses in our statements of operations, were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Operating lease expense $ 1,096 $ 648 $ 2,606 $ 1,944 Cash paid for operating leases $ 829 $ 767 $ 2,383 $ 2,288 The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of September 30, 2021 (in thousands): Remainder of 2021 $ 1,056 2022 4,292 2023 4,440 2024 4,589 2025 1,321 Thereafter 252 Total undiscounted operating lease payments 15,950 Imputed interest expenses ( 1,890 ) Total operating lease liabilities 14,060 Less: Current portion of operating lease liability ( 3,391 ) Operating lease liability, net of current portion $ 10,669 NOTE 8. STOCKHOLDERS’ EQUITY At the Market Offerings Agreement In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020 ("Registration Statement"), 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 ("Jefferies"), deemed to be “at the market offerings” (the "2020 Open Market Sales Agreement"). Pursuant to the 2020 Open Market Sales Agreement, Jefferies, as our sales agent, received a commission of up to 3.0 % of the gross sales price for shares of common stock sold under the 2020 Open Market Sales Agreement. During the nine months ended September 30, 2021 we sold 12.3 million shares of our common stock for aggregate gross proceeds of $ 68.7 million at a weighted average price of $ 5.58 per share under the 2020 Open Market Sales Agreement. We sold 8.2 million shares of our common stock between the dates of November 13, 2020 through February 19, 2021, 4.0 million shares between the dates of May 11, 2021 through June 18, 2021 and 3.3 million shares between the dates of August 24, 2021 and September 10, 2021 for a 16 Table of Contents cumulative total of 15.6 million shares and gross proceeds of $ 90.3 million at a weighted average sales price of approximately $ 5.80 per share during the life of the 2020 Open Market Sales Agreement. In August 2021, we filed an additional prospectus supplement under the Registration Statement 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 an additional sales agreement we entered into with Jefferies (the "2021 Open Market Sales Agreement"), pursuant to which we may, from time to time, sell up to $ 150.0 million in shares of our common stock through Jefferies. We are not required to sell shares under the 2021 Open Market Sales Agreement. Pursuant to the 2021 Open Market Sales Agreement, Jefferies, as our sales agent, receives a commission of up to 3.0 % of the gross sales price for shares of common stock sold under the 2021 Open Market Sales Agreement. As of September 30, 2021 we had sold no shares of our common stock under the 2021 Open Market Sales Agreement. NOTE 9. EQUITY INCENTIVE PLANS Stock-Based Compensation Stock-based compensation expense recognized for stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PRSUs") and our employee stock purchase program (the "ESPP") are recorded as operating expenses in our condensed statements of operations and comprehensive loss, as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 730 $ 963 $ 2,909 $ 3,165 General and administrative 1,532 1,564 5,659 4,984 Total $ 2,262 $ 2,527 $ 8,568 $ 8,149 As of September 30, 2021, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands): Unrecognized Compensation Expense Average Remaining Vesting Period (Years) Stock options $ 19,546 2.6 RSUs $ 4,839 3.3 ESPP $ 201 0.4 Stock Options A summary of our stock option activity and related information for the nine months ended September 30, 2021 is as follows (in thousands, except dollar amounts): Number of Shares Weighted Average Exercise Price Outstanding balance at December 31, 2020 9,790 $ 6.76 Granted 3,410 $ 6.60 Exercised ( 331 ) $ 1.96 Forfeited ( 1,481 ) $ 6.01 Outstanding balance at September 30, 2021 11,387 $ 6.95 Exercisable at September 30, 2021 6,434 $ 7.51 17 Table of Contents Restricted Stock Units A summary of our RSUs activity and related information for the nine months ended September 30, 2021 is as follows (in thousands, except dollar amounts): Number of RSUs Weighted Average Value at Grant Outstanding balance at December 31, 2020 159 $ 5.64 Granted 1,124 $ 6.62 Vested ( 140 ) $ 6.57 Forfeited ( 322 ) $ 6.68 Unvested at September 30, 2021 820 $ 6.42 We issued no PRSUs during the nine months ended September 30, 2021 and we have no PRSUs outstanding as of September 30, 2021. Employee Stock Purchase Plan In August 2021, we sold approximately 0.5 million shares of our common stock under the ESPP. The shares were purchased by employees at a purchase price of $ 1.21 per share resulting in proceeds to us of approximately $ 0.6 million. Issuance of Common Stock for Services Under Our Amended and Restated Non-Employee Director Compensation Program, members of our board of directors may elect to receive shares of our stock in lieu of their cash fees. During the nine months ended September 30, 2021, we issued approximately 25,989 shares of our common stock to members of the board of directors in accordance with the program. NOTE 10. RESTRUCTURING On July 29, 2021, our Board of Directors approved, and on August 2, 2021, we began implementing a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL. Under the restructuring plan, we reduced our workforce by 83 employees (approximately 33 %). Impacted employees received cash payments equal to their base pay for a notice period of sixty ( 60 ) days and Company funded COBRA premiums through such notice period. In addition, impacted employees were eligible to receive severance benefits and additional Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a separation agreement, which includes a general release of claims against us. In connection with the restructuring, we have incurred restructuring charges of $ 3.6 million, which were recorded during the quarter ended September 30, 2021, related to one-time termination notice and severance payments and other employee-related costs. Of this charge, $ 1.2 million was recorded in research and development expenses, and $ 2.4 million was recorded in general and administrative expense in the accompanying condensed statements of operations and comprehensive loss. The cash payments related to the reduction in workforce were disbursed during the quarter ended September 30, 2021. As discussed in Note 13, on October 8, 2021, our Board of Directors approved an additional restructuring plan subsequent to the conclusion of an End of Review Meeting with the FDA on October 1, 2021. The restructuring plan is expected to be completed in December 2021. NOTE 11. NET LOSS PER SHARE Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of stock-based awards and warrants. Diluted net loss per common share is computed giving effect to all potential dilutive common shares, including common stock issuable upon exercise of stock options, and unvested restricted common stock and stock units. As we had net losses for the three and nine months ended September 30, 2021 and 2020, all potential common shares were determined to be anti-dilutive. 18 Table of Contents The following table sets forth the computation of net loss per common share (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Numerator: Net loss $ ( 43,587 ) $ ( 18,108 ) $ ( 121,931 ) $ ( 65,437 ) Denominator: Weighted average common shares outstanding - basic and diluted 104,145 89,366 100,480 89,110 Net loss per share - basic and diluted $ ( 0.42 ) $ ( 0.20 ) $ ( 1.21 ) $ ( 0.73 ) For the three and nine months ended September 30, 2021, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 13.2 million and 13.4 million, respectively. For the three and nine months ended September 30, 2020, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 9.6 million and 10.4 million, respectively. NOTE 12. CONTINGENCIES On July 30, 2021, a putative securities class action lawsuit was commenced in the U.S. District Court for the Northern District of California naming as defendants Ardelyx and two current officers. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact related to tenapanor. The plaintiff seeks to represent all persons who purchased or otherwise acquired Ardelyx securities between August 6, 2020, and July 19, 2021. The plaintiff seeks damages and interest, and an award of costs, including attorneys’ fees. We believe the plaintiff’s claims are without merit and we have not recorded any accrual for a contingent liability associated with these legal proceedings. From time to time we may be involved in claims arising in connection with our business. Based on information currently available, management believes that the amount, or range, of reasonably possible losses in connection with any pending actions against us would not be material to our financial condition or cash flows, and no contingent liabilities were accrued as of September 30, 2021 or 2020. NOTE 13. SUBSEQUENT EVENTS Restructuring On October 8, 2021, our Board of Directors approved, and on October 12, 2021 we began implementing, a restructuring plan to reduce operating costs and better align our workforce with the needs of our business following the receipt of a CRL from the FDA on July 28, 2021 regarding our NDA for the control of serum phosphorus in CKD patients on dialysis, and the subsequent conclusion of an End of Review Meeting with the FDA on October 1, 2021. The restructuring plan actions are expected to be completed in December 2021. Under the restructuring plan, we are reducing our workforce by approximately 100 employees (approximately 60 %). Impacted employees received notice that their positions will be eliminated on December 15, 2021. The restructuring plan will result in the elimination of all positions in our research organization as well as the cessation of all research activities. At the time of departure from the Company, either on December 15, 2021, or earlier, impacted employees are eligible to receive severance benefits and Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a separation agreement, which includes a general release of claims against the Company. In connection with the restructuring, we estimate that we will incur aggregate restructuring charges of approximately $ 4 million, which will be recorded primarily in the fourth quarter 2021, related to severance payments and other employee-related costs. We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the reduction in workforce. In addition, on October 8, 2021, the Board determined that it is in the best interests of the Company and its stockholder to put in place arrangements designed to provide that the Company will have the continued dedication and commitment of those employees, including executives, determined to be key to the restructuring and planned future operations of the Company, and 19 Table of Contents thus, not impacted by the reduction in force. The Board approved, and management has implemented a retention program consisting of cash payments and grants of RSUs to the Company’s employees not impacted by the reduction in force. As part of the retention plan we have entered into retention agreements with the retained employees, including the following named executive officers: Mike Raab, our Chief Executive Officer, Justin Renz, our Chief Financial Officer and Susan Rodriguez, our Chief Commercial Officer. Under those retention arrangements, each of Messrs. Raab and Renz and Ms. Rodriguez have received an RSU grant for 300 thousand, 250 thousand and 150 thousand shares, respectively. The RSUs will vest in full on June 1, 2022. Additionally, the retention agreements provide Messrs. Raab and Renz and Ms. Rodriguez the opportunity to earn cash bonuses upon the achievement of certain milestones in the amounts of $ 300 thousand, $ 250 thousand and $ 150 thousand, respectively. Borrowing During November 2021, in compliance with the terms of our Loan Agreement as discussed in Note 5, we made the first principal repayment on the Term Loan in the amount of $ 16.7 million. At the Market Offerings Agreement We sold 6.0 million shares of our common stock pursuant to the 2020 Open Market Sales Agreement between the dates of October 21, 2021 and November 5, 2021 for gross proceeds of $ 7.4 million at a weighted average sales price of approximately $ 1.23 per share. We did not sell any additional shares of our common stock after November 5, 2021 and through the date of filing this report on Form 10-Q.