What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 193 added, 132 removed, 518 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2022 December 31,

17 unchanged sentences

Current portion of operating lease liability 3,791 3,492

Deferred revenue 4,003 —

Accrued expenses and other current liabilities 7,338 7,366

2 unchanged sentences

Deferred revenue, non-current 8,560 4,727

Deferred royalty obligation 9,591 —

Deferred royalty obligation related to the sale of future royalties 10,422 —

Total liabilities 77,811 67,296

3 unchanged sentences

5,000,000 shares authorized;

no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Common stock, $ 0.0001 par value;

300,000,000 shares authorized;

153,797,834 and 130,182,535 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

187,399,645 and 130,182,535 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital 857,788 795,540

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

11 unchanged sentences

Interest expense ( 886 ) ( 1,216 ) ( 2,409 ) ( 3,518 )

Other income, net 70 847 554 798

Non-cash interest expense related to the sale of future royalties ( 831 ) — ( 841 ) —

Other income (expense), net 704 ( 134 ) 1,258 664

Loss before provision for income taxes ( 22,893 ) ( 43,586 ) ( 77,894 ) ( 121,927 )

5 unchanged sentences

Net loss $ ( 22,893 ) $ ( 43,587 ) $ ( 77,902 ) $ ( 121,931 )

Unrealized losses on available-for-sale securities ( 21 ) 11 ( 103 ) 8

Unrealized (losses) gains on available-for-sale securities ( 5 ) ( 1 ) ( 108 ) 7

Comprehensive loss $ ( 22,898 ) $ ( 43,588 ) $ ( 78,010 ) $ ( 121,924 )

2 unchanged sentences

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Six Months ended June 30, 2022 and 2021

For the Three and Nine Months ended September 30, 2022 and 2021

(in thousands, except shares)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance as of March 31, 2022 136,330,360 $ 14 $ 805,265 $ ( 741,001 ) $ ( 88 ) $ 64,190

Balance as of June 30, 2022 153,797,834 $ 15 $ 821,075 $ ( 767,939 ) $ ( 109 ) $ 53,042

Issuance of common stock under employee stock purchase plan 181,256 — 112 — — 112

Issuance of common stock for services 711,675 — 390 — — 390

Issuance of common stock upon vesting of restricted stock units 95,555 — — — — —

3 unchanged sentences

Net loss — — — ( 22,893 ) — ( 22,893 )

Balance as of June 30, 2022 153,797,834 $ 15 $ 821,075 $ ( 767,939 ) $ ( 109 ) $ 53,042

Six Months Ended June 30, 2022

Balance as of September 30, 2022 187,399,645 $ 19 $ 857,788 $ ( 790,832 ) $ ( 114 ) $ 66,861

Nine Months Ended September 30, 2022

Common Stock Additional

6 unchanged sentences

Issuance of common stock under employee stock purchase plan 308,356 — 195 — — 195

Issuance of common stock for services 711,675 — 390 — — 390

Issuance of common stock upon vesting of restricted stock units 3,091,697 — — — — —

3 unchanged sentences

Net loss — — — ( 77,902 ) — ( 77,902 )

Balance as of June 30, 2022 153,797,834 $ 15 $ 821,075 $ ( 767,939 ) $ ( 109 ) $ 53,042

Three Months Ended June 30, 2021

Balance as of September 30, 2022 187,399,645 $ 19 $ 857,788 $ ( 790,832 ) $ ( 114 ) $ 66,861

Three Months Ended September 30, 2021

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance as of March 31, 2021 98,688,577 $ 10 $ 718,728 $ ( 587,920 ) $ ( 7 ) $ 130,811

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 for 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 gains on available-for-sale securities — — — — 11 11

Unrealized losses on available-for-sale securities — — — — ( 1 ) ( 1 )

Net loss — — — ( 43,587 ) — ( 43,587 )

Balance as of June 30, 2021 102,967,017 $ 10 $ 750,664 $ ( 633,109 ) $ 4 $ 117,569

Six Months Ended June 30, 2021

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

6 unchanged sentences

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

2 unchanged sentences

Net loss — — — ( 121,931 ) — ( 121,931 )

Balance as of June 30, 2021 102,967,017 $ 10 $ 750,664 $ ( 633,109 ) $ 4 $ 117,569

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.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

1 unchanged sentence

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense 407 787

Amortization of deferred financing costs 226 316

Amortization of deferred compensation for services 105 145

Amortization of premium on investment securities 16 274

Depreciation and amortization expense 1,035 2,312

Non-cash lease expense 2,570 2,257

3 unchanged sentences

Gain on sale of equipment ( 1,260 ) —

Non-cash interest associated with debt discount accretion 151 141

Non-cash interest expense 1,055 212

Changes in operating assets and liabilities:

21 unchanged sentences

Proceeds from issuance of common stock under equity incentive and stock purchase plans 195 1,403

Payments for taxes related to net share settlement of equity awards — ( 106 )

Net cash provided by financing activities 56,554 68,486

7 unchanged sentences

Right-of-use assets obtained in exchange for lease obligations $ — $ 14,379

Issuance of common stock for services $ 390 $ 190

Issuance of derivative in connection with issuance of loan payable $ 375 $ —

14 unchanged sentences

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, 2021.

The results for the three and six months ended June 30, 2022 are not necessarily indicative of results to be expected for the entire year ending December 31, 2022, or for any other interim period or future year.

The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the entire year ending December 31, 2022, or for any other interim period or future year.

Use of Estimates

4 unchanged sentences

Actual results could materially differ from those estimates.

As of June 30, 2022, we had cash and investments of approximately $ 81.0 million.

We have incurred operating losses since inception and our accumulated deficit as of June 30, 2022 is $ 767.9 million.

As of September 30, 2022, we had cash and investments of approximately $ 90.6 million.

We have incurred operating losses since inception and our accumulated deficit as of September 30, 2022 is $ 790.8 million.

Our current level of cash and investments alone is not sufficient to meet our plans for the next twelve months following the issuance of these financial statements.

6 unchanged sentences

Our significant accounting policies are described in Note 1 to our audited financial statements for the fiscal year ended December 31, 2021, included in our Annual Report on Form 10-K.

Our significant accounting policies for the three and six months ended June 30, 2022 also included the policies discussed below related to accounts receivable, inventory, revenue and cost of revenue for commercial product sales.

Our significant accounting policies for the three and nine months ended September 30, 2022 also included the policies discussed below related to accounts receivable, inventory, revenue and cost of revenue for commercial product sales.

With the exception of those noted below, there have been no material changes in our significant accounting policies as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Accounts Receivable

Accounts receivable is reported net of allowances for returns, chargebacks and contractual discounts offered to our customers.

Accounts receivable is reported net of allowances for returns, chargebacks and contractual off-invoice and prompt-pay discounts offered to our customers.

Our estimate of the allowance for doubtful accounts is based on an evaluation of the aging of our receivables.

1 unchanged sentence

To date, we have determined that an allowance for doubtful accounts is not required.

As of June 30, 2022 our accounts receivable balance is comprised of $ 4.1 million from our collaborators and $ 1.5 million from commercial customers.

As of September 30, 2022 our accounts receivable balance is comprised of $ 0.5 million from our collaboration agreements and $ 4.7 million from commercial customers.

As of December 31, 2021 our accounts receivable balance was comprised of $ 0.5 million from our collaborators.

Prior to the regulatory approval of drug product candidates, we incurred expenses for the manufacture of drug product that could potentially be available to support the commercial launch of our products.

We capitalize inventory costs associated with the production of our products after regulatory approval or when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized.

Otherwise, such costs are expensed as research and development.

We began to capitalize inventory costs associated with IBSRELA during the fourth quarter of 2021, when our intent to commercialize IBSRELA was established and we commenced preparation for the commercial launch of IBSRELA, which was when it was determined that the inventory had a probable future economic benefit.

Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method.

Inventory costs include third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs.

Inventory costs include the cost of materials, third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs.

We primarily use actual costs to determine the cost basis for inventory.

The determination of whether inventory costs will be realizable requires management review of the expiration dates of IBSRELA compared to our forecasted sales.

If actual market conditions are less favorable than projected by management, write-downs of inventory may be required, which would be recorded as cost of goods sold in the condensed statement of operations and comprehensive loss.

If actual market conditions are less favorable than projected by management, write-downs of inventory may be required, which would be recorded as cost of revenue in the condensed statement of operations and comprehensive loss.

A portion of inventory is included in other assets on our condensed balance sheets as a non-current asset.

The non-current balance represents product that is not expected to be sold or used within the next 12 months.

Product Sales, Net

4 unchanged sentences

in March 2022.

We distribute IBSRELA principally through a limited number of wholesalers and specialty pharmacy providers (collectively, our "Customers").

We distribute IBSRELA principally through major wholesalers, specialty pharmacies and group purchasing organizations ("GPOs") (collectively, our "Customers").

Our Customers subsequently sell IBSRELA to pharmacies and patients.

Separately, we enter into arrangements with third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts.

Separately, we enter into arrangements with third parties that provide for government-mandated rebates, chargebacks and discounts.

Revenue from product sales is recognized when our performance obligations are satisfied, which is when Customers obtain control of our product and occurs upon delivery.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration, including rebates, discounts, patient copay assistance programs, and estimated product returns.

These estimates are based on the amounts earned or to be claimed for related sales and are classified as reductions of gross accounts receivable if the amount is payable to our Customers or a current liability if the amount is payable to a party other than a Customer.

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration, including discounts which may be settled in the form of off-invoice discounts, chargebacks, or rebates depending on the customer, wholesaler fees, group purchasing organization administrative fees, patient copay assistance programs, and estimated product returns.

These estimates are based on the amounts earned or to be claimed for related sales and are classified as reductions of gross accounts receivable if settlement is expected to occur through a reduction in the amounts paid by our customers or a current liability if settlement is expected to occur through a payment from us.

Where appropriate, these estimates are based on factors such as industry data and forecasted customer buying and payment patterns, our historical experience, current contractual and statutory requirements, specific known market events and trends.

4 unchanged sentences

As we gain more historical experience, estimates will be more heavily based on the expected utilization from historical data we have accumulated since the IBSRELA product launch.

Rebates include mandated discounts under the Medicaid Drug Rebate Program ("Medicaid") and the Medicare Coverage Gap Program ("Medicare").

Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public-sector benefit providers.

These estimates for rebates are recorded in the same period the related gross revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the condensed balance sheets.

Rebates include wholesaler fees, GPO fees, as well as mandated discounts under the Medicaid Drug Rebate Program ("Medicaid") and the Medicare Coverage Gap Program ("Medicare").

Estimates for rebates are recorded in the same period the related gross revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the condensed balance sheets.

We estimate our Medicaid and Medicare rebates based upon the estimated payor mix, and statutory discount rates.

6 unchanged sentences

Our payment terms are generally 30 to 60 days.

Wholesalers and specialty pharmacies are offered various forms of consideration, including service fees.

Wholesalers may also receive prompt pay discounts for payment within a specified period.

We expect prompt pay discounts to be earned when offered and therefore, we deduct the full amount of these discounts and service fees from product sales when revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

Wholesalers, GPOs and specialty pharmacies are offered various forms of consideration, including off-invoice discounts which may be paid to GPOs and specialty pharmacies.

Wholesalers and GPOs may also receive prompt pay discounts for payment within a specified period.

We expect discounts to be earned when offered and therefore, we deduct the full amount of these discounts from product sales when revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

Other Reserves:

Patients who have commercial insurance may receive co-pay assistance when product is dispensed by pharmacies to patients.

We estimate the amount of co-pay assistance provided to eligible patients based on the terms of the program and redemption information provided by third-party claims processing organizations and are recorded in accounts payable and accrued expenses and other current liabilities on the condensed balance sheets.

Patients who have commercial insurance may receive copay assistance when product is dispensed by pharmacies to patients.

We estimate the amount of copay assistance provided to eligible patients based on the terms of the program and redemption information provided by third-party claims processing organizations and are recorded in accounts payable and accrued expenses and other current liabilities on the condensed balance sheets.

Other reserves include estimated product returns which are recorded in the same period the related gross revenue is recognized, resulting in a reduction of product revenue as well as gross accounts receivable.

We estimate our product returns reserve based upon our historical experience, and specific known market events and trends

Cost of Revenue

Cost of revenue consists of the cost of commercial goods sold to our Customers, international partners under product supply agreements, and royalty expense based on sales of tenapanor.

Cost of revenue consists of the cost of commercial goods sold to our Customers and international partners under product supply agreements, as well as royalty expense based on sales of tenapanor.

Otherwise, such costs are expensed as research and development.

A portion of the costs of IBSRELA units recognized as revenue during the three and six months ended June 30, 2022 were expensed prior to the fourth quarter of 2021, at which time our intent to commercialize IBSRELA was established and we commenced preparation for the commercial launch of IBSRELA.

A portion of the costs of IBSRELA units recognized as revenue during the three and nine months ended September 30, 2022 were expensed prior to the fourth quarter of 2021, at which time our intent to commercialize IBSRELA was established and we commenced preparation for the commercial launch of IBSRELA.

Cost of revenue includes payments due to 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.

3 unchanged sentences

Non-cash Interest Expense on Deferred Royalty Obligation

The net proceeds we receive from the sale of certain future royalties are amortized to non-cash interest expense over the estimated life of the associated agreement using the effective interest method.

As we earn royalties and remit those royalties pursuant to the agreement, the balance of the deferred royalty obligation will be effectively repaid over the life of agreement.

The net proceeds we receive from the sale of certain future royalties are recorded as deferred royalty obligation related to the sale of future royalties on our balance sheets.

As we earn royalties and remit those royalties pursuant to the agreement, the balance of the deferred royalty obligation will be effectively repaid over the life of agreement and non-cash interest expense related to the sale of future royalties is recorded using the effective interest method.

To determine the amortization of our deferred royalty obligation, we are required to estimate the total amount of future royalty payments we expect to earn.

7 unchanged sentences

CASH, CASH EQUIVALENTS AND INVESTMENTS

Securities classified as cash, cash equivalents and investments as of June 30, 2022 and December 31, 2021 are summarized below (in thousands):

June 30, 2022

Securities classified as cash, cash equivalents and investments as of September 30, 2022 and December 31, 2021 are summarized below (in thousands):

September 30, 2022

Gross Unrealized

8 unchanged sentences

Corporate bonds 1,005 — ( 9 ) 996

Asset-backed securities 1,003 — ( 3 ) 1,000

treasury notes 6,008 — ( 26 ) 5,982

Total short-term investments 29,109 — ( 114 ) 28,995

13 unchanged sentences

Total cash equivalents and investments $ 116,695 $ 1 $ ( 7 ) $ 116,689

Cash equivalents consist of money market funds and other debt securities with original maturities of three months or less at the time of purchase, and the carrying amount is a reasonable approximation of fair value.

Cash equivalents consist of money market funds with original maturities of three months or less at the time of purchase, and the carrying amount is a reasonable approximation of fair value.

We invest our cash in high quality securities of financial and commercial institutions.

These securities are carried at fair value, which is based on readily available market information, with unrealized gains and losses included in accumulated other comprehensive income (loss) within stockholders’ equity on our balance sheets.

We use the specific identification method to determine the amount of realized gains or losses on sales of marketable securities.

Realized gains or losses have been insignificant and are included in other income (expense), net, in the statement of operations and comprehensive loss.

All short-term available-for-sale securities held as of June 30, 2022 had contractual maturities of less than one year .

All short-term available-for-sale securities held as of September 30, 2022 had contractual maturities of less than one year .

Our available-for-sale securities are subject to a periodic impairment review.

1 unchanged sentence

When we evaluate an investment for other-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 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 it down through the statement of operations and comprehensive loss to its fair value and establishes that value as a new cost basis for the investment.

If an investment is other-than-temporarily impaired, we write it down through the statement of operations and comprehensive loss to its fair value and establish that value as a new cost basis for the investment.

We did not identify any of our available-for-sale securities as other-than-temporarily impaired in any of the periods presented.

As of June 30, 2022, no investment was in a continuous unrealized loss position for more than one year and we believe that it is more likely than not that the investments will be held until maturity or a forecasted recovery of fair value.

As of September 30, 2022, no investment was in a continuous unrealized loss position for more than one year and we believe that it is more likely than not that the investments will be held until maturity or a forecasted recovery of fair value.

FAIR VALUE MEASUREMENTS

8 unchanged sentences

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):

June 30, 2022

September 30, 2022

Fair Value Level 1 Level 2 Level 3

3 unchanged sentences

Corporate bonds 996 — 996 —

Asset-backed securities 1,000 — 1,000 —

treasury notes 5,982 — 5,982 —

Total $ 89,971 $ 60,976 $ 28,995 $ —

18 unchanged sentences

Derivative Liability , 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 June 30, 2022 and December 31, 2021, due to their short-term nature.

The carrying amounts reflected in the condensed 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, 2022 and December 31, 2021, due to their short-term nature.

Fair Value of Debt

The interest rates of our deferred royalty obligation and term loan facility approximate the rate at which we could obtain alternative financing.

Therefore, the carrying amount of the deferred royalty obligation and the term loan facility approximated their fair values at June 30, 2022 and December 31, 2021.

Deferred Royalty Obligation and Note 8.

Borrowing for a description of the Level 3 inputs used to estimate the fair value of each respective liability.

The principal amount outstanding under our term loan facilities is subject to a variable interest rate.

Therefore, we believe the carrying amount of the term loan facility approximates fair value as of September 30, 2022 and December 31, 2021.

Borrowing for a description of the Level 2 inputs used to estimate the fair value of the liability.

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of September 30, 2022 and is based on our current estimates of future royalties and commercialization milestones expected to be paid to us by KKC over the life of the agreement.

Deferred Royalty Obligation Related to the Sale of Future Royalties for a description of the Level 3 inputs used to estimate the fair value of the liability.

We began capitalizing inventory during the fourth quarter of 2021, at which time our intent to commercialize IBSRELA was established and we commenced preparation for the commercial launch of IBSRELA.

Inventory consisted of the following (in thousands):

June 30, 2022

September 30, 2022

Raw materials $ 5,798

2 unchanged sentences

Total $ 9,774

Prepaid commercial manufacturing of $ 17.8 million and $ 9.4 million as of June 30, 2022 and December 31, 2021, respectively, consist of prepayments to third party contract manufacturing organizations for the manufacture of IBSRELA for production orders which we expect work to commence within the next 12 months.

Prepayments for commercial manufacturing of $ 3.8 million as of June 30, 2022 that are expected to be converted into inventory after 12 months are included in other assets on our Condensed Balance Sheets.

Inventory $ 1,250

Other assets 8,524

Total $ 9,774

Prepaid commercial manufacturing of $ 16.1 million and $ 9.4 million as of September 30, 2022 and December 31, 2021, respectively, consist of prepayments to third party contract manufacturing organizations for the manufacture of IBSRELA for production orders which we expect work to commence within the next 12 months.

Prepayments for commercial manufacturing of $ 3.8 million as of September 30, 2022 that are expected to be converted into inventory after 12 months are included in other assets on our condensed balance sheets.

PRODUCT REVENUE, NET

2 unchanged sentences

in March 2022.

We recorded net revenue for IBSRELA of $ 1.6 million and $ 2.0 million during the three and six months ended June 30, 2022, respectively.

Sales to AmerisourceBergen Drug Corporation, Cardinal Health, and McKesson Corporation made up 40.2 %, 22.7 %, and 24.6 % of our gross product revenue during the three months ended June 30, 2022 and 35.1 %, 21.7 %, and 22.5 % during the six months ended June 30, 2022.

We recorded net revenue for IBSRELA of $ 4.9 million and $ 6.9 million during the three and nine months ended September 30, 2022, respectively.

Sales to AmerisourceBergen Drug Corporation, Cardinal Health, and McKesson Corporation made up 26.4 %, 25.2 %, and 20.2 % of our gross product revenue during the three months ended September 30, 2022 and 28.9 %, 24.2 %, and 20.9 % during the nine months ended September 30, 2022.

The activities and ending reserve balances for each significant category of discounts and allowances, which constitute variable consideration, were as follows (in thousands):

3 unchanged sentences

Credits/deductions issued ( 250 ) ( 438 ) ( 576 ) ( 1,264 )

Balance as of June 30, 2022 $ 43 $ 314 $ 189 $ 546

There were no product sales or gross-to-net accruals during the three and six months ended June 30, 2021.

Balance as of September 30, 2022 $ 108 $ 720 $ 539 $ 1,367

There were no product sales or gross-to-net accruals during the three and nine months ended September 30, 2021.

COLLABORATION AND LICENSING AGREEMENTS

1 unchanged sentence

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.

5 unchanged sentences

Under the third amendment to the 2019 KKC Agreement entered into on June 28, 2022, the current term will end on February 28, 2023.

We have no material future obligations under the 2019 KKC Agreement and recorded no revenue under the 2019 KKC Agreement during the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2021, we recognized $ 1.3 million and $ 2.8 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss.

We have no material future obligations under the 2019 KKC Agreement and recorded no revenue under the 2019 KKC Agreement during the three and nine months ended September 30, 2022.

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.

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 NHE3 inhibitors including tenapanor in Japan for the treatment of cardiorenal diseases and conditions, excluding cancer.

In November 2017, we entered into an exclusive license agreement with KKC (the “2017 KKC Agreement”), under which we granted KKC an exclusive license to develop and commercialize certain 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.

6 unchanged sentences

Under the terms of the 2017 KKC Agreement, KKC paid us an up-front license fee of $ 30.0 million.

We may be entitled to receive up to $ 55.0 million in total development and regulatory milestones, of which $ 10.0 million has been received and recognized as revenue as of June 30, 2022.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 62.3 million at the currency exchange rate on June 30, 2022, as well as reimbursement of costs plus a reasonable overhead for the supply of product and royalties on net sales throughout the term of the agreement.

We may be entitled to receive up to $ 55.0 million in total development and regulatory milestones, of which $ 10.0 million has been received and recognized as revenue as of September 30, 2022.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 58.7 million at the currency exchange rate on September 30, 2022, as well as reimbursement of costs plus a reasonable overhead for the supply of product and royalties on net sales throughout the term of the agreement.

As discussed in Note 7.

1 unchanged sentence

pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement.

The variable consideration related to the remaining milestone payments has not been included in the transaction price as these were fully constrained at June 30, 2022.

On April 11, 2022, we entered into a second amendment (the "Amendment") to the 2017 KKC Agreement.

The variable consideration related to the remaining milestone payments has not been included in the transaction price as these were fully constrained at September 30, 2022.

Please see Note 16 Subsequent Events related to the October 31, 2022 KKC submission of a NDA to the Japanese Ministry of Health, Labour and Welfare for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis.

On April 11, 2022, we entered into a second amendment to the 2017 KKC Agreement (the "2022 Amendment").

Under the terms of the 2022 Amendment, we and KKC have agreed to a reduction in the royalty rate payable to us by KKC upon net sales of tenapanor in Japan.

4 unchanged sentences

As consideration for the reduction in the royalty rate, KKC has agreed to pay us up to an additional $ 40.0 million payable in two tranches, with the first payment due following KKC's filing with the Japanese Ministry of Health, Labour and Welfare of its application for marketing approval for tenapanor and the second payment due following KKC’s receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan.

The variable consideration related to the reduction in the royalty rate has not been included in the transaction price as these were fully constrained at June 30, 2022.

During the three and six months ended June 30, 2022 we recognized no licensing revenue upon the achievement of development milestones.

During the three and six months ended June 30, 2021, we recognized zero and $ 5.0 million respectively, as licensing revenue upon the initiation of phase 3 clinical studies by KKC in Japan to evaluate tenapanor for hyperphosphatemia.

During the three and six months ended June 30, 2022, we recognized $ 952 thousand and $ 966 thousand, respectively, 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 six months ended June 30, 2021, we recognized zero and $ 126 thousand, respectively, as product supply revenue pursuant to the 2017 KKC Agreement.

The variable consideration related to the reduction in the royalty rate has not been included in the transaction price as these were fully constrained at September 30, 2022.

During the three and nine months ended September 30, 2022 we recognized no licensing revenue related to the 2017 KKC Agreement.

During the three and nine months ended September 30, 2021, we recognized zero and $ 5.0 million respectively, as licensing revenue upon the initiation of phase 3 clinical studies by KKC in Japan to evaluate tenapanor for hyperphosphatemia.

During the three and nine months ended September 30, 2022, we recognized $ 83 thousand and $ 1.0 million, respectively, 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, 2021, we recognized $ 0.3 million and $ 0.4 million, respectively, as product supply revenue pursuant to the 2017 KKC Agreement.

As detailed below under the heading Deferred revenue - non-current , we have received prepayments from KKC for the manufacturing of tenapanor drug substance that will be used to satisfy KKC needs.

3 unchanged sentences

Under the terms of the Fosun Agreement, Fosun paid us a $ 12.0 million upfront license fee.

We may be entitled to receive development and commercialization milestones of up to $ 113.0 million, of which $ 3.0 million has been received and recognized as revenue as of June 30, 2022, 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 June 30, 2022.

We have recorded no revenue during the three and six months ended June 30, 2022 or 2021 related to the Fosun Agreement.

We may be entitled to receive development and commercialization milestones of up to $ 113.0 million, of which $ 3.0 million has been received and recognized as revenue as of September 30, 2022, 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, 2022.

During the three and nine months ended September 30, 2022, we recognized $ 9 thousand as product supply revenue pursuant to the terms of the Fosun Agreement.

We recorded no revenue during the three and nine months ended September 30, 2021 related to the Fosun Agreement.

Knight Therapeutics, Inc.

1 unchanged sentence

Under the terms of the Knight Agreement, Knight paid us a $ 2.3 million upfront payment.

We may also be eligible to receive approximately CAD 22.2 million for development and commercialization milestones, or approximately $ 17.2 million at the currency exchange rate on June 30, 2022, of which $ 0.7 million has been received and recognized as revenue as of June 30, 2022.

We may also be eligible to receive approximately CAD 22.2 million for development and commercialization milestones, or approximately $ 16.1 million at the currency exchange rate on September 30, 2022, of which $ 0.7 million has been received and recognized as revenue as of September 30, 2022.

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 June 30, 2022.

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, 2022.

During the three and nine months ended September 30, 2022, we recognized $ 9 thousand and $ 23 thousand, respectively, as licensing revenue under the terms of the Knight Agreement.

During the three and nine months ended September 30, 2021, we recognized $ 2 thousand and $ 7 thousand respectively, under the terms of the Knight Agreement.

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 licensee of tenapanor or another NHE3 inhibitor, up to a maximum of $ 75.0 million in aggregate for (i) and (ii).

As of June 30, 2022, to date in aggregate, we have recognized $ 11.9 million of the $ 75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $ 11.6 million.

During the three and six months ended June 30, 2022 we recognized and recorded as cost of revenue $ 0.2 million and $ 0.3 million, respectively, related to the AstraZeneca Termination Agreement.

During the three and six months ended June 30, 2021 we recognized zero and $ 1.0 million, respectively, as cost of revenue related to the AstraZeneca Termination Agreement.

As of September 30, 2022, to date in aggregate, we have recognized $ 12.4 million of the $ 75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $ 11.6 million.

During the three and nine months ended September 30, 2022 we recognized and recorded as cost of revenue $ 0.5 million and $ 0.8 million, respectively, related to the AstraZeneca Termination Agreement.

During the three and nine months ended September 30, 2021 we recognized zero and $ 1.0 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 June 30, 2022 and 2021 current deferred revenue balance is attributable entirely to the 2019 KKC Agreement and the non-current deferred revenue balances are attributable entirely to the 2017 KKC Agreement (in thousands):

The September 30, 2022 deferred revenue balance is attributable entirely to the 2017 KKC Agreement, while the current September 30, 2021 deferred revenue balance is attributable to the 2019 KKC Agreement and the non-current September 30, 2021 deferred revenue balance is attributable to the 2017 KKC Agreement (in thousands):

Deferred revenue - current 2022 2021

Balance at January 1, $ — $ 4,177

Increases due to amounts reclassified from non-current, to be recognized in the next twelve months 3,961

Increases to amounts invoiced, for which cash has not yet been received 42 —

Decreases due to revenue recognized in the period for which cash has been received — ( 3,650 )

Balance at June 30, $ — $ 1,412

Balance at September 30, $ 4,003 $ 527

Deferred revenue - non-current 2022 2021

2 unchanged sentences

Increases to amounts invoiced, for which cash has not yet been received 100 —

Balance at June 30, $ 12,421 $ 2,947

DEFERRED ROYALTY OBLIGATION

Decreases due to amounts reclassified as current, to be recognized in the next twelve months ( 3,961 ) —

Balance at September 30, $ 8,560 $ 2,947

DEFERRED ROYALTY OBLIGATION RELATED TO THE SALE OF FUTURE ROYALTIES

On June 28, 2022, we and HealthCare Royalty Partners IV, L.P.

5 unchanged sentences

Under the HCR Agreement, an event of default will occur if, among other things, any of the representations and warranties included in the HCR Agreement proves not to have been true and correct in all material respects, at the time it was made, we breach any of our covenants under the HCR Agreement, subject to specified cure periods with respect to certain breaches, we are in breach or default under the 2017 KKC Agreement in any manner which is likely to cause a material adverse effect on the Royalty Interest Payments, the occurrence of a termination of the 2017 KKC Agreement under certain circumstances or we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings, or we are unable to pay our debts as they become due.

We received the $ 10.0 million upfront payment from HCR during June 2022 and recorded it as a deferred royalty obligation on our condensed balance sheet.

As part of the sale, we incurred approximately $ 0.4 million in transaction costs, which, along with the deferred royalty obligation, will be amortized to non-cash interest expense over the estimated life of the HCR Agreement using the effective interest method.

We received the $ 10.0 million upfront payment from HCR during June 2022 and recorded it as a deferred royalty obligation related to the sale of future royalties (the "deferred royalty obligation") on our condensed balance sheet.

Due to our ongoing manufacturing obligations under the 2017 KKC Agreement, we account for the proceeds as imputed debt and therefore will recognize royalties received under the arrangement as non-cash royalty revenue.

Non-cash interest expense will be recognized over the life of the HCR Agreement using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of future royalty payments to be received from KKC.

As part of the sale, we incurred approximately $ 0.4 million in transaction costs, which, along with the deferred royalty obligation, are being amortized to non-cash interest expense over the estimated life of the HCR Agreement using the effective interest method.

As future royalties are remitted to us by KKC, and subsequently from us to HCR, the balance of the deferred royalty obligation will be effectively repaid over the life of the HCR Agreement.

To determine the amortization of the deferred royalty obligation, we are required to estimate the total amount of future royalty payments to be received from KKC for sales of tenapanor in Japan.

There are a number of factors that could materially affect the amount and timing of royalty payments from KKC, most of which are not within our control.

We will periodically assess the estimated royalty payments from KKC and, to the extent that the amount or timing of such payments is materially different than our original estimates, we will prospectively adjust the imputed interest rate and the related amortization of the deferred royalty obligation.

As of June 30, 2022, our effective interest rate used to amortize the liability is 34.4 %.

During the three and six months ended June 30, 2022, we did not recognize a material amount of non-cash interest expense for the amortization of the deferred royalty obligation.

As of September 30, 2022, our effective interest rate used to amortize the liability is 34.4 %.

During the three and nine months ended September 30, 2022, we recognized approximately $ 0.8 million of non-cash interest expense for the amortization of the deferred royalty obligation.

As of September 30, 2022, we have received no royalty payments from KKC and, therefore, the deferred royalty obligation has not begun to be reduced.

Solar Capital and Western Alliance Bank Loan Agreement

1 unchanged sentence

and Western Alliance Bank (collectively the “2018 Lenders”).

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

The 2018 Loan Agreement provided for a loan facility for up to $ 50.0 million with a maturity date of November 1, 2022 (the “2018 Loan”).

As of the Closing Date for the 2022 Loan, as discussed below, we owed $ 25.0 million in principal payments from the 2018 Loan, which we repaid in full at that time.

26 unchanged sentences

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 obligations owed under the 2022 Loan Agreement.

We have classified the 2022 Loan balance as a current liability as of June 30, 2022 due to the determination of the existence of substantial doubt about our ability to continue operating as a going concern discussed in Note 1.

We have classified the 2022 Loan balance as a current liability as of September 30, 2022 due to the determination of the existence of substantial doubt about our ability to continue operating as a going concern discussed in Note 1.

Organization and Basis of Presentation:

1 unchanged sentence

The lenders have not invoked the material adverse change clause as of the date of issuance of these financial statements.

As of June 30, 2022, our future payment obligations related to the 2022 Loan, excluding interest payments and the 2022 final fee, are as follows (in thousands):

As of September 30, 2022, our future payment obligations related to the 2022 Loan, excluding interest payments and the 2022 final fee, are as follows (in thousands):

Total repayment obligations $ 28,862

10 unchanged sentences

The estimated fair value of the 2018 Exit Fee is recorded as a derivative liability and included in accrued expenses and other current liabilities on the accompanying condensed balance sheets.

As of both June 30, 2022 and December 31, 2021, the estimated fair value of the 2018 Exit Fee was $ 0.7 million.

As of both September 30, 2022 and December 31, 2021, the estimated fair value of the 2018 Exit Fee was $ 0.7 million.

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.

7 unchanged sentences

The estimated fair value of the 2022 Exit Fee is recorded as a derivative liability and included in accrued expenses and other current liabilities on the accompanying condensed balance sheets.

As of June 30, 2022, the estimated fair value of the 2022 Exit Fee is $ 0.4 million.

As of September 30, 2022, the estimated fair value of the 2022 Exit Fee is $ 0.4 million.

2 unchanged sentences

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 10.0 % increase (decrease) in the probability of occurrence would not result in a material fair value fluctuation.

Changes in the fair value of our exit fee derivative liabilities 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 three and six months ended June 30, 2022 and 2021 (in thousands):

Changes in the fair value of our exit fee derivative liabilities 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 three and nine months ended September 30, 2022 and 2021 (in thousands):

Balance at January 1, $ 698 $ 1,376

3 unchanged sentences

2022 Exit Fee $ 58 $ —

Balance at June 30, $ 1,091 $ 663

Balance at September 30, $ 1,127 $ 680

All of our leases are operating leases and each contain customary rent escalation clauses.

2 unchanged sentences

The following table provides additional details of our facility leases presented in our condensed balance sheets (dollars in thousands):

Facilities June 30, 2022 December 31, 2021

Facilities September 30, 2022 December 31, 2021

Right-of-use assets $ 10,182 $ 12,752

5 unchanged sentences

Lease costs, which are included in operating expenses in our statements of operations, were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Cash paid for operating lease $ 1,072 $ 829 $ 3,194 $ 2,383

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of June 30, 2022 (in thousands):

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of September 30, 2022 (in thousands):

Remainder of 2022 $ 1,097

8 unchanged sentences

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").

The 2020 Open Market Sales Agreement was fully utilized as of December 31, 2021.

During the six months ended June 30, 2021 we sold 9.0 million shares and received gross proceeds of $ 63.8 million at a weighted average sales price of approximately $ 7.10 per share under the 2020 Open Market Sales Agreement.

As of December 31, 2021, we had sold 23.3 million shares and received the maximum gross proceeds of $ 100.0 million pursuant to 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.

1 unchanged sentence

Pursuant to the 2021 Open Market Sales Agreement, Jefferies, as our sales agent, receives a commission of up to 3 % of the gross sales price for shares of common stock sold under the 2021 Open Market Sales Agreement.

During the six months ended June 30, 2022 we sold 20.5 million shares and received gross proceeds of $ 18.9 million at a weighted average sales price of approximately $ 0.92 per share under the 2021 Open Market Sales Agreement.

During the three months ended September 30, 2022 we sold 32.6 million shares and received gross proceeds of $ 35.1 million at a weighted average sales price of approximately $ 1.08 per share under the 2021 Open Market Sales Agreement.

During the nine months ended September 30, 2022 we sold 53.1 million shares and received gross proceeds of $ 54.0 million at a weighted average sales price of approximately $ 1.02 per share under the 2021 Open Market Sales Agreement.

As of September 30, 2022, we have sold a total of 68.8 million shares and received aggregate gross proceeds of $ 79.0 million under the 2021 Open Market Sales Agreement.

EQUITY INCENTIVE PLANS

1 unchanged sentence

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Total $ 1,834 $ 2,262 $ 8,659 $ 8,568

As of June 30, 2022, the balance of inventory included in our condensed balance sheet includes $ 0.2 million stock-based compensation.

During the three and six months ending June 30, 2022, the amount of stock-based compensation released from inventory into cost of revenue was not material.

As of June 30, 2022, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands):

As of September 30, 2022, the balance of inventory included in our condensed balance sheet includes $ 0.2 million stock-based compensation.

During the three and nine months ending September 30, 2022, the amount of stock-based compensation released from inventory into cost of revenue was not material.

As of September 30, 2022, 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)

3 unchanged sentences

Stock Options

A summary of our stock option activity and related information for the six months ended June 30, 2022 is as follows (in thousands, except dollar amounts):

A summary of our stock option activity and related information for the nine months ended September 30, 2022 is as follows (in thousands, except dollar amounts):

Number of Shares Weighted-Average

4 unchanged sentences

Options forfeited or canceled ( 1,454 ) $ 6.39

Balance at June 30, 2022 14,000 $ 4.91

Exercisable at June 30, 2022 7,085 $ 6.91

Balance at September 30, 2022 13,840 $ 4.91

Exercisable at September 30, 2022 7,801 $ 6.55

Restricted Stock Units

A summary of our RSUs activity and related information for the six months ended June 30, 2022 is as follows (in thousands, except dollar amounts):

A summary of our RSUs activity and related information for the nine months ended September 30, 2022 is as follows (in thousands, except dollar amounts):

RSUs Weighted-Average

5 unchanged sentences

Forfeited ( 306 ) $ 2.25

Non-vested restricted stock units at June 30, 2022 1,674 $ 2.26

Non-vested restricted stock units at September 30, 2022 1,432 $ 2.25

Employee Stock Purchase Plan

In February 2022, we sold approximately 0.1 million shares of our common stock under the ESPP.

The shares were purchased by employees at a purchase price of $ 0.65 per share resulting in proceeds to us of approximately $ 0.1 million.

During the nine months ended September 30, 2022, we sold approximately 0.3 million shares of our common stock under the ESPP.

The shares were purchased by employees at an average purchase price of $ 0.63 per share resulting in proceeds to us of approximately $ 0.2 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 six months ended June 30, 2022, we issued no shares of our common stock to members of the board of directors in accordance with the program.

During the nine months ended September 30, 2022, we issued 0.7 million shares of our common stock to members of the board of directors in accordance with the program.

RESTRUCTURING

During 2021, we implemented restructuring plans in August 2021 and October 2021 following the receipt of a Complete Response Letter (“CRL”) from the U.S.

FDA relating to our new drug application (“NDA”) for XPHOZAH® (tenapanor) and following the conclusion of an End of Review Type A meeting with the FDA, respectively.

Both restructuring plans were substantially completed in December 2021 and most of the cash payments related to the reduction in workforce were disbursed prior to December 31, 2021.

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 included a general release of claims against us.

In connection with restructuring, we incurred restructuring charges of $ 3.6 million during the three and nine months ended September 30, 2021 related to one-time termination notice and severance payments and other employee-related costs.

We incurred no restructuring charges during the three and nine months ended September 30, 2022.

We did not incur any significant contract termination costs pursuant to restructuring.

Of the charges recognized as of September 30, 2021, $ 1.2 million was recorded in research and development expenses and $ 2.4 million was recorded in general and administrative expense in the accompanying statements of operations and comprehensive loss.

NET LOSS PER SHARE

1 unchanged sentence

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 six months ended June 30, 2022 and 2021, all potential common shares were determined to be anti-dilutive.

As we had net losses for the nine months ended September 30, 2022 and 2021, all potential common shares were determined to be anti-dilutive.

The following table sets forth the computation of net loss per common share (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

For the periods presented, all common stock equivalents are excluded from the computation of diluted loss per share, as the result would be anti-dilutive, including the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

CONTINGENCIES

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 will not be material to our financial condition or cash flows, and no contingent liabilities were accrued as of June 30, 2022 or 2021.

On July 30 and August 12, 2021, two putative securities class action lawsuits were commenced in the U.S.

District Court for the Northern District of California naming as defendants Ardelyx and two current officers captioned Strezsak v.

Ardelyx, Inc., et al.

4:21-cv-05868-HSG, and Siegel v.

Ardelyx, Inc., et al.

5:21-cv-06228-HSG (together, the “Securities Class Actions”).

The complaints allege 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 plaintiffs seek to represent all persons who purchased or otherwise acquired Ardelyx securities between August 6, 2020, and July 19, 2021.

The plaintiffs seek damages and interest, and an award of costs, including attorneys’ fees.

On July 19, 2022, the court consolidated the two putative class actions and appointed a lead plaintiff and lead counsel.

The lead plaintiff filed an amended complaint on September 29, 2022.

Defendant’s motion to dismiss the amended complaint is due December 2, 2022.

A hearing on the anticipated motion to dismiss has not yet been scheduled.

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.

On December 7, 2021 and March 29, 2022, two verified shareholders derivative lawsuits were filed purportedly on behalf of Ardelyx against certain of Ardelyx’s executive officers and members of our board of directors, captioned Go v.

4:21-cv-09455-HSG, and Morris v.

4:22-cv-01988-JSC.

The complaints allege violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste, and seek contribution under Sections 10(b) and 21D of the Securities Exchange Act of 1934 from two executive officers.

On January 19, and April 27, 2022, the court granted the parties’ stipulation to stay the Go and Morris actions, respectively, until resolution of the anticipated motion(s) to dismiss in the Securities Class Actions.

On October 25, 2022, the parties filed a stipulation to consolidate and stay the Go and Morris actions, and on October 27, 2022, the court consolidated the Go and Morris action and stayed the consolidated action pending resolution of the anticipated motion(s) to dismiss in the Securities Class Action.

From time to time, we may be involved in legal proceedings arising in the ordinary course of business.

As of September 30, 2022, there is no litigation pending that would reasonably be expected to have a material adverse effect on our results of operations and financial condition, and no contingent liabilities were accrued as of September 30, 2022.

SUBSEQUENT EVENTS

On October 31, 2022, we announced that our collaboration partner, KKC, submitted a New Drug Application to the Japanese Ministry of Health, Labour and Welfare for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis.

This submission triggers KKC's obligation to make an aggregate of $ 35.0 million to us in milestone payments and payments under the 2022 Amendment.

In accordance with the terms of the 2022 Amendment, we expect to receive these payments during the fourth quarter of 2022.

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-Q

Item 1. Financial Statements