What changed in this filing

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Item 1. Financial Statements

2023-08-02 compared with 2023-05-03 · 158 added, 91 removed, 501 unchanged (33% of the section changed)

29 unchanged sentences

Deferred royalty obligation related to the sale of future royalties 13,191 11,254

Other liabilities, non-current 172 —

Total liabilities 88,042 91,737

3 unchanged sentences

5,000,000 shares authorized;

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

no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

Common stock, $ 0.0001 par value;

300,000,000 shares authorized;

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

500,000,000 shares and 300,000,000 shares authorized;

217,862,921 and 198,575,016 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

Additional paid-in capital 947,380 878,500

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Product sales, net $ 18,309 $ 1,564 $ 29,664 $ 2,014

2 unchanged sentences

Total revenues 22,333 2,526 33,702 2,994

Cost of goods sold:

Cost of sales 492 44 864 57

Other cost of revenue 2,997 94 4,162 166

Total cost of goods sold 3,489 138 5,026 223

Operating expenses:

Cost of revenue 1,537 85

Research and development 8,282 9,741 17,375 18,592

12 unchanged sentences

Net loss $ ( 17,121 ) $ ( 26,938 ) $ ( 43,894 ) $ ( 55,009 )

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

Unrealized losses on available-for-sale securities ( 190 ) ( 21 ) ( 156 ) ( 103 )

Comprehensive loss $ ( 17,311 ) $ ( 26,959 ) $ ( 44,050 ) $ ( 55,112 )

2 unchanged sentences

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months ended March 31, 2023 and 2022

For the Three and Six Months ended June 30, 2023 and 2022

(in thousands, except shares)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Common Stock Additional

4 unchanged sentences

Shares Amount

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

Issuance of common stock for services 86,095 — 337 — — 337

Issuance of common stock upon exercise of options 62,993 — 149 — — 149

Issuance of common stock upon vesting of restricted stock units 215,301 — — — — —

Issuance of common stock in at the market offering 3,036,482 1 11,365 — — 11,366

Stock-based compensation — — 3,199 — — 3,199

Unrealized losses on available-for-sale securities — — — — ( 190 ) ( 190 )

Net loss — — — ( 17,121 ) — ( 17,121 )

Balance as of June 30, 2023 217,862,921 $ 22 $ 947,380 $ ( 824,031 ) $ ( 210 ) $ 123,161

Six Months Ended June 30, 2023

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders'

Shares Amount

Balance as of December 31, 2022 198,575,016 $ 20 $ 878,500 $ ( 780,137 ) $ ( 54 ) $ 98,329

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

Issuance of common stock for services 86,095 — 337 — — 337

Issuance of common stock upon exercise of options 98,994 — 211 — — 211

2 unchanged sentences

Stock-based compensation — — 6,111 — — 6,111

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

Unrealized losses on available-for-sale securities — — — — ( 156 ) ( 156 )

Net loss — — — ( 43,894 ) — ( 43,894 )

Balance as of June 30, 2023 217,862,921 $ 22 $ 947,380 $ ( 824,031 ) $ ( 210 ) $ 123,161

Three Months Ended June 30, 2022

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders'

Shares Amount

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

Three Months Ended March 31, 2022

Issuance of common stock upon vesting of restricted stock units 2,882,673 — — — — —

Issuance of common stock in at the market offering 14,584,801 1 12,556 — — 12,557

Stock-based compensation — — 3,254 — — 3,254

Unrealized losses on available-for-sale securities — — — — ( 21 ) ( 21 )

Net loss — — — ( 26,938 ) — ( 26,938 )

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

Six Months Ended June 30, 2022

Common Stock Additional

11 unchanged sentences

Net loss — — — ( 55,009 ) — ( 55,009 )

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

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

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

4 unchanged sentences

Stock-based compensation 6,111 6,976

Change in derivative liabilities 70 15

Debt refinancing costs — 102

Gain on sale of equipment — ( 853 )

Impairment of long-lived assets 429 —

Non-cash interest expense 2,090 151

Other, net ( 521 ) 136

Changes in operating assets and liabilities:

18 unchanged sentences

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

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

Proceeds from issuance of common stock in at the market offering, net of issuance costs 62,085 18,478

Proceeds from issuance of common stock under equity incentive and stock purchase plans 349 83

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

Net cash provided by financing activities 62,434 22,075

Net decrease in cash and cash equivalents ( 66,082 ) ( 19,020 )

5 unchanged sentences

Supplementary disclosure of non-cash activities:

Issuance of common stock for services $ 337 $ —

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

2 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except per share amounts and where otherwise noted)

ORGANIZATION AND BASIS OF PRESENTATION

5 unchanged sentences

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.

On May 17, 2023, the U.S.

Food and Drug Administration (“FDA”) accepted our resubmission of the New Drug Application (“NDA”) for tenapanor, branded as XPHOZAH for the control of serum phosphorus in adult patients with chronic kidney disease (“CKD”) on dialysis who have had an inadequate response or intolerance to a phosphate binder therapy.

The FDA set a user fee goal date for review of our NDA of October 17, 2023.

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.

7 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 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.

The results for the three and six months ended June 30, 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

4 unchanged sentences

Actual results could materially differ from those estimates.

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.

As of June 30, 2023, we had cash, cash equivalents and short-term investments of approximately $ 127.6 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of June 30, 2023 is $ 824.0 million.

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.

12 unchanged sentences

CASH, CASH EQUIVALENTS AND INVESTMENTS

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

Securities classified as cash, cash equivalents and short-term investments as of June 30, 2023 and December 31, 2022 are summarized below (in thousands):

June 30, 2023

Gross Unrealized

28 unchanged sentences

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 .

All of the short-term available-for sale securities held as of June 30, 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.

2 unchanged sentences

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.

Our unrealized losses as of June 30, 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 June 30, 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.

9 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):

March 31, 2023

June 30, 2023

Fair Value Level 1 Level 2 Level 3

23 unchanged sentences

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.

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 June 30, 2023 and December 31, 2022, due to their short-term nature.

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 March 31, 2023 and December 31, 2022.

Therefore, we believe the carrying amount of the term loan facility approximates fair value as of June 30, 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 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.

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of June 30, 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.

1 unchanged sentence

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

March 31, 2023 December 31, 2022

Inventory as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands):

June 30, 2023 December 31, 2022

Raw materials $ 22,783 $ 22,299

5 unchanged sentences

Total $ 47,912 $ 28,346

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.

Prepaid commercial manufacturing of $ 13.2 million and $ 13.6 million as of June 30, 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

2 unchanged sentences

in March 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").

2 unchanged sentences

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.

During the three and six months ended June 30, 2023, we recorded net revenue for IBSRELA of $ 18.3 million and $ 29.7 million, respectively.

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

Revenue from the following Customers who contributed greater than 10% of our product revenue, net during the three and six months ended June 30, 2023 and 2022 as a percentage of total product revenue, net was as follows:

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

2023 2022 2023 2022

Cardinal Health 22.4 % 22.7 % 22.3 % 21.7 %

AmerisourceBergen Drug Corporation 21.1 % 40.2 % 21.3 % 35.1 %

McKesson Corporation 18.4 % 24.6 % 19.4 % 22.5 %

BioRidge Pharma, LLC 20.0 % — % 19.0 % — %

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

3 unchanged sentences

Credits/payments ( 1,782 ) ( 4,325 ) ( 3,864 ) ( 9,971 )

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

Balance as of June 30, 2023 $ 338 $ 2,843 $ 2,666 $ 5,847

COLLABORATION AND LICENSING AGREEMENTS

12 unchanged sentences

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.

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 June 30, 2023.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 58.8 million at the currency exchange rate on June 30, 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.

1 unchanged sentence

pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement.

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

The variable consideration related to the remaining milestone payments was fully constrained at June 30, 2023.

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

7 unchanged sentences

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.

The remaining variable consideration related to the reduction in the royalty rate was fully constrained at June 30, 2023.

During the three and six months ended June 30, 2023, we recognized $ 3.3 million of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

During the three and six months ended June 30, 2022, we recognized $ 952 thousand and $ 966 thousand, respectively, of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

Shanghai Fosun Pharmaceutical Industrial Development Co.

2 unchanged sentences

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.

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

Based on 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.

We may be entitled to receive development and commercialization milestones of up to $ 113.0 million, of which $ 3.0 million has been received and recognized as revenue as of June 30, 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 June 30, 2023.

In July 2023, we announced that an NDA for tenapanor had been accepted for review by China’s Center for Drug Evaluation of the National Medical Products Administration ("NMPA") for the control of serum phosphorus in adult patients with chronic kidney disease on hemodialysis.

This acceptance triggers a $ 2.0 million milestone payment to us under the terms of the Fosun Agreement.

We expect to receive this payment during the third quarter of 2023 and record it as licensing revenue on our condensed statement of operations and comprehensive loss.

During the three and six months ended June 30, 2023 and 2022, we did not recognize a material amount of revenue pursuant to the Fosun Agreement.

Knight Therapeutics, Inc.

2 unchanged sentences

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.

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 $ 16.7 million at the currency exchange rate on June 30, 2023, of which $ 0.7 million has been received and recognized as revenue as of June 30, 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.

The variable consideration related to the remaining development milestone payments was fully constrained at June 30, 2023.

During the three and six months ended June 30, 2023 and 2022, we did not recognize a material amount of revenue pursuant to the Knight Agreement.

METiS Therapeutics Inc.

In April 2023, we entered into an exclusive, worldwide license agreement with METiS Therapeutics Inc., ("METiS Agreement") for the development and commercialization of a portfolio of TGR5 agonist compounds that were discovered and developed by Ardelyx for all therapeutic areas.

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

Based on our assessment, we determined that the license was the material performance obligation at the inception of the agreement.

Under the terms of the METiS Agreement, we received a $ 0.8 million non-refundable, one-time upfront payment in April 2023 and may be eligible to receive additional development and commercialization milestone payments worth up to $ 243.0 million.

We are also eligible to receive royalties ranging within the mid-single digits throughout the term of the agreement.

The variable consideration related to the remaining development and commercialization milestone payments was fully constrained at June 30, 2023.

During the three and six months ended June 30, 2023, we recognized $ 0.8 million of licensing revenue pursuant to the METiS 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 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.

As of June 30, 2023, to date in aggregate, we have recognized $ 18.3 million of the $ 75.0 million, which has been recorded as other cost of revenue on our condensed statements of operations and comprehensive loss, and have paid AstraZeneca $ 16.4 million.

During the three and six months ended June 30, 2023, we recognized $ 1.9 million and $ 3.0 million, respectively, as other cost of revenue related to the AstraZeneca Termination Agreement.

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

Deferred Revenue

2 unchanged sentences

Balance at January 1, $ 4,211 $ —

Increases due to cash received, excluding amounts recognized as revenue during the period 816 —

Increases due to amounts reclassified from non-current, to be recognized in the next twelve months 3,265

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

Balance at March 31, $ 5,545 $ —

Decreases due to revenue recognized in the period for which cash has not been received ( 2,333 ) —

Balance at June 30, $ 5,959 $ —

Deferred revenue - non-current 2023 2022

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

Increases due to cash received during the period 3,478 3,829

Increases to amounts invoiced, for which cash has not yet been received — 3,865

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 ( 3,265 ) —

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

Balance at June 30, $ 9,238 $ 12,421

DEFERRED ROYALTY OBLIGATION RELATED TO THE SALE OF FUTURE ROYALTIES

15 unchanged sentences

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.

As of June 30, 2023, our effective interest rate used to amortize the liability is 34.4 %.

During the three and six months ended June 30, 2023, we recognized approximately $ 1.0 million and $ 1.9 million, respectively, of non-cash interest expense related to the deferred royalty obligation.

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

As of June 30, 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

19 unchanged sentences

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.

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) December 20, 2023, and (iii) the prepayment, refinancing, substitution, or replacement of the Term A Loan on or prior to December 20, 2023.

We are obligated to pay a final fee equal to 4.95 % of the aggregate original principal amount of the 2022 Loan funded upon the earliest to occur of the maturity date, the acceleration of the 2022 Loan, and the prepayment, refinancing, substitution, or replacement of the 2022 Loan.

1 unchanged sentence

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 (“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”).

As discussed in Note 9.

Derivative Liability , in connection with the 2022 Loan, we entered into an agreement pursuant to which we agreed to pay an exit fee in the amount of 2 % of the 2022 Loan funded (the "2022 Exit Fee").

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

4 unchanged sentences

Upon the occurrence and for the duration of an event of default, an additional default interest rate equal to 4 % per annum will apply to all obligations owed under the 2022 Loan Agreement.

We have classified the 2022 Loan balance as a current liability as of 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.

We have classified the 2022 Loan balance as a current liability as of June 30, 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:

1 unchanged sentence

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:

As of June 30, 2023, our future payment obligations related to the 2022 Loan, excluding interest payments and the 2022 final fee, were as follows (in thousands):

Total repayment obligations $ 28,861

10 unchanged sentences

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.

As of June 30, 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.

8 unchanged sentences

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

As of 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.

As of June 30, 2023 and December 31, 2022, the estimated fair value of the 2022 Exit Fee was $ 0.5 million and $ 0.4 million, respectively.

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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 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):

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 six months ended June 30, 2023 and 2022 (in thousands):

Balance at January 1, $ 1,656 $ 698

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2022 Exit Fee 3 47

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

Balance at June 30, $ 1,737 $ 1,091

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

2 unchanged sentences

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

Facilities March 31, 2023 December 31, 2022

Facilities June 30, 2023 December 31, 2022

Right-of-use assets $ 7,053 $ 9,295

5 unchanged sentences

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,

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

2023 2022 2023 2022

Operating lease expense $ 1,064 $ 1,064 $ 2,128 $ 2,128

Cash paid for operating lease $ 1,100 $ 1,064 $ 2,198 $ 2,122

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

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of June 30, 2023 (in thousands):

Remainder of 2023 $ 2,242

10 unchanged sentences

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.

The Sub-lease commenced in April 2023 and we recognized $ 0.2 million and $ 0.3 million income from the Sub-lease during the three and six months ended June 30, 2023, respectively.

STOCKHOLDERS’ EQUITY

At the Market Offerings 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.

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 we were authorized to issue and sell, from time to time, under a sales agreement we entered into with Jefferies (the "2021 Open Market Sales Agreement"), pursuant to which we, from time to time, sold 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.

As of March 2023, we had 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;

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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.

During the three months ended June 30, 2023, we completed sales pursuant to the 2023 Open Market Sales Agreement resulting in the issuance of 3.0 million shares of our common stock and receipt of gross proceeds of $ 11.6 million at a weighted average sales price of approximately $ 3.83 per share.

EQUITY INCENTIVE PLANS

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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,

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

2023 2022 2023 2022

Selling, general and administrative $ 2,303 $ 2,220 $ 4,391 $ 4,728

1 unchanged sentence

Total $ 3,199 $ 3,193 $ 6,111 $ 6,824

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):

As of June 30, 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 three months ended March 31, 2023 is as follows (in thousands, except dollar amounts):

A summary of our stock option activity and related information for the six months ended June 30, 2023 is as follows (in thousands, except dollar amounts):

Number of Shares Weighted-Average

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Options forfeited or canceled ( 121 ) $ 4.87

Balance at March 31, 2023 20,343 $ 4.18

Exercisable at March 31, 2023 9,185 $ 5.97

Balance at June 30, 2023 21,074 $ 4.18

Exercisable at June 30, 2023 10,269 $ 5.63

Restricted Stock Units

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):

A summary of our RSUs activity and related information for the six months ended June 30, 2023 is as follows (in thousands, except dollar amounts):

RSUs Weighted-Average

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Forfeited ( 35 ) $ 3.88

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

Non-vested restricted stock units at June 30, 2023 3,065 $ 2.62

Employee Stock Purchase Plan

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

During the six months ended June 30, 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.

1 unchanged sentence

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 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.

During the six months ended June 30, 2023, we issued 0.1 million 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 three months ended March 31, 2023 and 2022, all potential common shares were determined to be anti-dilutive.

As we had net losses for the six months ended June 30, 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 March 31,

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

2023 2022 2023 2022

Net loss $ ( 17,121 ) $ ( 26,938 ) $ ( 43,894 ) $ ( 55,009 )

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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,

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

2023 2022 2023 2022

Options to purchase common stock 20,659 13,099 20,260 13,182

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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.

Defendants filed a motion to dismiss the amended complaint on June 2, 2023, with a hearing on the motion to dismiss to be 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.

11 unchanged sentences

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

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.

As of June 30, 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 June 30, 2023.

SUBSEQUENT EVENTS

In July 2023, we announced that an NDA for tenapanor had been accepted for review by China’s Center for Drug Evaluation of the NMPA for the control of serum phosphorus in adult patients with chronic kidney disease on hemodialysis.

This acceptance triggers a $ 2.0 million milestone payment to us under the terms of the Fosun Agreement.

We expect to receive this payment during the third quarter of 2023 and record it as licensing revenue on our condensed statement of operations and comprehensive loss.

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