What changed in this filing

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Item 1. Financial Statements

2023-05-03 compared with 2022-11-03 · 212 added, 331 removed, 380 unchanged (59% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2023 December 31,

7 unchanged sentences

Total current assets 167,047 153,603

Inventory, non-current 40,124 25,064

Right-of-use assets 7,972 9,295

19 unchanged sentences

5,000,000 shares authorized;

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

no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.

Common stock, $ 0.0001 par value;

300,000,000 shares authorized;

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

214,462,050 and 198,575,016 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.

Additional paid-in capital 932,330 878,500

7 unchanged sentences

(in thousands, except share and per share amounts)

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

2022 2021 2022 2021

Three Months Ended March 31,

Product sales, net $ 11,355 $ 450

1 unchanged sentence

Licensing revenue 12 4

Collaborative development revenue — 886 — 3,650

Total revenues 11,369 468

7 unchanged sentences

Non-cash interest expense related to the sale of future royalties ( 969 ) —

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

Other income, net 1,302 484

Loss before provision for income taxes ( 26,759 ) ( 28,069 )

1 unchanged sentence

Net loss $ ( 26,773 ) $ ( 28,071 )

Net loss per common share, basic and diluted $ ( 0.14 ) $ ( 0.42 ) $ ( 0.53 ) $ ( 1.21 )

Net loss per share of common stock - basic and diluted $ ( 0.13 ) $ ( 0.21 )

Shares used in computing net loss per share - basic and diluted 207,023,127 130,934,795

1 unchanged sentence

Net loss $ ( 26,773 ) $ ( 28,071 )

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

Unrealized gains (losses) on available-for-sale securities 34 ( 82 )

Comprehensive loss $ ( 26,739 ) $ ( 28,153 )

2 unchanged sentences

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the Three Months ended March 31, 2023 and 2022

(in thousands, except shares)

Three Months Ended September 30, 2022

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders'

Shares Amount

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 — — — — —

Issuance of common stock in at the market offering 32,613,325 4 34,363 — — 34,367

Stock-based compensation — — 1,848 — — 1,848

Unrealized losses on available-for-sale securities — — — — ( 5 ) ( 5 )

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

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

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Common Stock Additional

6 unchanged sentences

Issuance of common stock under employee stock purchase plan 165,969 — 138 — — 138

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

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

Issuance of common stock in at the market offering 53,105,382 6 52,839 — — 52,845

Stock-based compensation — — 8,824 — — 8,824

Unrealized losses on available-for-sale securities — — — — ( 108 ) ( 108 )

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

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

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders'

Shares Amount

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

Issuance of common stock under employee stock purchase plan 284,456 — 341 — — 341

Issuance of common stock for services 25,989 — 190 — — 190

Issuance of common stock upon exercise of options 36,001 — 62 — — 62

Issuance of common stock upon vesting of restricted stock units 207,773 — — — — —

Taxes paid for net share settlement of equity awards — — ( 106 ) — — ( 106 )

Issuance of common stock in at the market offering 15,477,291 1 50,718 — — 50,719

Stock-based compensation — — 2,912 — — 2,912

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

Unrealized gains on available-for-sale securities — — — — 34 34

Net loss — — — ( 26,773 ) — ( 26,773 )

Balance as of September 30, 2021 106,771,584 $ 11 $ 758,114 $ ( 676,696 ) $ 3 $ 81,432

Nine Months Ended September 30, 2021

Balance as of March 31, 2023 214,462,050 $ 21 $ 932,330 $ ( 806,910 ) $ ( 20 ) $ 125,421

Three Months Ended March 31, 2022

Common Stock Additional

6 unchanged sentences

Issuance of common stock under employee stock purchase plan 127,100 — 83 — — 83

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 113,469 — — — — —

Taxes paid for net share settlement of equity awards — — ( 106 ) — — ( 106 )

Issuance of common stock in at the market offering 5,907,256 1 5,920 — — 5,921

Stock-based compensation — — 3,722 — — 3,722

Unrealized gains on available-for-sale securities — — — — 7 7

Unrealized losses on available-for-sale securities — — — — ( 82 ) ( 82 )

Net loss — — — ( 28,071 ) — ( 28,071 )

Balance as of September 30, 2021 106,771,584 $ 11 $ 758,114 $ ( 676,696 ) $ 3 $ 81,432

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

The accompanying notes are an integral part of these condensed financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

7 unchanged sentences

Gain on sale of equipment — ( 710 )

Impairment of long-lived assets 429 —

Non-cash interest expense 1,044 109

15 unchanged sentences

Purchases of property and equipment ( 14 ) —

Net cash provided by investing activities 16,974 28,852

Net cash (used in) provided by investing activities ( 9,777 ) 2,332

Financing activities

Proceeds from 2022 Loan, net of issuance costs — 26,971

Repayment of 2018 Loan, net of settlement costs ( 33,038 ) —

Proceeds from the sale of future royalties, net of issuance costs 9,581 —

Payments for 2018 Loan, net of costs — ( 33,038 )

Proceeds from issuance of common stock in at the market offering, net of issuance costs 50,719 5,921

Proceeds from issuance of common stock under equity incentive and stock purchase plans 200 83

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

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

Net cash provided by (used in) financing activities 50,919 ( 63 )

Net decrease in cash and cash equivalents ( 3,653 ) ( 25,351 )

5 unchanged sentences

Supplementary disclosure of non-cash activities:

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

5 unchanged sentences

Ardelyx, Inc.

(the “Company,” “we,” “us” or “our”) is a biopharmaceutical company founded with a mission to discover, develop and commercialize innovative first-in-class medicines that meet significant unmet medical needs.

(“Company,” “we,” “us” or “our”) is a biopharmaceutical company founded with a mission to discover, develop and commercialize innovative, first-in-class medicines that meet significant unmet medical needs.

We developed a unique and innovative platform that enabled the discovery of new biological mechanisms and pathways to develop potent and efficacious therapies that minimize the side effects and drug-drug interactions frequently encountered with traditional, systemically absorbed medicines.

The first molecule we discovered and developed was tenapanor, a targeted, first-in-class, oral, small molecule therapy.

Tenapanor, branded as IBSRELA, is approved in the U.S.

for the treatment of adults with irritable bowel syndrome with constipation (“IBS-C”).

In April 2023, we resubmitted a New Drug Application (“NDA”) to the U.S.

Food and Drug Administration (“FDA”) for the approval of XPHOZAH (tenapanor) for the control of serum phosphate in adult patients with chronic kidney disease (“CKD”) on dialysis who have had an inadequate response or intolerance to a phosphate binder therapy, under the brand name XPHOZAH.

We also have a development stage asset, RDX013 for adult patients with CKD and/or heart failure with hyperkalemia, or elevated serum potassium, and a discovery phase asset, RDX020 for adult patients with metabolic acidosis, a serious electrolyte disorder, in patients with CKD.

We operate in one business segment, which is the development and commercialization of biopharmaceutical products.

6 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, 2022.

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.

The results for the three months ended March 31, 2023 are not necessarily indicative of results to be expected for the entire year ending December 31, 2023, or for any other interim period or future year.

Use of Estimates

1 unchanged sentence

GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes thereto.

On an ongoing basis, management evaluates its estimates, including those related to recognition of revenue, clinical trial accruals, contract manufacturing accruals, the fair value of assets and liabilities, income taxes and stock-based compensation.

On an ongoing basis, management evaluates its estimates, including those related to recognition of revenue, clinical trial accruals, contract manufacturing accruals, utilization of inventory, fair value of assets and liabilities, income taxes and stock-based compensation.

Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances.

Actual results could materially differ from those estimates.

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.

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 sales of IBSRELA, our potential receipt of anticipated milestones from our collaboration partners, our potential receipt of anticipated payments from our Japanese collaboration partner under the second amendment to our License Agreement, our ability to access the capital markets, as well as through the implementation of cash preservation activities to reduce or defer discretionary spending.

As of March 31, 2023, we had cash, cash equivalents and short-term investments of approximately $ 130.4 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of March 31, 2023 is $ 806.9 million.

Our current level of cash, cash equivalents and short-term investments alone is not sufficient to meet our plans for the next twelve months following the issuance of these condensed financial statements on May 3, 2023.

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 condensed financial statements.

We plan to address our operating cash flow requirements with our current cash, cash equivalents and short-term investments, cash generated from product sales of IBSRELA, and if approved, cash generated from sales of XPHOZAH, our potential receipt of anticipated milestones payments from our collaboration partners, our potential receipt of anticipated payments from our Japanese collaboration partner under the second amendment to our License Agreement, with additional financing sources and 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.

If our current cash, cash equivalents and short-term 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.

1 unchanged sentence

Our significant accounting policies are described in Note 2 to our audited financial statements for the fiscal year ended December 31, 2022, included in our Annual Report on Form 10-K.

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 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.

Trade receivable balances are written off against the allowance when it is probable that the receivable will not be collected.

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

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.

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.

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 or could be sold to our international partners under product supply agreements.

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 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 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

We account for our commercial product sales, net in accordance with Topic 606 - Revenue from Contracts with Customers .

We received approval from the U.S.

Food and Drug Administration (“FDA”) in September 2019 to market IBSRELA, the first and only sodium hydrogen exchanger 3 (“NHE3”) inhibitor for the treatment of irritable bowel syndrome with constipation ("IBS-C") in adults, in the United States ("U.S.").

We began selling IBSRELA in the U.S.

in March 2022.

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 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 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.

Overall, these reductions to gross sales reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Actual amounts of consideration ultimately received may differ from our estimates.

If actual results in the future vary from our estimates, we adjust these estimates, which would affect product revenue and earnings in the period such variances become known.

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 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.

Our estimates for payor mix are guided by payor information received from specialty pharmacies, expected utilization for wholesaler sales to pharmacies, and available industry payor information.

Chargebacks are discounts that occur when certain contracted purchasers purchase directly from our wholesalers at a discounted price.

The wholesaler, in turn, charges back the difference between the price initially paid to us by the wholesaler and the discounted price paid to the wholesaler by the contracted purchaser.

Amounts for estimated chargebacks are established in the same period that the related gross revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

The accrual for wholesaler chargebacks is estimated based on known chargeback rates, known sales to wholesalers, and estimated utilization by types of contracted purchasers.

Discounts and Fees:

Our payment terms are generally 30 to 60 days.

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 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 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 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.

We have agreed to pay AstraZeneca up to a maximum of $ 75.0 million in the aggregate for (i) and (ii).

We recognize these expenses as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to AstraZeneca.

To date, we have recognized an aggregate of $ 12.4 million as cost of revenue under the AZ Termination Agreement.

Non-cash Interest Expense on Deferred Royalty Obligation

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.

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

We periodically assess the amount of royalty payments we expect to receive which are subject to the agreement and, to the extent that the amount or timing of such payments is materially different than our original estimates, we prospectively adjust the imputed interest rate and the related amortization of the deferred royalty obligation.

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, 2022.

Recent Accounting Pronouncements

New Accounting Pronouncements - Recently Adopted

We have adopted no new accounting pronouncements other than those disclosed in our most recent Annual Report on Form 10-K.

We have adopted no new accounting pronouncements subsequent to filing our most recent Annual Report on Form 10-K.

Recent Accounting Pronouncements Not Yet Adopted

There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.

There were various accounting standards and interpretations issued recently, none of which are expected to have a material impact on our financial position, operations or cash flows.

CASH, CASH EQUIVALENTS AND INVESTMENTS

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

Securities classified as cash, cash equivalents and short-term investments as of March 31, 2023 and December 31, 2022 are summarized below (in thousands):

March 31, 2023

Gross Unrealized

7 unchanged sentences

government-sponsored agency bonds 12,618 8 ( 6 ) 12,620

Corporate bonds 1,005 — ( 9 ) 996

treasury notes 6,008 — ( 26 ) 5,982

Asset backed securities 1,935 — ( 2 ) 1,933

Total short-term investments 37,906 11 ( 31 ) 37,886

Total cash equivalents and investments $ 90,737 $ — $ ( 114 ) $ 90,623

Total cash, cash equivalents and investments $ 130,393 $ 11 $ ( 31 ) $ 130,373

December 31, 2022

8 unchanged sentences

Corporate bonds 1,000 — ( 1 ) 999

Asset backed securities 5,306 — ( 2 ) 5,304

government-sponsored agency bonds 1,487 — ( 8 ) 1,479

Total short-term investments 27,823 6 ( 60 ) 27,769

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

Total cash, cash equivalents and investments $ 123,963 $ 6 $ ( 60 ) $ 123,909

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 condensed balance sheets.

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 loss within stockholders’ equity on our condensed 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 September 30, 2022 had contractual maturities of less than one year .

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

All of the short-term available-for sale securities held as of March 31, 2023 and December 31, 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 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 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.

If an investment is other-than-temporarily impaired or subject to credit losses, 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.

Our unrealized losses as of March 31, 2023 and December 31, 2022 were not material.

We determined that none of our available-for-sale securities were other-than-temporarily impaired as of March 31, 2023 and December 31, 2022, and no investment was in a continuous unrealized loss position for more than one year.

As such, we believe that it is more likely than not that 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):

September 30, 2022

March 31, 2023

Fair Value Level 1 Level 2 Level 3

2 unchanged sentences

government-sponsored agency bonds 12,620 — 12,620 —

Corporate bonds 996 — 996 —

treasury notes 5,982 — 5,982 —

Asset-backed securities 1,933 — 1,933 —

Total $ 122,387 $ 84,501 $ 37,886 $ —

6 unchanged sentences

Corporate bonds 999 — 999 —

Asset-backed securities 5,304 — 5,304 —

government-sponsored agency bonds 1,479 — 1,479 —

Total $ 112,082 $ 84,313 $ 27,769 $ —

7 unchanged sentences

treasury notes, corporate bonds, commercial paper, and asset-backed securities as Level 2.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities, such as the 2018 Exit Fee and 2022 Exit Fee, as defined and discussed in Note 9.

Derivative Liability , are classified as Level 3.

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.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities, such as the 2018 Exit Fee and the 2022 Exit Fee, as defined and discussed in Note 9.

Derivative Liabilities , are classified as Level 3.

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 March 31, 2023 and December 31, 2022, due to their short-term nature.

Based on our procedures under the expected credit loss model, including an assessment of unrealized losses in our portfolio, we concluded that any unrealized losses on our marketable securities were not attributable to credit and, therefore, we have no t recorded an allowance for credit losses for these securities as of March 31, 2023 and December 31, 2022.

Fair Value of Debt

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.

Therefore, we believe the carrying amount of the term loan facility approximates fair value as of March 31, 2023 and December 31, 2022.

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.

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of March 31, 2023 and December 31, 2022 and is based on our current estimates of future royalties and commercialization milestones expected to be paid to us by Kyowa Kirin Co., Ltd.

("Kyowa Kirin") 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):

September 30, 2022

Inventory as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

March 31, 2023 December 31, 2022

Raw materials $ 21,702 $ 22,299

3 unchanged sentences

Inventory $ 4,823 $ 3,282

Other assets 8,524

Inventory, non-current 40,124 25,064

Total $ 44,947 $ 28,346

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.

Prepaid commercial manufacturing of $ 13.8 million and $ 13.6 million as of March 31, 2023 and December 31, 2022, respectively, consisted 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.

PRODUCT REVENUE, NET

We received approval from the FDA in September 2019 to market IBSRELA, the first and only NHE3 inhibitor for the treatment of IBS-C in adults, in the U.S.

We received approval from the FDA in September 2019 to market IBSRELA in the U.S.

We began selling IBSRELA in the U.S.

in March 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.

We recorded net revenue for IBSRELA of $ 11.4 million and $ 0.5 million during the three months ended March 31, 2023 and 2022, respectively.

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 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.

Sales to Cardinal Health, AmerisourceBergen Drug Corporation, and McKesson Corporation made up 22.2 %, 21.6 %, and 20.8 %, respectively, of our product sales, net during the three months ended March 31, 2023.

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

Discounts and Chargebacks Rebates Other Fees, Copay and Returns Total

Discounts and Chargebacks Rebates, Wholesaler and GPO Fees Copay and Returns Total

Balance as of December 31, 2022 $ 142 $ 1,444 $ 1,258 $ 2,844

Activity related to 2022 sales 358 1,158 1,115 2,631

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

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.

Provisions 824 2,361 2,575 5,760

Credits/payments ( 726 ) ( 1,685 ) ( 1,909 ) ( 4,320 )

Balance as of March 31, 2023 $ 240 $ 2,120 $ 1,924 $ 4,284

COLLABORATION AND LICENSING AGREEMENTS

Kyowa Kirin Co., Ltd.

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”).

Pursuant to the 2019 KKC Agreement, upon completion of the research and designation by the research steering committee of one or more DCs, KKC has the right to execute one or more separate collaborative agreements relating to the development and commercialization of one or both DCs in certain specified territories.

Under the terms of the 2019 KKC Agreement, KKC paid us a non-refundable, non-creditable upfront fee of $ 10.0 million in two installments as follows:

the first installment of $ 5.0 million within 30 days of November 11, 2019 (the “Effective Date”), and the second installment of $ 5.0 million on the first anniversary of the Effective Date.

The original term of the 2019 KKC Agreement commenced on the Effective Date and was to end on the earliest of:

(i) 2 years following the Effective Date, (ii) the nomination of a program DC for both programs, (iii) the nomination of one program DC and the decision by the parties to cease research for the other program, or (iv) the decision by the parties to cease research for both programs.

We entered into three amendments to the 2019 KKC Agreement, which have resulted in the extension of the original term.

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 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”), 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.

(“Kyowa Kirin”)

In November 2017, we entered into an exclusive license agreement with Kyowa Kirin (“2017 Kyowa Kirin Agreement”), under which we granted Kyowa Kirin 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.

Pursuant to the 2017 KKC Agreement, KKC is responsible for all costs and expenses incurred in the development and commercialization of tenapanor for all licensed indications in Japan.

We are responsible for supplying the tenapanor drug substance for KKC’s use in development and commercialization throughout the term of the 2017 KKC Agreement, provided that KKC may exercise an option to manufacture the tenapanor drug substance under certain conditions.

Pursuant to the 2017 Kyowa Kirin Agreement, Kyowa Kirin is responsible for all costs and expenses incurred in the development and commercialization of tenapanor for all licensed indications in Japan.

We are responsible for supplying the tenapanor drug substance for Kyowa Kirin’s use in development and commercialization throughout the term of the 2017 Kyowa Kirin Agreement, provided that Kyowa Kirin may exercise an option to manufacture the tenapanor drug substance under certain conditions.

In October 2022, we entered into a Commercial Supply Agreement with Kyowa Kirin to further define the obligations of the parties with respect to the commercial supply of tenapanor drug substance (“2022 Kyowa Kirin Supply Agreement”).

As detailed below under the heading “Deferred revenue’ we have received advanced payments from Kyowa Kirin for the manufacturing of tenapanor drug substance that will be used to satisfy Kyowa Kirin needs.

We assessed these arrangements in accordance with Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments (“ASC 606”) and concluded that the contract counterparty, KKC, is a customer.

Under the terms of the 2017 KKC Agreement, we received $ 30.0 million in upfront license fees, which was recognized as revenue when the agreement was executed.

Based on our assessment, management determined that the license and the manufacturing supply services were its material performance obligations at the inception of the 2017 KKC Agreement, and as such, each of the performance obligations is distinct.

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 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.

2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments (“ASC 606”) and concluded that the contract counterparty, Kyowa Kirin, is a customer.

Under the terms of the 2017 Kyowa Kirin Agreement, we received $ 30.0 million in upfront license fees, which was recognized as revenue when the agreement was executed.

Based on our assessment, management determined that the license and the manufacturing supply services were its material performance obligations at the inception of the 2017 Kyowa Kirin Agreement, and as such, each of the performance obligations is distinct.

Under the terms of the 2017 Kyowa Kirin Agreement, Kyowa Kirin 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 $ 20.0 million has been received and recognized as revenue as of March 31, 2023.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 64.1 million at the currency exchange rate on March 31, 2023, 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.

Deferred Royalty Obligation , the future royalties and commercial milestone payments we may receive under the 2017 KKC Agreement will be remitted to HealthCare Royalty Partners IV, L.P.

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future royalties and commercial milestone payments we may receive under the 2017 Kyowa Kirin Agreement will be remitted to HealthCare Royalty Partners IV, L.P.

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 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.

The variable consideration related to the remaining milestone payments was fully constrained at March 31, 2023.

In April 2022, we entered into a second amendment to the 2017 Kyowa Kirin Agreement ("2022 Amendment").

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

The royalty rate will be reduced from the high teens to low double digits for a two-year period of time following the first commercial sale in Japan, and then to mid-single digits for the remainder of the royalty term.

As discussed in Note 7.

Deferred Royalty Obligation , the future commercial milestones and royalties we may receive under the 2017 KKC Agreement will be remitted to HealthCare Royalty Partners IV, L.P.

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future commercial milestones and royalties we may receive under the 2017 Kyowa Kirin Agreement will be remitted to HealthCare Royalty Partners IV, L.P.

pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement.

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 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.

As consideration for the reduction in the royalty rate, Kyowa Kirin agreed to pay us up to an additional $ 40.0 million payable in two tranches, with the first payment due following Kyowa Kirin'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 Kyowa Kirin’s receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan.

In October 2022, we announced that Kyowa Kirin submitted an NDA to the Japanese Ministry of Health, Labour and Welfare for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis, which resulted in payment to us from Kyowa Kirin for an aggregate of $ 35.0 million for milestone payments and payments under the 2022 Amendment.

We received these payments during the fourth quarter of 2022 and recorded them as licensing revenue on our statement of operations and comprehensive loss.

The remaining variable consideration related to the reduction in the royalty rate was fully constrained at March 31, 2023.

During the three months ended March 31, 2023 and 2022, we did not recognize a material amount of revenue pursuant to the 2017 Kyowa Kirin Agreement.

Shanghai Fosun Pharmaceutical Industrial Development Co.

(“Fosun Pharma”)

In December 2017, we entered into an exclusive license agreement with Fosun Pharma (the “Fosun Agreement”), for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C.

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 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.

In December 2017, we entered into an exclusive license agreement with Fosun Pharma ("Fosun Agreement") for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C.

We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, Fosun Pharma, is a customer.

Under the terms of the Fosun Agreement, we received $ 12.0 million in up-front license fees which was recognized as revenue when the agreement was executed.

Based on our assessment, we determined that the license and the manufacturing supply services represented the material performance obligations at the inception of the agreement and, as such, each of the performance obligations are distinct.

We may be entitled to receive development and commercialization milestones of up to $ 110.0 million, of which $ 3.0 million has been received and recognized as revenue as of March 31, 2023, 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 was fully constrained at March 31, 2023.

During the three months ended March 31, 2023 and 2022, we did not recognize a material amount of revenue pursuant to the Fosun Agreement.

Knight Therapeutics, Inc.

In March 2018, we entered into an exclusive license agreement with Knight (the “Knight Agreement”) for the development, commercialization and distribution of tenapanor in Canada for hyperphosphatemia and IBS-C.

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 $ 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 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.

In March 2018, we entered into an exclusive license agreement with Knight Therapeutics, Inc., ("Knight Agreement") for the development, commercialization and distribution of tenapanor in Canada for hyperphosphatemia and IBS-C.

We assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Knight, is a customer.

Based on our assessment, we determined that the license and the manufacturing supply services were the material performance obligations at the inception of the agreement and, as such, each of the performance obligations are distinct.

Under the terms of the Knight Agreement, we received a $ 2.3 million non-refundable, one-time upfront payment in March 2018 and may be eligible to receive additional development and commercialization milestone payments worth up to CAD 22.2 million, or approximately $ 16.3 million at the currency exchange rate on March 31, 2023, of which $ 0.7 million has been received and recognized as revenue as of March 31, 2023.

We are also eligible to receive royalties ranging from the mid-single digits to the low twenties throughout the term of the agreement, and a transfer price for manufacturing services.

The variable consideration related to the remaining development milestone payments was fully constrained at March 31, 2023.

During the three months ended March 31, 2023 and 2022, we did not recognize a material amount of revenue pursuant to 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 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.

In June 2015, we entered into a termination agreement with AstraZeneca (the “AstraZeneca Termination Agreement”) pursuant to which we have agreed to pay AstraZeneca (i) future royalties at a royalty rate of 10 % of net sales of tenapanor or other NHE3 products by us or our licensees, and (ii) 20 % of non-royalty revenue received from a new collaboration partner should we elect to license, or otherwise provide rights to develop and commercialize tenapanor or other NHE3 products, up to a maximum of $ 75.0 million in aggregate for (i) and (ii).

As of March 31, 2023, to date in aggregate, we have recognized $ 16.4 million of the $ 75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $ 11.9 million.

During the three months ended March 31, 2023, we recognized and recorded $ 1.2 million as cost of revenue related to the AstraZeneca Termination Agreement.

During the three months ended March 31, 2022 we recognized $ 0.1 million 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 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):

The following tables present changes in our current and non-current deferred revenue balances during the reporting period, which are all attributable to the 2017 Kyowa Kirin Agreement (in thousands):

Deferred revenue - current 2023 2022

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Increases to amounts invoiced, for which cash has not yet been received 525 —

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

Balance at September 30, $ 4,003 $ 527

Balance at March 31, $ 5,545 $ —

Deferred revenue - non-current 2023 2022

Balance at January 1, $ 9,025 $ 4,727

Increases due to cash received during the period 7,694 2,947

Increases to amounts invoiced, for which cash has not yet been received 3,282 3,829

Increase due to unbilled prepayments recorded during the period — 7

Decreases due to amounts reclassified as current, to be recognized in the next twelve months ( 809 ) —

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

Balance at March 31, $ 11,498 $ 8,563

DEFERRED ROYALTY OBLIGATION RELATED TO THE SALE OF FUTURE ROYALTIES

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

(“HCR”) entered into a Royalty and Sales Milestone Interest Acquisition Agreement (the “HCR Agreement”).

Under the terms of the HCR Agreement, HCR has agreed to pay us up to $ 20.0 million in exchange for the royalty payments and commercial milestone payments (collectively the “Royalty Interest Payments”) that we may receive under our 2017 License Agreement with KKC based upon KKC's net sales of tenapanor in Japan.

As consideration for the sale of the Royalty Interest Payments, HCR paid to us a $ 10.0 million upfront payment, and we are eligible to receive a $ 5.0 million payment following KKC's receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, and another $ 5.0 million payment in the event net sales by KKC in Japan exceed a certain annual target level by the end of 2025.

The HCR Agreement is effective until terminated by the mutual agreement of the parties and contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to prosecution, maintenance, defense and enforcement of certain patent rights in Japan, restrictions regarding our ability to forgive, release or reduce any Royalty Interest Payments due to us under the 2017 KKC Agreement, to create or incur any liens with respect to the Royalty Interest Payments, the 2017 KKC Agreement or certain patents, or to sell, license or transfer certain patents in the field and territory described in the 2017 KKC Agreement.

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

(“HCR”) entered into a Royalty and Sales Milestone Interest Acquisition Agreement (“HCR Agreement”).

Under the terms of the HCR Agreement, HCR has agreed to pay us up to $ 20.0 million in exchange for the royalty payments and commercial milestone payments (collectively the “Royalty Interest Payments”) that we may receive under our 2017 License Agreement with Kyowa Kirin based upon Kyowa Kirin's net sales of tenapanor in Japan for hyperphosphatemia.

As consideration for the sale of the Royalty Interest Payments, HCR paid to us a $ 10.0 million upfront payment, and we are eligible to receive a $ 5.0 million payment following Kyowa Kirin's receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, and another $ 5.0 million payment in the event net sales by Kyowa Kirin in Japan exceed a certain annual target level by the end of 2025.

The HCR Agreement is effective until terminated by the mutual agreement of the parties and contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to prosecution, maintenance, defense and enforcement of certain patent rights in Japan, restrictions regarding our ability to forgive, release or reduce any Royalty Interest Payments due to us under the 2017 Kyowa Kirin Agreement, to create or incur any liens with respect to the Royalty Interest Payments, the 2017 Kyowa Kirin Agreement or certain patents, or to sell, license or transfer certain patents in the field and territory described in the 2017 Kyowa Kirin Agreement.

In addition, the HCR Agreement contains customary events of default with respect to which we may incur indemnification obligations to HCR for any losses incurred by HCR and related parties as a result of the event of default, subject to a specified limitation of liability cap.

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 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.

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 Kyowa Kirin 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 Kyowa Kirin 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 related to the sale of future royalties ("deferred royalty obligation") on our balance sheet.

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

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.

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 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.

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

There are a number of factors that could materially affect the fair value of the deferred royalty obligation.

Such factors include, but are not limited to, the amount and timing of potential future royalty payments to be received from Kyowa Kirin under the 2017 Kyowa Kirin agreement, changing standards of care, the introduction of competing products, manufacturing or other delays, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to HCR are made in U.S.

dollars while the underlying sales of the products by Kyowa Kirin are made in Japanese yen, and other events or circumstances that could result in reduced royalty payments from Kyowa Kirin, which are not within our control, and all of which would result in a reduction of non-cash royalty revenues and the non-cash interest expense over the life of the deferred royalty obligation.

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

As of March 31, 2023, our effective interest rate used to amortize the liability is 34.4 %.

During the three months ended March 31, 2023, we recognized approximately $ 1.0 million of non-cash interest expense for the amortization of the deferred royalty obligation.

As of March 31, 2023, we have received no royalty payments from Kyowa Kirin and, therefore, the deferred royalty obligation has not begun to be reduced.

Solar Capital and Western Alliance Bank Loan Agreement

On May 16, 2018, we entered into a loan and security agreement (as amended on October 9, 2020, March 1, 2021, May 5, 2021, and July 29, 2021) (the "2018 Loan Agreement") with Solar Capital Ltd.

In May 2018, we entered into a loan and security agreement (as amended on October 9, 2020, March 1, 2021, May 5, 2021, and July 29, 2021) (the "2018 Loan Agreement") with Solar Capital Ltd.

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

6 unchanged sentences

Loan Agreement

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 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 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 Loan”).

On August 1, 2022, we entered into an amendment to the 2022 Loan Agreement with SLR Investment Corp.

that extends the date by which we must receive approval by the FDA for our NDA for the control of serum phosphorus in chronic kidney disease patients on dialysis in order to borrow the additional $ 22.5 million from December 31, 2022 to March 31, 2023.

On February 23, 2022 (“Closing Date”), we entered into a loan and security agreement (“2022 Loan Agreement”) with SLR Investment Corp.

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

The 2022 Loan Agreement was subsequently amended on August 1, 2022 and February 9, 2023.

We concluded that the Loan amendments were modifications to the 2022 Loan Agreement and are accounted for accordingly.

The 2022 Loan Agreement as amended provides for a senior secured loan facility, with $ 27.5 million (“Term A Loan”) funded on the Closing Date and an additional $ 22.5 million which we may borrow on or prior to December 20, 2023;

provided that (i) we have received approval by the FDA for our NDA for XPHOZAH by November 30, 2023, and (ii) we have achieved certain product revenue milestone targets described in the 2022 Loan Agreement (“Term B Loan”, and collectively, the Term A Loan and the Term B Loan, the “2022 Loan”).

The 2022 Term A Loan funds were used to repay the 2018 Loan with the 2018 Lenders.

The 2022 Loan has a maturity date of March 1, 2027.

Borrowings under the 2022 Loan bear interest at a floating per annum rate equal to 7.95 % plus the greater of (i) one tenth percent ( 0.10 %) and (ii) the one-month rate published by the Intercontinental Exchange Benchmark Administration Ltd or its successor.

We are permitted to make interest-only payments on the 2022 Loan through March 31, 2024.

Accordingly, beginning on April 1, 2024, we will be required to make monthly payments of interest plus repay the 2022 Loan in consecutive equal monthly installments of principal over 36 months.

Borrowings under the 2022 Loan as amended bear interest at a floating per annum interest rate with 7.95 % plus the greater of (a) one percent ( 1.00 %) per annum and (b)(i) 0.022 % plus (ii) 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website.

We are permitted to make interest-only payments on the 2022 Loan through March 31, 2024, which date will be extended to March 31, 2025 if we receive approval by the FDA for our NDA for XPHOZAH on or prior to November 30, 2023 or achieve a defined net product revenue threshold for 2023.

Accordingly, beginning on April 1, 2024 or April 1, 2025, we will be required to make monthly payments of interest plus repayment of the 2022 Loan in consecutive equal monthly installments of principal over 36 months or 24 months, respectively.

We were obligated to pay $ 0.2 million, upon the closing of the Term A Loan, and we are obligated to pay $ 0.1 million on the earliest of (i) the funding date of the Term B Loan, (ii) July 25, 2023, and (iii) the prepayment, refinancing, substitution, or replacement of the Term A Loan on or prior to July 25, 2023.

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The 2022 Loan is secured by substantially all of our assets, except for our intellectual property and certain other customary exclusions.

Additionally, in connection with the 2022 Loan, we entered into an agreement, whereby we agreed to pay an exit fee in the amount of 2 % of the 2022 Loan funded (the “2022 Exit Fee”) upon (i) any change of control transaction or (ii) our achievement of net revenue from the sale of any products equal to or greater than $ 100.0 million, measured on a six (6) months basis, tested monthly at the end of each month.

Additionally, in connection with the 2022 Loan, we entered into an agreement, whereby we agreed to pay an exit fee in the amount of 2 % of the 2022 Loan funded (“2022 Exit Fee”) upon (i) any change of control transaction or (ii) our achievement of net revenue from the sale of any products equal to or greater than $ 100.0 million, measured on a six (6) months basis, tested monthly at the end of each month.

Notwithstanding the prepayment or termination of the 2022 Loan, the 2022 Exit Fee will expire 10 years from the Closing Date.

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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 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.

We have classified the 2022 Loan balance as a current liability as of March 31, 2023 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:

Liquidity and our assessment that the material adverse change clause under the 2022 Loan Agreement is not within our control.

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

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):

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

As of March 31, 2023, our future payment obligations related to the 2022 Loan, excluding interest payments and the 2022 final fee, were as follows (in thousands) and may be condensed to the 24 months ending March 1, 2027 if certain conditions noted above to extend the interest-only period are achieved:

Total repayment obligations $ 28,861

Unamortized discount ( 1,185 )

Unamortized discount and debt issuance costs ( 1,282 )

Unaccreted value of final fee ( 699 )

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Long-term debt, net of current portion $ —

DERIVATIVE LIABILITY

DERIVATIVE LIABILITIES

2018 Exit Fee

In May 2018, in connection with entering into the 2018 Loan Agreement, we entered into an agreement pursuant to which we agreed to pay $ 1.5 million in cash (the “2018 Exit Fee”) upon any change of control transaction in respect of the Company or if we obtain both (i) FDA approval of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis and (ii) FDA approval of tenapanor for the treatment of patients with IBS-C, which was obtained on September 12, 2019 when the FDA approved IBSRELA ® (tenapanor), a 50 milligram, twice daily oral pill for the treatment of IBS-C in adults (the “2018 Exit Fee Agreement”).

In May 2018, in connection with entering into the 2018 Loan Agreement, we entered into an agreement pursuant to which we agreed to pay $ 1.5 million in cash ("2018 Exit Fee") upon any change of control transaction in respect of the Company or if we obtain both (i) FDA approval of XPHOZAH and (ii) FDA approval of IBSRELA, which was obtained on September 12, 2019 (“2018 Exit Fee Agreement”).

Notwithstanding the February 2022 prepayment of the 2018 Loan, our obligation to pay the 2018 Exit Fee will expire on May 16, 2028.

We concluded that the 2018 Exit Fee is a freestanding derivative which should be accounted for at fair value on a recurring basis.

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

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

As of March 31, 2023 and December 31, 2022, the estimated fair value of the 2018 Exit Fee was $ 1.3 million and $ 1.2 million, respectively.

The fair value of the derivative liability was determined using a discounted cash flow analysis and is classified as a Level 3 measurement within the fair value hierarchy since our valuation utilized significant unobservable inputs.

Specifically, the key assumptions included in the calculation of the estimated fair value of the 2018 derivative liability include:

(i) our estimates of both the probability and timing of a potential $ 1.5 million payment to the 2018 Lenders as a result of the FDA approvals and (ii) a discount rate which was derived from our estimated cost of debt, adjusted with current LIBOR (or a comparable successor rate if LIBOR no longer exists).

Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the derivative liability and it is estimated that a 10.0 % increase (decrease), not to exceed 100%, in the probability of occurrence would result in a fair value fluctuation of no more than $ 0.1 million.

Specifically, the key assumptions included in the calculation of the estimated fair value of the derivative instrument include:

(i) our estimates of both the probability and timing of a potential $ 1.5 million payment to Solar Capital Ltd.

and Western Alliance Bank as a result of the FDA approvals, and (ii) a discount rate which was derived from our estimated cost of debt, adjusted with current LIBOR.

Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the derivative instrument and it is estimated that a 10 % increase (decrease), not to exceed 100%, in the probability of occurrence would result in a fair value fluctuation of no more than $ 0.1 million.

2022 Exit Fee

On February 23, 2022, in connection with entering into the 2022 Loan Agreement, we entered into an agreement, whereby we agreed to pay an exit fee in the amount of 2 % of the 2022 Loan funded (the “2022 Exit Fee”) upon (i) any change of control transaction or (ii) our achievement of net revenue from the sale of any products equal to or greater than $ 100.0 million, measured on a six (6) months basis (the "Revenue Milestone"), tested monthly at the end of each month.

In February 2022, in connection with entering into the 2022 Loan Agreement, we entered into an agreement, whereby we agreed to pay an exit fee in the amount of 2 % of the 2022 Loan funded (“2022 Exit Fee”) upon (i) any change of control transaction or (ii) our achievement of net revenue from the sale of any products equal to or greater than $ 100.0 million, measured on a six (6) months basis ("Revenue Milestone"), tested monthly at the end of each month.

Notwithstanding the prepayment or termination of the 2022 Loan, the 2022 Exit Fee will expire on February 23, 2032.

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

As of March 31, 2023 and December 31, 2022, the estimated fair value of the 2022 Exit Fee was $ 0.5 million and $ 0.4 million, respectively.

Specifically, the key assumptions included in the calculation of the estimated fair value of the 2022 derivative liability include:

(i) our estimates of both the probability and timing of achieving the Revenue Milestone and (ii) the probability and timing of funding the Term B Loan, which is dependent upon (a) approval by the FDA for our NDA for the control of serum phosphorus in chronic kidney disease patients on dialysis by December 31, 2022, and (b) achievement of certain product revenue milestone targets.

(i) our estimates of both the probability and timing of achieving the Revenue Milestone and (ii) the probability and timing of funding the Term B Loan, which is dependent upon (a) approval by the FDA for our NDA for the control of serum phosphorus in adult patients with CKD on dialysis by November 30, 2023, and (b) achievement of certain product revenue milestone targets.

Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the derivative liability and it is estimated that a 10 % increase (decrease) 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 nine months ended September 30, 2022 and 2021 (in thousands):

Changes in the fair value of recurring measurements included in Level 3 of the fair value hierarchy are presented as other income, net in our condensed statements of operations and comprehensive loss and were as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Balance at January 1, $ 1,656 $ 698

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2022 Exit Fee 22 —

Balance at September 30, $ 1,127 $ 680

Balance at March 31, $ 1,726 $ 1,088

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

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

Facilities September 30, 2022 December 31, 2021

Facilities March 31, 2023 December 31, 2022

Right-of-use assets $ 7,972 $ 9,295

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Weighted-average discount rate 6.8 % 6.8 %

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

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

2022 2021 2022 2021

The lease costs, which are included in operating expenses in our condensed statements of operations and comprehensive loss, were as follows (in thousands):

Three Months Ended March 31,

Operating lease expense $ 1,064 $ 1,064

Cash paid for operating lease $ 1,098 $ 1,058

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

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of March 31, 2023 (in thousands):

Remainder of 2023 $ 3,343

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Operating lease liability, net of current portion $ 4,814

In March 2023, we entered into a sub-lease Agreement (the “Sub-lease”) with Chronus Health, Inc.

The Sub-lease permits use by Chronus of a portion of the space in our facility in Fremont, California.

We lease the facility from a different counterparty under a separate head lease that commenced in September 2008 and has been amended multiple times to add space and to extend the lease term through March 2025.

We have sub-leased to Chronus approximately 21,644 square feet of the 72,500 square foot building's interior space, plus corresponding exterior support space and parking.

The term of the Sub-lease shall expire on February 1, 2025.

In accordance with the Sub-lease we recognized an impairment of long-lived assets totaling $ 0.4 million during the three months ended March 31, 2023, which consisted primarily of impairment to the Fremont facility right-of-use asset.

The Sub-lease commenced in April 2023 and we have recognized no income from the sub-lease as of March 31, 2023.

STOCKHOLDERS’ EQUITY

At the Market Offerings Agreement

In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020 ("Registration Statement"), containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings;

and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 100.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies LLC ("Jefferies"), deemed to be “at the market offerings” (the "2020 Open Market Sales Agreement").

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.

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 % of the gross sales price for shares of common stock sold 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.

In August 2021, we filed an additional prospectus supplement under a Registration Statement which was filed in July 2020 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 a 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.

Pursuant to the 2021 Open Market Sales Agreement, Jefferies, as our sales agent, received 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 three months ended March 31, 2023 we sold 15.5 million shares and received gross proceeds of $ 51.9 million at a weighted average sales price of approximately $ 3.35 per share under the 2021 Open Market Sales Agreement.

As of March 31, 2023, we have sold a total of 95.2 million shares and received the maximum gross proceeds of $ 150.0 million under the 2021 Open Market Sales Agreement.

In January 2023, we filed a Form S-3 registration statement, which became effective in January 2023 ("2023 Registration Statement"), containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings;

and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 150.0 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” ("2023 Open Market Sales Agreement").

Pursuant to the 2023 Open Market Sales Agreement, Jefferies, as sales agent, may receive a commission of up to 3.0 % of the gross sales price for shares of common stock sold under the 2023 Open Market Sales Agreement.

As of March 31, 2023, there have been no sales of our common stock under the 2023 Open Market Sales Agreement.

EQUITY INCENTIVE PLANS

Stock-Based Compensation

Stock-based compensation expense recognized for stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PRSUs") and our employee stock purchase program (the "ESPP") are recorded as operating expenses in our condensed statements of operations and comprehensive loss, as follows (in thousands):

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

2022 2021 2022 2021

Stock-based compensation expense recognized for stock options, restricted stock units ("RSUs"), 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 March 31,

Selling, general and administrative $ 2,088 $ 2,508

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Total $ 2,912 $ 3,722

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):

As of March 31, 2023, 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)

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Stock Options

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):

A summary of our stock option activity and related information for the three months ended March 31, 2023 is as follows (in thousands, except dollar amounts):

Number of Shares Weighted-Average

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Options forfeited or canceled ( 56 ) $ 5.84

Balance at September 30, 2022 13,840 $ 4.91

Exercisable at September 30, 2022 7,801 $ 6.55

Balance at March 31, 2023 20,343 $ 4.18

Exercisable at March 31, 2023 9,185 $ 5.97

Restricted Stock Units

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):

A summary of our RSUs activity and related information for the three months ended March 31, 2023 is as follows (in thousands, except dollar amounts):

RSUs Weighted-Average

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Forfeited — $ —

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

Non-vested restricted stock units at March 31, 2023 2,982 $ 2.50

Employee Stock Purchase Plan

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

During the three months ended March 31, 2023, we sold approximately 0.2 million shares of our common stock under the ESPP.

The shares were purchased by employees at an average purchase price of $ 0.83 per share resulting in proceeds to us of approximately $ 0.1 million.

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Under Our Amended and Restated Non-Employee Director Compensation Program, members of our board of directors may elect to receive shares of our stock in lieu of their cash fees.

During the nine months ended September 30, 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.

During the three months ended March 31, 2023, we issued no shares of our common stock to members of the board of directors in accordance with the program.

NET LOSS PER SHARE

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

As we had net losses for the three months ended March 31, 2023 and 2022, 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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net loss $ ( 26,773 ) $ ( 28,071 )

Weighted average common shares outstanding - basic and diluted 207,023 130,935

Net loss per share - basic and diluted $ ( 0.14 ) $ ( 0.42 ) $ ( 0.53 ) $ ( 1.21 )

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net loss per share of common stock - basic and diluted $ ( 0.13 ) $ ( 0.21 )

For the periods presented, the total numbers of securities that could potentially dilute net income per share in the future that were not considered in the diluted net loss per share calculations because the effect would have been anti-dilutive were as follows (in thousands):

Three Months Ended March 31,

Options to purchase common stock 19,855 13,266

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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.

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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.

Defendants filed a motion to dismiss the amended complaint on December 2, 2022.

In January and February 2023, in lieu of filing a response to defendant’s motion to dismiss, plaintiffs filed a motion seeking leave to further amend their complaint and defendants filed an opposition to the motion for leave to further amend the complaint.

On April 6, 2023, the court granted plaintiff’s motion for leave to further amend the complaint.

With the second amended complaint, the plaintiffs seek to represent all persons who purchased or otherwise acquired Ardelyx securities between March 6, 2020 and July 19, 2021.

The parties have stipulated to a schedule for the filing of Defendants second motion to dismiss on June 2, 2023, and a hearing on the motion to dismiss to held on September 14, 2023.

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.

On December 7, 2021 and March 29, 2022, two verified shareholders derivative lawsuits were filed in the U.S.

District Court for the Northern District of California purportedly on behalf of Ardelyx against certain of Ardelyx’s executive officers and members of our board of directors, captioned Go v.

Raab, et al., Case No.

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

Raab, et al., Case No.

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.

The complaints allege that the defendants violations of Section 14(a) of the Securities Exchange Act of 1934, as amended, breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, for personally making and/or causing Ardelyx to make materially false and misleading statements regarding the Company’s business, operations and prospects.

The complaint seeks 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.

We believe the plaintiff’s claims are without merit and we have not recorded any accrual for a contingent liability associated with these legal proceedings.

From time to time, we may be involved in 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.

As of March 31, 2023, 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 March 31, 2023.

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