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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-03-08 · 210 added, 215 removed, 215 unchanged (66% of the section changed)

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 section of this report entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in this report.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and related notes included elsewhere in this report.

This discussion 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.

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Unless the context requires otherwise, the terms “Ardelyx”, “Company”, “we”, “us”, and “our” refer to Ardelyx, Inc.

We are a specialized biopharmaceutical company focused on developing first-in-class medicines to improve treatment for people 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.

Our lead product candidate, tenapanor, is a first-in-class medicine for which we submitted a New Drug Application (“NDA”) to the U.S.

Food and Drug Administration (“FDA”) in June 2020 for the control of serum phosphorus in adult patients with CKD on dialysis.

In September 2020 the FDA accepted the filing of our NDA and set a Prescription Drug User Fee Act (“PDUFA”) date of April 29, 2021.

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.

We are a biopharmaceutical company founded with a mission to discover, develop and commercialize innovative first-in-class medicines that meet significant unmet medical needs.

This includes adult patients with irritable bowel syndrome with constipation (“IBS-C”), adult patients with chronic kidney disease (“CKD”) on dialysis suffering from elevated serum phosphorus, or hyperphosphatemia;

and adult patients with CKD and/or heart failure with elevated serum potassium, or hyperkalemia.

Since commencing operations in October 2007, substantially all our efforts have been dedicated to our research and development (“R&D”) activities, including developing tenapanor and developing our proprietary drug discovery and design

We have not generated any revenues from product sales.

As of December 31, 2021, we had an accumulated deficit of $712.9 million.

We expect to continue to incur substantial operating losses for the foreseeable future as we prepare for commercialization of IBSRELA ® (tenapanor) in April of this year, seek to gain approval for XPHOZAH ® (tenapanor) for the control of serum phosphorus in adult patients with CKD on dialysis;

prepare for the potential commercialization of XPHOZAH, if approved;

incur manufacturing and development cost for, tenapanor;

and incur development costs for RDX013.

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 agreements with our lenders.

On February 28, 2022, we received a letter from Nasdaq indicating that we have failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2).

Nasdaq Listing Rule 5550(a)(2) requires that companies listed on the Nasdaq Capital Market maintain a minimum closing bid price of at least $1.00 per share.

Under Nasdaq Listing Rule 5810(c)(3)(A), we have a 180 calendar day grace period to regain compliance by meeting the continued listing standard.

To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this grace period.

We are monitoring the bid price of our common stock and will consider options available to us to achieve compliance.

There can be no assurances that we will be successful in restoring our compliance with the Nasdaq listing requirements.

OUR PRODUCT PIPELINE

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”).

IBSRELA for IBS-C

Our unique discovery platform and deep understanding of the primary mechanism of sodium transport in the intestine resulted in our discovery and development of IBSRELA, a first-in-class, FDA approved, sodium hydrogen exchanger 3 ("NHE3") inhibitor for the treatment of IBS-C in adults.

IBSRELA acts locally in the gut and is minimally absorbed.

By inhibiting NHE3, IBSRELA exerts a triple action mechanism.

First, it blocks dietary sodium absorption, leading to increased intestinal transit time and softer stool to address constipation.

Second, it decreases intestinal permeability to reduce abdominal pain, and, third, it decreases visceral hypersensitivity to reduce abdominal pain.

The triple action mechanism of IBSRELA is differentiated from existing therapies and has been shown to provide significant improvement in abdominal pain, bloating, and constipation – with a quick onset of action and sustained efficacy.

Treatment with IBSRELA has been demonstrated to result in improved quality of life versus placebo and patient treatment satisfaction.

We plan to launch IBSRELA in the U.S.

in April 2022.

IBS-C is a gastrointestinal disorder characterized by both abdominal pain and altered bowel movements, estimated to affect 11 million people in the U.S.

IBS-C is associated with significantly impaired quality of life, reduced productivity, and substantial economic burden.

The introduction of new agents over the last decade has led to an established prescription ("RX") treated market with 9,000 writers accounting for 50% of the RXs.

Despite the active use of GCC agonist therapies, 83% of Health Care Providers ("HCPs") report a significant unmet need for new therapies, and report that approximately 35% of the patients currently under their care do not adequately respond to the available treatments.

When presented with the IBSRELA product profile, 75% of HCPs respond favorably, with the efficacy profile and novel method of action rated as the most compelling aspects of the product profile.

In preparation for our commercial launch of IBSRELA, we have built a commercial organization highly experienced in launching novel therapies into specialty areas.

The established nature of the market, limited number of players, concentration of prescribers, recognized unmet need, and favorable response to the novel mechanism IBSRELA product profile enable a targeted promotional effort centered on the 9,000 health care providers that account for 50% of IBS-C prescriptions.

Central to the go to market strategy is a highly experienced specialty sales force, many with existing relationships across their GI target base, full company engagement, and innovative peer-to-peer and digital initiatives leveraging the rapidly evolving market dynamics in how HCPs receive information and interact with industry.

With a concentrated promotional focus on patients currently being managed for IBS-C by high writing HCPs - in contrast to the DTC centered, market building approach taken by the existing GCC agonists - competition for IBSRELA will come largely from the four prescription products indicated for IBS-C:

Linzess (linaclotide);

Amitiza (lubiprostone);

Trulance (plecanatide) and Zelnorm (tegaserod).

Additionally, over the counter products are commonly used to treat the constipation component of IBS-C, both alone, and in combination with the IBS-C indicated RX therapies.

We have established commercial agreements with Shanghai Fosun Pharmaceutical Industrial Development Co.

(“Fosun Pharma”) in China and Knight Therapuetics, Inc.

(“Knight”) in Canada for IBSRELA for IBS-C.

Knight is currently marketing IBSRELA in Canada.

Development Candidate XPHOZAH:

A New Approach for The Control of Serum Phosphorus in Adult Patients with CKD on Dialysis

XPHOZAH is a first-in-class medicine being developed for the control of serum phosphorus in adult patients with CKD on dialysis.

XPHOZAH has a unique mechanism of action and acts locally in the gut to inhibit NHE3.

This results in the tightening of the epithelial cell junctions, thereby significantly reducing paracellular uptake of phosphate, the primary pathway of phosphate absorption.

In September 2020 we announced that the FDA accepted the filing of our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis.

The acceptance of our NDA represents the next critical step toward bringing to market a completely new approach to the management of hyperphosphatemia.

The FDA has set a PDUFA date of April 29, 2021.

We continue to advance our commercial preparations for the launch of tenapanor.

The NDA is supported by three successful Phase 3 trials involving over 1,000 patients that evaluated the use of tenapanor for the control of serum phosphorus in CKD patients on dialysis, with two trials evaluating tenapanor as monotherapy and one trial evaluating tenapanor as part of a dual mechanism approach with binders.

We have established agreements with Kyowa Kirin Co., Ltd.

(“KKC”) in Japan, Shanghai Fosun Pharmaceutical Industrial Development Co.

(“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 CKD patients 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 foundational 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 Kyowa Kirin Co., Ltd., 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.

Tenapanor, if approved, would be the first therapy for phosphate management that blocks phosphorus absorption at the primary pathway of uptake.

If approved, XPHOZAH would be the first therapy for phosphate management that blocks phosphorus absorption at the primary site 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.

In June 2020, we submitted a new drug application ("NDA") to the U.S.

Food and Drug Administration (“FDA”) for tenapanor the control of serum phosphorus in adult patients with CKD on dialysis.

The NDA was supported by three Phase 3 trials involving over 1,000 adult patients that evaluated the use of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis, with two trials evaluating tenapanor as monotherapy and one trial evaluating tenapanor as part of a dual mechanism approach with phosphate binders.

All three Phase 3 trials met their primary and key secondary endpoints.

On July 28, 2021, we received a Complete Response Letter ("CRL") from the FDA regarding our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis.

According to the CRL, while the FDA agrees “that the submitted data provide substantial evidence that tenapanor is effective in reducing serum phosphorus in adult patients with CKD on dialysis,” the FDA characterizes the magnitude of the treatment effect as “small and of unclear clinical significance.” Following an End-of-Review Type A meeting (“End of Review Meeting”) in October 2021, with the FDA’s Division of Cardiology and Nephrology (the “Division”), we submitted a Formal Dispute Resolution Request (“FDRR”) in December 2021.

The FDRR was focused on demonstrating that the data submitted in the NDA supported the clinical significance of the treatment effect of tenapanor.

On February 4, 2022, we received an Appeal Denied Letter (“ADL”) from the FDA’s Office of Cardiology, Hematology, Endocrinology and Nephrology (“OCHEN”).

On February 18, 2022, we submitted an appeal of the ADL to the FDA’s Center for Drug Evaluation and Research, Office of New Drugs (“OND”).

If accepted, we expect a decision on the appeal to the OND in April 2022.

While the CRL noted that in order for the NDA to be approved, we need to conduct an additional adequate and well-controlled trial demonstrating a clinically relevant treatment effect on serum phosphorus or an effect on the clinical outcome thought to be caused by hyperphosphatemia in adult patients with CKD on dialysis, the ADL provided a potential additional path forward involving the resubmission of the NDA (without conducting an additional trial) with a number of new analyses of each of our Phase 3 clinical trials;

an assessment of tenapanor’s benefits and risks;

and a proposal of how to label tenapanor for prescribers.

There can be no assurances that the Formal Dispute Resolution (“FDR”) process will result in approval of our NDA, or in a clear path to resubmission of our NDA that is achievable in terms of clinical endpoints, time and cost.

RDX013 Program:

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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 December 31, 2020, we had an accumulated deficit of $554.8 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 CKD patients on dialysis;

our preparations for, and if approved, the commercialization of tenapanor in the United States for the control of serum phosphorus in CKD patients on dialysis, 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.

and Western Alliance Bank.

Hyperkalemia is a common problem in patients with heart and kidney disease, particularly in patients taking customary blood pressure medications known as renin-angiotensin-aldosterone system (“RAAS”) inhibitors.

RDX013 is a novel mechanism agent 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 secretagogue with demonstrated proof of concept in a Phase 2 dose ranging study evaluating the safety and pharmacodynamics of RDX013 in adult patients with hyperkalemia.

The next steps for RDX013 will be determined based on final analyses of the Phase 2 results, continued formulation development, and sufficient financial resources.

RDX020 Program:

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We have identified lead compounds that are potent, selective and proprietary inhibitors of bicarbonate secretion.

Our research organization was eliminated as part of our October 2021 restructuring, and therefore, we currently expect to continue to advance this discovery program utilizing third-party resources managed by internal non-clinical expertise.

FINANCIAL OPERATIONS OVERVIEW

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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 currently expect to commence commercialization of IBSRELA in April 2022.

In the future, we may generate revenue from a combination of our own product sales 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 extent to which we are successful in our efforts to commercialize IBSRELA;

whether we receive regulatory approval for tenapanor for the control of serum phosphorous in adult patients with CKD on dialysis (the “Hyperphosphatemia Indication”), and if such approval is received, the timing of such approval and the extent to which we are successful in our efforts to commercialize XPHOZAH for such indication;

the timing and progress of goods and services provided pursuant to our current or future collaborative partnerships;

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and the extent to which any of our product candidates are approved and successfully commercialized by a collaboration partner.

If we, 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.

If we are not able to obtain market acceptance for IBSRELA;

if we are not successful in our efforts to obtain and sustain an adequate level of coverage and reimbursement for IBSRELA by third-party payors;

if we fail to obtain regulatory approval for tenapanor for the Hyperphosphatemia indication and/or our current collaboration partners or any future collaboration partners fail to obtain regulatory approval for tenapanor in their respective territories, 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.

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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 to which we provide

rights to develop and commercialize tenapanor or certain other NHE3 inhibitors.

Cost of revenue represents payments due to AstraZeneca AB (“AstraZeneca”), which under the terms of a termination agreement entered into in 2015 (the “AZ Termination Agreement”) 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 as a result of the development and commercialization of 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).

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Research and Development

We recognize all research and development expenses as they are incurred to support the discovery, research, development and manufacturing of our product candidates.

Pursuant to the October 2021 restructuring plan, we have eliminated our internal research organization and expect to continue our discovery efforts with respect to RDX020 through the use of third-parties managed internally by non-clinical expertise.

We recognized all research and development expenses as they were 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:

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• 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, 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.

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.

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.

Interest Expense

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Contracts are combined and accounted for as a single arrangement if one or more of the following criteria are met:

(i) the contracts are negotiated as a package

with a single commercial objective;

(i) the contracts are negotiated as a package with a single commercial objective;

(ii) the amount of consideration to be paid in one contract depends on the price or performance of the other contract;

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If a license granted to a customer to use our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from consideration allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

For licenses that are bundled with other promises, we apply judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, to conclude upon the appropriate method of measuring progress for purposes of recognizing revenue related to consideration allocated to the performance obligation.

time, to conclude upon the appropriate method of measuring progress for purposes of recognizing revenue related to consideration allocated to the performance obligation.

Customer options, such as options granted to allow a licensee to choose to research, develop and commercialize licensed compounds are evaluated at contract inception in order to determine whether those options provide a material right (i.

, an optional good or service offered for free or at a discount) to the customer.

e., an optional good or service offered for free or at a discount) to the customer.

If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement.

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This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service

providers invoice us monthly in arrears for services performed or when contractual milestones are met.

The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

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We record expenses related to clinical studies and manufacturing development activities based on our estimates of the services received and efforts expended pursuant to contracts with our CROs and manufacturing vendors that conduct and manage these activities on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows.

The financial terms of these agreements are subject to negotiation, vary from contract to

contract, and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense.

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As such, the expected term is estimated using the simplified method whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

Expected Volatility — Since January 1, 2017, we have used the historic volatility of our own stock over the retrospective period corresponding to the expected remaining term of the options, or the period since our shares were first quoted on The Nasdaq Global Market, if that is shorter, to compute our expected stock price volatility.

Beginning in 2021, we estimate the expected term of our options based upon historical exercises and post-vesting termination behavior, which has not resulted in a material difference as compared to using the simplified method.

Expected Volatility — We use the historic volatility of our own stock over the retrospective period corresponding to the expected remaining term of the options, or the period since our shares were first quoted on The Nasdaq Global Market, if that is shorter, to compute our expected stock price volatility.

Risk-Free Interest Rate —The risk-free interest rate assumption is based on zero-coupon U.S.

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As required, we review our valuation assumptions at each grant date and, as a result, we are likely to change our valuation assumptions used to value employee stock-based awards granted in future periods.

Employee and director stock-

based compensation costs are to be recognized over the vesting period of the award, and we have elected to use the straight-line attribution method.

Employee and director stock-based compensation costs are to be recognized over the vesting period of the award, and we have elected to use the straight-line attribution method.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

We estimate forfeitures based on historical experience.

Restricted stock units, or RSUs, are measured at the fair value of our common stock on the date of grant and expensed over the period of vesting using the straight-line attribution approach.

Performance-based RSUs, or PRSUs, are valued at grant-date fair market value.

Restricted stock units ("RSUs") are measured at the fair value of our common stock on the date of grant and expensed over the period of vesting using the straight-line attribution approach.

Performance-based RSUs ("PRSUs") are valued at grant-date fair market value.

The vesting of the PRSUs is based on performance conditions.

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The Company recognizes compensation cost with respect to the vesting of the PRSUs on a ratable basis over the requisite service period, upon the performance conditions being deemed probable of achievement.

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.

RESULTS OF OPERATIONS

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Below is a summary of our total revenue (dollars in thousands):

Year Ended December 31,

Year Ended December 31, Change

2021 2020 2019 $ % $ %

Collaborative development revenue $ 4,177 $ 5,364 $ 459 $ (1,187) (22.1) % $ 4,905 1,068.6 %

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Total revenues $ 10,097 $ 7,571 $ 5,281 $ 2,526 33.4 % $ 2,290 43.4 %

Fiscal 2021 compared to 2020 :

The increase to total revenues is primarily attributable to a $5.0 million development milestone which we earned and recognized as licensing revenue during the current year upon the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia.

The increase was partially offset by lower collaborative development revenue and product supply revenue from KKC during the current year.

Fiscal 2020 compared to 2019 :

The increase in our revenue was primarily attributable to $4.9 million higher collaborative development revenue recognized in connection with the KKC Agreement, which was entered into in November 2019, a $0.7 million licensing revenue recognized upon Knight’s achievement of a development milestone pursuant to the Knight Agreement and a $1.4 million increase in manufacturing supply of tenapanor and other materials sold to KKC in accordance with the 2017 KKC Agreement, partially offset by $3.0 million revenue related to achievement of a milestone pursuant to the Fosun agreement during the year ended December 31, 2019.

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Below is a summary of our operating expenses (dollars in thousands):

Year Ended December 31,

Year Ended December 31, Change

2021 2020 2019 $ % $ %

Cost of revenue $ 1,000 $ 145 $ 600 $ 855 589.7 % $ (455) (75.8) %

Research and development 91,140 65,053 71,677 26,087 40.1 % (6,624) (9.2) %

General administrative

General and administrative 72,303 33,153 24,267 39,150 118.1 % 8,886 36.6 %

Total operating expenses $ 164,443 $ 98,351 $ 96,544 $ 66,092 67.2 % $ 1,807 1.9 %

Cost of Revenue

Fiscal 2021 compared to 2020 :

The increase in cost of revenue 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.

Fiscal 2020 compared to 2019 :

Cost of revenue was $0.1 million for the year ended December 31, 2020, a decrease of $0.5 million, or 75.8%, compared to $0.6 million for the year ended December 31, 2019.

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Below is a summary of our research and development expenses (dollars in thousands):

Year Ended December 31,

Year Ended December 31, Change

2021 2020 2019 $ % $ %

External R&D expenses $ 56,747 $ 37,624 $ 45,989 $ 19,123 50.8 % $ (8,365) (18.2) %

Employee-related expenses 27,268 20,911 19,466 6,357 30.4 % 1,445 7.4 %

Facilities, equipment and depreciation expense

Facilities, equipment and depreciation expenses 5,803 5,738 5,934 65 1.1 % (196) (3.3) %

Other 1,322 780 288 542 69.5 % 492 170.8 %

Total research and development expenses $ 91,140 $ 65,053 $ 71,677 $ 26,087 40.1 % $ (6,624) (9.2) %

Fiscal 2021 compared to 2020 :

The increase in our external R&D expenses is the result of tenapanor manufacturing costs as well as 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 is related to compensation and benefits expenses for our research and development workforce.

Employee-related expenses for twelve months ended December 31, 2021 include $2.7 million severance payments and other employee-related costs as discussed in Note 11 - Restructuring to the financial statements included elsewhere in this Annual Report.

Fiscal 2020 compared to 2019 :

The decrease in our external R&D expenses for the year ended December 31, 2020 primarily includes a $9.7 million decrease in our tenapanor-related expenses, partially offset by $3.0 million of higher expenses attributable to KKC Research Agreement-related research and general R&D expenses.

Of the overall tenapanor-related decrease, approximately $11.0 million relates to lower clinical study costs due to the winding down of expenses associated with our Phase 3 program for tenapanor for the control of hyperphosphatemia, offset by an out-of-period adjustment recorded during 2019 that reduced clinical trial expenses by $3.6 million related to our tenapanor clinical trials for the nine months ended September 30, 2019;

and approximately $2.9 million relates to lower manufacturing expenses due to reduced validation related expenses for tenapanor in 2020 as compared to 2019;

offset by an increase of $3.1 million related to regulatory expenses that includes $2.9 million paid to the FDA for the filing of a NDA for tenapanor for the control of serum phosphorus in CKD patients on dialysis in June 2020.

Of the overall tenapanor-related decrease, approximately $11.0 million relates to lower clinical study costs due to the winding down of expenses associated with our Phase 3 clinical program for tenapanor for the control of hyperphosphatemia, offset by an out-of-period adjustment recorded during 2019 that reduced clinical trial expenses by $3.6 million related to our tenapanor clinical trials for the nine months ended September 30, 2019;

and approximately $2.9 million related to lower manufacturing expenses due to reduced validation related expenses for tenapanor in 2020 as compared to 2019;

General and Administrative

Fiscal 2021 compared to 2020 :

The increase in general and administrative expenses was primarily due to increased costs associated with building and staffing our commercial infrastructure and teams as we prepared for a potential U.S.

launch of tenapanor.

The increase consisted of headcount and related personnel costs and an increase in external spending for disease awareness initiatives, commercial infrastructure and strategy.

General and administrative expenses for the twelve months ended December 31, 2021 include $3.5 million severance payments and other employee-related costs as discussed in Note 11 - Restructuring to the financial statements included elsewhere in this Annual Report.

Fiscal 2020 compared to 2019 :

The increase in general and administrative expenses for the year ended December 31, 2020 was primarily due to an increase in costs associated with building and staffing our commercial infrastructure and teams as we prepare for the anticipated U.S.

launch of tenapanor for the control of serum phosphorus in CKD patients on dialysis.

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.

Other Income (Expense), net

Other Income, net

Below is a summary of our other income (expense), net (dollars in thousands):

Year Ended December 31,

Year Ended December 31, Change

2021 2020 2019 $ % $ %

Interest expense $ (4,502) $ (5,099) $ (5,726) $ 597 (11.7) % $ 627 (11.0) %

Other income, net 687 1,568 2,352 (881) (56.2) % (784) (33.3) %

Total other income, net $ (3,815) $ (3,531) $ (3,374) $ (284) 8.0 % $ (157) 4.7 %

Fiscal 2021 compared to 2020 :

The decrease in interest expense was primarily due to lower interest rates on our variable-rate term loan.

The changes in other income, net were primarily due to lower income earned on our investments, which was largely offset by the revaluation of our derivative liability related to our term loan agreement following receipt of the FDA CRL on July 28, 2021.

Fiscal 2020 compared to 2019 :

The decrease in interest expense for the year ended December 31, 2020 was primarily due to lower interest rates on our variable-rate term loan.

The decrease in other income, net for the year ended December 31, 2020 was primarily due to a decrease in investment income, a lower exit fee revaluation adjustment related to our loan agreement and a decrease in currency exchange losses.

Comparison of the Years Ended December 31, 2019 and 2018

Below is a summary of our operating expenses (dollars in thousands):

Year Ended December 31,

Collaborative development revenue

Product supply revenue

Licensing revenue

Total revenues

Total revenues for the year ended December 31, 2019 were $5.3 million, which represents an increase of $2.7 million, or 102.6%, as compared to total revenues of $2.6 million for the year ended December 31, 2018.

The licensing revenue of $4.5 million is attributable to the achievement of a milestone, which amounted to $3.0 million, pursuant to our exclusive license agreement with Fosun Pharma, entered into in December 2017 for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C, and the full recognition of the $1.5 million license fee related to the XuanZhu Agreement, as discussed in Note 12, Collaboration and Licensing Agreements, to our financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K.

The increase in collaborative development revenue is attributed to revenue recognized during the fourth quarter of 2019 related to the 2019 KKC Agreement.

We expect to recognize the remaining $9.5 million of the initial transaction price over the research and development period of the program, which we currently expect to extend through the end of 2021.

We will revisit our current estimates and timing of performance at the end of each future reporting period and adjust as necessary.

Product supply revenue of $0.3 million relates to the manufacturing supply of tenapanor and other materials sold to KKC in connection with that collaboration partner’s product development and clinical trials in Japan.

Operating Expenses

Below is a summary of our operating expenses (dollars in thousands):

Year Ended December 31,

Cost of revenue

Research and development

General administrative

Cost of Revenue

Cost of revenue was $0.6 million for the year ended December 31, 2019, an increase of $0.1 million, or 28.8%, compared to $0.5 million for the year ended December 31, 2018.

Cost of revenue in both periods is the portion of tenapanor-related up front and milestone payment from our collaboration partners that we are required to make to AstraZeneca under the AstraZeneca Termination Agreement.

Research and Development

Below is a summary of our research and development expenses (dollars in thousands):

Year Ended December 31,

External R&D expenses

Employee-related expenses

Facilities, equipment and depreciation expenses

Other expenses

Research and development expenses were $71.7 million for the year ended December 31, 2019, an increase of $2.3 million, or 3.3%, compared to $69.4 million for the year ended December 31, 2018.

The increase consisted of a $3.7 million increase to advance our internal pipeline programs and a $1.4 million decrease in our collaboration program costs.

The increase in our internal costs of $3.7 million was primarily due to an increase in headcount and related personnel costs and an increase in stock-based compensation expenses.

The decrease in our external program costs of $1.4 million included a $4.6 million decrease in expenses primarily related to manufacturing of tenapanor and regulatory expenses related to our IBS-C NDA in 2018, partially offset by $2.5 million increase in clinical development expenses related to our RDX013 program and a $0.7 million increase primarily related to our tenapanor clinical trial expenses that includes an out-of-period adjustment recorded during the second quarter of 2019 that reduced clinical trial expenses by $3.6 million related to our tenapanor clinical trials.

General and Administrative

General and administrative expenses were $24.3 million for the year ended December 31, 2019, an increase of $0.6 million, or 2.3%, compared to $23.7 million for the year ended December 31, 2018.

The increase was primarily due to an increase in personnel costs, stock-based compensation expense, audit expenses and recruiting expenses, partially offset by a decrease in other professional services.

Other Income (Expense), net

Below is a summary of our other income (expense), net (dollars in thousands):

Year Ended December 31,

Interest expense

Other income, net

Interest expense, net was $5.7 million for the year ended December 31, 2019, an increase of $2.2 million, or 62.0%, compared to $3.5 million for the year ended December 31, 2018.

The increase in interest expense in 2019 compared to 2018 was because the interest expense during 2018 represents only part of the year related to the loan agreement entered in May 2018, as compared with a full year of interest expense in 2019.

Other income, net, was $2.4 million for the year ended December 31, 2019, which represents a decrease of $0.8 million, or 26.2%, compared to $3.2 million for the year ended December 31, 2018.

The decrease was primarily due to a decrease in treasury-related income and revaluation adjustments related to our loan agreement.

LIQUIDITY AND CAPITAL RESOURCES

Below is a summary of our cash, cash equivalents and marketable securities (in thousands):

Year Ended December 31, Change

2021 2020 $ %

Cash and cash equivalents $ 72,428 $ 91,032 $ (18,604) (20.4) %

Marketable securities - current

Marketable securities - non-current

Short-term investments 44,261 95,452 (51,191) (53.6) %

Long-term investments — 2,114 (2,114) (100.0) %

Total liquid funds $ 116,689 $ 188,598 $ (71,909) (38.1) %

As of December 31, 2020, we had cash, cash equivalents and marketable securities totaling $188.6 million compared to $247.5 million as of December 31, 2019.

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 the Company of up to a maximum aggregate offering price of $250.0 million of the Company’s 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 the Company 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.” As of December 31, 2020, we have received net proceeds of $21.2 million through the sale of approximately 3.3 million shares pursuant to this sales agreement.

On December 9, 2019, we completed an underwritten public offering of 20.0 million shares of common stock at a price of $6.25 per share before underwriting discounts and commissions (“the 2019 Offering”).

In connection with the 2019 Offering, we entered into an underwriting agreement (“the 2019 Underwriting Agreement”) with Citigroup Global Markets Inc., Cowen and Company LLC, SVB Leerink LLC and Piper Jaffray & Co., collectively “the 2019 Underwriters”) pursuant to which we granted to the 2019 Underwriters a 30-day option to purchase up to an additional 3.0 million shares of our common stock (“the 2019 Overallotment”).

We completed the sale of 23.0 million shares, inclusive of the 2019 Overallotment, and that sale resulted in our receipt of aggregate gross proceeds of approximately $143.8 million, less underwriting discounts, commissions and offering expenses totaling approximately $8.9 million, which resulted in net proceeds of approximately $134.9 million .

On November 22, 2019, we and KKC entered into a stock purchase agreement, pursuant to which we sold an aggregate of 2.9 million shares of our common stock at $6.96 per share for aggregate net proceeds of approximately $20.0 million, or the Private Placement.

The Private Placement closed on November 25, 2019.

On May 25, 2018, we completed an underwritten public offering of 12.5 million shares of common stock at a price of $4.00 per share before underwriting discounts and commissions (“the 2018 Offering”).

In connection with the 2018 Offering, we entered into an underwriting agreement (“the 2018 Underwriting Agreement”) with Jefferies LLC and SVB Leerink (formerly known as Leerink Partners LLC), or together the 2018 Underwriters, pursuant to which we granted to the 2018 Underwriters a 30-day option to purchase up to an additional 1.9 million shares of our common stock (“the 2018 Overallotment”).

We completed the sale of 14.4 million, inclusive of the 2018 Overallotment, to the 2018 Underwriters.

That sale resulted in our receipt of aggregate gross proceeds of approximately $57.5 million, less underwriting discounts, commissions and offering expenses totaling approximately $3.7 million, which resulted in net proceeds of approximately $53.8 million .

As of December 31, 2021, we had cash and investments of approximately $116.7 million.

We have incurred operating losses since inception and our accumulated deficit as of December 31, 2021 is $712.9 million.

Our current level of cash and investments alone is not sufficient to meet our plans for the next twelve months following the filing of these financial statements on February 28, 2022.

These factors raise substantial doubt regarding our ability to continue as a going concern for a period of one year from the issuance of these financial statements.

We plan to address our operating cash flow requirements with our current cash and investments, cash generated from the product launch of IBSRELA, our potential receipt of anticipated milestone payments from our collaboration partners, our ability to access the capital markets, as well as through the implementation of cash preservation activities to reduce or defer discretionary spending.

There are no assurances that our efforts to meet our operating cash flow requirements will be successful.

If our current cash and investments as well as our plans to meet our operating cash flow requirements are not sufficient to fund necessary expenditures and meet our obligations for at least the next twelve months following the issuance of these financial statements, our liquidity, financial condition and business prospects will be materially affected.

These financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event that we can no longer continue as a going concern.

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 its common stock that may be issued and sold, from time to time, under an Open Market Sales Agreement with Jefferies LLC, as sales agent, deemed to be “at the market offerings” (the "2020 Open Market Sales Agreement").

Pursuant to the 2020 Open Market Sales Agreement, Jefferies, as 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.

We sold a cumulative total of 23.3 million shares and received gross proceeds of $100.0 million at a weighted average sales price of approximately $4.30 per share under 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 December 31, 2021 we have sold 15.7 million shares and received gross proceeds of $25.0 million at a weighted average sales price of approximately $1.60 per share under the 2021 Open Market Sales Agreement.

On May 16, 2018, we entered into a loan and security agreement (the "2018 Loan Agreement") with Solar Capital Ltd.

and Western Alliance Bank (“the Lenders”).

The Loan Agreement provides for a $50.0 million term loan facility with a maturity date of November 1, 2022.

The full amount of the loan was funded on May 16, 2018.

We received net proceeds from the loan of $49.3 million, after deducting the closing fee, legal expenses and issuance cost.

On October 9, 2020, we and the Lenders entered into an amendment to the Loan Agreement, as defined and discussed in Note 6, Borrowings, to extend the date through which we are permitted to make interest-only payments on the Term Loan from December 1, 2020 to December 1, 2021.

The 2018 Loan Agreement provides for a $50.0 million term loan facility with a maturity date of November 1, 2022 (”the 2018 Term Loan”).

The full amount of the 2018 Term Loan was funded on May 16, 2018.

We received net proceeds from the loan of approximately $49.3 million, after deducting the closing fee, legal expenses and issuance costs.

On October 9, 2020, we and the Lenders entered into an amendment to the 2018 Loan Agreement (“the 2020 Amendment”), as defined and discussed in Note 6, Borrowing , to extend the date through which we were permitted to make interest-only payments on the 2018 Term Loan by twelve months to December 1, 2021.

In May and July 2021, we and the Lenders entered into additional amendments to the 2018 Loan Agreement (“the 2021 Amendments”) which together extended the period of time that we were permitted to make interest-only payments on the loan to December 1, 2021;

provided that if we had 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 would expire and principal repayments would be required to begin on November 1, 2021.

If principal repayments were required to begin prior to December 1, 2021 under the 2021 Amendments, then the first such repayment was required to include all payments that would have been due if monthly principal repayment had begun on June 1, 2021.

During November 2021, in compliance with the terms of our 2018 Loan Agreement, we paid the first principal repayment on the loan in the amount of $16.7 million.

See Note 6, Borrowings , in the notes to our financial statements, included in Part II, Item 8, for details on our 2018 Loan Agreement.

As discussed in Note 18 - Subsequent Events , on February 23, 2022 (the “Closing Date”), we entered into a loan and security agreement (the “2022 Loan Agreement”) with SLR Investment Corp.

as collateral agent (the “Agent”), and the lenders listed in the 2022 Loan Agreement (collectively the “2022 Lenders”).

The 2022 Loan Agreement provides for a senior secured term loan facility, with $27.5 million (the “Term A Loan”) funded on the Closing Date and an additional $22.5 million that we may borrow on or prior to July 25, 2023;

provided that (i) we have received approval by the FDA for our NDA for tenapanor for the control of serum phosphorus in chronic kidney disease patients on dialysis by December 31, 2022, and (ii) we have achieved certain product revenue milestone targets described in the 2022 Loan Agreement (the “Term B Loan”, and collectively, the Term A Loan and the Term B Loan, the “2022 Term Loan”).

The Term A Loan funds are being used to repay the 2018 Term Loan with the Lenders as discussed in Note 6 - Borrowings and to fund our ongoing operations.

We had $25.0 million principal from the 2018 Term Loan outstanding as of the Closing Date.

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 2018 Loan Agreement.

Our primary uses of cash are to fund operating expenses, primarily research and development expenditures and pre-commercial expenses.

Our primary uses of cash have been 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.

We believe that our existing capital resources as of December 31, 2020 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;

● our ability to successfully commercialize tenapanor in the U.S.

for the control of serum phosphorus in CKD patients on dialysis, if approved;

● 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;

● the selling and marketing costs associated with tenapanor, including the cost and timing of building our sales and marketing capabilities;

Our future funding requirements are difficult to forecast and will depend on many factors, including:

• the extent to which we are able to generate product revenue from sales of IBSRELA;

• whether we are successful in our efforts under the FDR process to secure approval for our NDA for tenapanor for the Hyperphosphatemia Indication, or to reach resolution with the FDA regarding a path to address the deficiencies in the NDA noted in the CRL, and the time and cost associated with such path;

• the sales price and the availability of adequate third-party reimbursement for IBSRELA and XPHOZAH, if approved;

• the manufacturing costs of IBSRELA and XPHOZAH;

• the selling and marketing costs associated with IBSRELA and XPHOZAH, if approved;

• 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;

1 unchanged sentence

• 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;

• any clinical trials we are required to or decide to pursue for tenapanor or 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;

● 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 on October 9, 2020.

• the payment of interest and principal related to our loan and security agreement entered into with SLR Investment Corp.

in February 2022.

CASH FLOW ACTIVITIES

The following table summarizes our cash flows for the periods indicated (in thousands):

Year Ended December 31,

Cash used in operating activities

Cash (used in) provided by investing activities

Cash provided by financing activities

Year Ended December 31, Change

2021 2020 2019 $ % $ %

Net cash used in operating activities $ (152,551) $ (81,435) $ (76,484) $ (71,116) 87.3 % $ (4,951) 6.5 %

Net cash provided by (used in) investing activities 50,948 (31,442) 23,373 82,390 (262.0) % (54,815) (234.5) %

Net cash provided by financing activities 82,999 22,776 155,476 60,223 264.4 % (132,700) (85.4) %

Net (decrease) increase in cash and cash equivalents $ (18,604) $ (90,101) $ 102,365 $ 71,497 (79.4) % $ (192,466) (188.0) %

Cash Flows from Operating Activities

2020 compared to 2019

Net cash used in operating activities during the year ended December 31, 2020 was $81.4 million, as compared to $76.5 million for the year ended December 31, 2019.

The most significant factors that contributed to the $5.0 million increase in net cash used in operating activities for the year ended December 31, 2020, as compared to 2019 was primarily a $6.2 million decrease to changes in operating assets and liabilities, primarily driven by cash received in 2019 and reported as deferred revenue for the KKC Research Agreement that was recognized as revenue in 2020, offset by a $0.6 million increase in non-cash charges and $0.6 million decrease to the net loss.

2019 compared to 2018

Net cash used in operating activities during the year ended December 31, 2019, was $76.5 million, as compared to $70.3 million of net cash used in operating activities during the year ended December 31, 2018.

The $6.2 million increase in net cash used in operating activities is predominantly attributable toa $1.9 million decrease in payments made to AstraZeneca during 2019 in connection with the AZ Termination Agreement, as compared to payments made in 2018;

a $0.4 million increase in cash R&D expenses (excluding working capital-related fluctuations) in 2019, as compared to 2018;

● a $0.4 million decrease in cash G&A expenses (excluding working capital-related fluctuations) in 2019, as compared to 2018;

● a $2.1 million increase in net cash interest payments in 2019, as compared to 2018;

● a $0.9 million decrease in cash paid for income taxes in 2019, as compared to 2018;

● a $6.5 million net increase in cash used related to fluctuations in components of our non-revenue-related working capital in 2019, as compared to 2018, which was comprised of a $7.8 million decrease, a $1.9 million decrease and a $0.4 million decrease in cash provided by fluctuations in our non-payroll-related accruals and other current liabilities, lease liability and prepaid expenses and other current assets, respectively, partially offset by a $2.2 million increase and a $1.4 million increase of cash provided by fluctuations in our accrued compensation and benefits and accounts payable, respectively.

Fiscal 2021 compared to 2020 :

Net cash used in operating activities during the year ended December 31, 2021 increased by $71.1 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 prepared for the anticipated U.S.

launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis.

In addition to the increased net loss, cash flows related to our operating assets and liabilities increased in the amount of $8.7 million.

Fiscal 2020 compared to 2019 :

Net cash used in operating activities during the year ended December 31, 2020 increased $5.0 million as compared to the prior year.

The most significant factors that contributed to the increase was primarily a $6.2 million decrease to changes in operating assets and liabilities, primarily driven by cash received in 2019 and reported as deferred revenue for the KKC Research Agreement that was recognized as revenue in 2020, offset by a $0.6 million increase in non-cash charges and $0.6 million decrease to the net loss.

Cash Flows from Investing Activities

2020 compared to 2019

Fiscal 2021 compared to 2020 :

Net cash provided by investing activities increased by $82.4 million as our investment maturities increased to exceed the cost to purchase investments.

Fiscal 2020 compared to 2019 :

Net cash provided by investing activities decreased by $54.8 million during the year ended December 31, 2020, as compared to the year ended December 31, 2019.

This decrease was attributable to a $48.2 million increase in purchases of available-for-sale investments and a decrease in proceeds from maturities and redemptions of short-term investments of $6.6 million.

2019 compared to 2018

Net cash provided by investing activities increased by $53.3 million during the year ended December 31, 2019, as compared to the year ended December 31, 2018.

This increase was attributable to a $66.3 million decrease in purchases of short-term available-for-sale investments and a $1.2 million increase in sales and redemptions of investments, partially offset by a decrease in proceeds from maturities and redemptions of short-term investments of $13.1 million.

This decrease was attributable to a $48.2 million

increase in purchases of available-for-sale investments and a decrease in proceeds from maturities and redemptions of short-term investments of $6.6 million.

Cash Flows from Financing Activities

2020 compared to 2019

Net cash provided by financing activities decreased by $132.7 million during the year ended December 31, 2020, as compared to the year ended December 31, 2019.

Fiscal 2021 compared to 2020 :

Net cash provided by financing activities increased by $60.2 million due to net proceeds from issuance of our common stock pursuant to our at-the-market offerings, which were partially offset by principal repayments for our loan payable.

Fiscal 2020 compared to 2019 :

Net cash provided by financing activities decrea sed by $132.7 million during the year ended December 31, 2020, as compared to the year ended December 31, 2019.

This decrease was predominantly attributable to $134.9 million in net proceeds received in connection with underwritten public offering initiatives that was received in 2019 but did not recur in 2020.

This decrease was partially offset by $2.4 million net additional proceeds received in 2020 as compared to 2019 from sales of our common stock pursuant to our at-the-market sales agreement with Jefferies LLC, employee stock plan purchases and option exercises, and the 2019 sale of common stock in the Private Placement with KKC.

2019 compared to 2018

Net cash provided by financing activities increased by $51.9 million during the year ended December 31, 2019, as compared to the year ended December 31, 2018.

This increase was predominantly attributable to an $81.2 million increase in net proceeds received in connection with underwritten public offering initiatives and a $20.0 million increase in net proceeds received in connection with the Private Placement, partially offset by a net $49.3 million decrease in proceeds received in connection with a long-term loan borrowing.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2020 and 2019, 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.

SMALLER REPORTING COMPANY AND NON-ACCELERATED FILER STATUS

On June 28, 2018, the SEC adopted amendments that raise the thresholds in the smaller reporting company, or SRC, definition, whereby we were determined to qualify as an SRC.

On June 28, 2018, the SEC adopted amendments that raise the thresholds in the smaller reporting company ("SRC") definition, whereby we were determined to qualify as an SRC.

We elected to reflect that determination and avail ourselves with most of the SRC scaled disclosure accommodations in our filings subsequent to the adoption.

On March 12, 2020, the SEC amended its rules to allow SRCs that have less than $100.0 million in annual revenue and a public float of less than $700.0 million to qualify as a non-accelerated filer.

As a non-accelerated filer, we are not required to obtain an opinion of our independent auditors with respect to our internal controls over financial reporting for the period ended December 31, 2020.

As a non-accelerated filer, we were not required to obtain an opinion of our independent auditors with respect to our internal controls over financial reporting for the periods through December 31, 2020.

On June 30, 2021, our public float exceeded $700.0 million and therefore, as of December 31, 2021, we no longer qualify as an SRC and are considered a large accelerated filer.

The disclosures contained within this Annual Report on Form 10-K have been expanded accordingly.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis