What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-08-02 · 210 added, 174 removed, 485 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2023 December 31,

22 unchanged sentences

Operating lease liability, net of current portion 2,887 5,855

Long-term debt, net of current portion 27,229 —

Deferred revenue, non-current 10,290 9,025

6 unchanged sentences

5,000,000 shares authorized;

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

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

Common stock, $ 0.0001 par value;

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.

232,133,132 and 198,575,016 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.

Additional paid-in capital 1,008,741 878,500

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ARDELYX, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share amounts)

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

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

2023 2022 2023 2022

11 unchanged sentences

Total operating expenses 41,301 26,134 112,665 82,927

Loss from operations ( 16,624 ) ( 26,215 ) ( 42,688 ) ( 54,022 )

Income (loss) from operations 7,398 ( 21,880 ) ( 35,290 ) ( 75,902 )

Interest expense ( 1,107 ) ( 886 ) ( 3,210 ) ( 2,409 )

1 unchanged sentence

Other income, net 1,460 704 4,308 1,258

Loss before provision for income taxes ( 17,121 ) ( 26,932 ) ( 43,880 ) ( 55,001 )

Income (loss) before provision for income taxes 6,829 ( 22,893 ) ( 37,051 ) ( 77,894 )

Provision for income taxes 200 — 214 8

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

Net loss per share of common stock - basic and diluted $ ( 0.08 ) $ ( 0.19 ) $ ( 0.21 ) $ ( 0.40 )

Shares used in computing net loss per share - basic and diluted 214,951,127 145,544,372 211,009,029 138,279,945

Comprehensive loss:

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

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

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

Net income (loss) $ 6,629 $ ( 22,893 ) $ ( 37,265 ) $ ( 77,902 )

Net income (loss) per share of common stock - basic and diluted $ 0.03 $ ( 0.14 ) $ ( 0.17 ) $ ( 0.53 )

Shares used in computing net income (loss) per share - basic 222,782,229 165,104,789 214,976,555 147,319,818

Shares used in computing net income (loss) per share - diluted 227,894,335 165,104,789 214,976,555 147,319,818

Comprehensive income (loss):

Net income (loss) $ 6,629 $ ( 22,893 ) $ ( 37,265 ) $ ( 77,902 )

Unrealized gains (losses) on available-for-sale securities 9 ( 5 ) ( 147 ) ( 108 )

Comprehensive income (loss) $ 6,638 $ ( 22,898 ) $ ( 37,412 ) $ ( 78,010 )

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

1 unchanged sentence

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the Three and Nine Months ended September 30, 2023 and 2022

(in thousands, except shares)

Three Months Ended June 30, 2023

Three Months Ended September 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

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

Issuance of common stock under employee stock purchase plan 269,739 — 670 — — 670

Issuance of common stock upon exercise of options 28,227 — 40 — — 40

2 unchanged sentences

Stock-based compensation — — 3,489 — — 3,489

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

Unrealized gains on available-for-sale securities — — — — 9 9

Net income — — — 6,629 — 6,629

Balance as of September 30, 2023 232,133,132 $ 23 $ 1,008,741 $ ( 817,402 ) $ ( 201 ) $ 191,161

Nine Months Ended September 30, 2023

Common Stock Additional

13 unchanged sentences

Net loss — — — ( 37,265 ) — ( 37,265 )

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

Three Months Ended June 30, 2022

Balance as of September 30, 2023 232,133,132 $ 23 $ 1,008,741 $ ( 817,402 ) $ ( 201 ) $ 191,161

Three Months Ended September 30, 2022

Common Stock Additional

4 unchanged sentences

Shares Amount

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

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

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

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

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

3 unchanged sentences

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

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

Six Months Ended June 30, 2022

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

Nine Months Ended September 30, 2022

Common Stock Additional

6 unchanged sentences

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

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

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

3 unchanged sentences

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

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

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

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

38 unchanged sentences

Supplementary disclosure of non-cash activities:

Right-of-use assets obtained in exchange for lease obligations $ 339 $ —

Issuance of common stock for services $ 337 $ 390

7 unchanged sentences

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.

The first molecule we discovered and developed was tenapanor, a minimally absorbed, 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).

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.

Tenapanor, branded as XPHOZAH®, was approved by the U.S.

Food and Drug Administration (FDA) on October 17, 2023, to reduce serum phosphorus in adults with chronic kidney disease (CKD) on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

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.

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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 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.

The results for the three and nine months ended September 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

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Actual results could materially differ from those estimates.

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.

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 August 2, 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, 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.

As of September 30, 2023, we had cash, cash equivalents and short-term investments of approximately $ 165.1 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of September 30, 2023 is $ 817.4 million.

Since December 31, 2021 and prior to September 30, 2023, our liquidity position raised substantial doubt about our ability to continue as a going concern.

We have addressed our operating cash flow requirements through cash generated from product sales of IBSRELA, proceeds from the sale of shares of our common stock under our at-the-market offering, and from the receipt of milestones payments from our collaboration partners and payments from our Japanese collaboration partner under the second amendment to our License Agreement, which were received in October 2023.

We believe our available cash, cash equivalents and short-term investments as of September 30, 2023 will be sufficient to fund our operations for at least a period of one year from the issuance of these condensed financial statements.

Summary of Significant Accounting Policies

3 unchanged sentences

New Accounting Pronouncements - Recently Adopted

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

In July 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718) Presentation of Financial Statements (ASU 2023-03).

ASU 2023-03 amends the FASB Accounting Standards Codification to include Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SEC Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

As the ASU does not provide any new guidance, there is no transition or effective date associated with its adoption.

Accordingly, we adopted ASU 2023-03 immediately upon its issuance.

The adoption of ASU 2023-03 did not have any impact on our condensed financial statement presentation or related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

1 unchanged sentence

CASH, CASH EQUIVALENTS AND INVESTMENTS

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

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

September 30, 2023

Gross Unrealized

7 unchanged sentences

government-sponsored agency bonds 31,850 5 ( 44 ) 31,811

Corporate bonds 6,284 — ( 2 ) 6,282

Asset-backed securities 10,529 — ( 28 ) 10,501

18 unchanged sentences

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, net, in the statement of operations and comprehensive loss.

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 .

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

All of the short-term available-for sale securities held as of September 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.

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 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 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.

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

Our unrealized losses as of September 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 September 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):

June 30, 2023

September 30, 2023

Fair Value Level 1 Level 2 Level 3

2 unchanged sentences

government-sponsored agency bonds 31,811 — 31,811 —

Corporate bonds 6,282 — 6,282 —

Asset-backed securities 10,501 — 10,501 —

8 unchanged sentences

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

Asset-backed securities — — — —

Total $ 112,082 $ 84,313 $ 27,769 $ —

9 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 June 30, 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 June 30, 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 September 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 June 30, 2023 and December 31, 2022.

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

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of September 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 June 30, 2023 and December 31, 2022 consisted of the following (in thousands):

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

Raw materials $ 22,783 $ 22,299

5 unchanged sentences

Total $ 47,498 $ 28,346

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.

Prepaid commercial manufacturing of $ 17.2 million and $ 13.6 million as of September 30, 2023 and December 31, 2022, respectively, consisted of prepayments to third party contract manufacturing organizations for work we expect to commence within the next 12 months.

PRODUCT REVENUE, NET

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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.

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,

During the three and nine months ended September 30, 2023, we recorded net revenue for IBSRELA of $ 22.3 million and $ 51.9 million, respectively.

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

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

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

2023 2022 2023 2022

8 unchanged sentences

Credits/payments ( 3,262 ) ( 7,610 ) ( 6,065 ) ( 16,937 )

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

Balance as of September 30, 2023 $ 346 $ 3,346 $ 3,032 $ 6,724

COLLABORATION AND LICENSING AGREEMENTS

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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 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.

We may be entitled to receive up to $ 55.0 million in total development and regulatory milestones, of which $ 35.0 million has been recognized as revenue and $ 20.0 million has been received as of September 30, 2023.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 57.0 million at the currency exchange rate on September 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 June 30, 2023.

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

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

4 unchanged sentences

pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement.

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 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.

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 (MHLW) 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, both of which have occurred as of September 30, 2023.

In October 2022, we announced that Kyowa Kirin submitted a New Drug Application (NDA) to the Japanese MHLW 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 condensed statement of operations and comprehensive income (loss).

In September 2023, we announced that Kyowa Kirin received approval from the Japanese MHLW for the NDA for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis, which results in payment to us from Kyowa Kirin for an aggregate of $ 30.0 million for milestone payments and payments under the 2022 Amendment.

We received these payments in October 2023 and recorded them as licensing revenue on our condensed statement of operations and comprehensive income (loss) when earned during the three months ended September 30, 2023 and reported them as accounts receivable on our condensed balance sheet as of September 30, 2023.

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

During the three and nine months ended September 30, 2023, we recognized $ 2.1 million and $ 5.4 million, respectively, of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

During the three and nine months ended September 30, 2022, we recognized $ 83 thousand and $ 1.0 million, respectively, of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

Shanghai Fosun Pharmaceutical Industrial Development Co.

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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 $ 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.

We may be entitled to receive development and commercialization milestones of up to $ 113.0 million, of which $ 5.0 million has been received and recognized as revenue as of September 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 September 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 CKD on hemodialysis.

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

We received this payment during the third quarter of 2023 and recorded it as licensing revenue on our condensed statement of operations and comprehensive income (loss) when earned during the three months ended September 30, 2023.

In October 2023, we announced that the FDA had approved XPHOZAH to reduce serum phosphorus in adults with CKD on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

This triggered an additional $ 3.0 million milestone payment to us under the terms of the Fosun Agreement, which we expect to receive during the fourth quarter of 2023.

Also, in October 2023, we announced that Fosun Pharma received approval from the Hong Kong Department of Health for the marketing application for tenapanor for the treatment of irritable bowel syndrome with constipation (IBS-C).

During the three and nine months ended September 30, 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 $ 16.7 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.

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 $ 16.4 million at the currency exchange rate on September 30, 2023, of which $ 0.7 million has been received and recognized as revenue as of September 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 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.

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

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

METiS Therapeutics Inc.

4 unchanged sentences

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.

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

During the three and nine months ended September 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 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.

In June 2015, we entered into a termination agreement with AstraZeneca (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 September 30, 2023, to date in aggregate, we have recognized $ 23.9 million of the $ 75.0 million, which has been recorded as other cost of revenue on our condensed statements of operations and comprehensive income (loss), and have paid AstraZeneca $ 18.3 million.

During the three and nine months ended September 30, 2023, we recognized $ 5.7 million and $ 8.7 million, respectively, as other cost of revenue related to the AstraZeneca Termination Agreement.

During the three and nine months ended September 30, 2022 we recognized $ 0.5 million and $ 0.8 million, respectively, as other 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, which are all attributable to the 2017 Kyowa Kirin Agreement (in thousands):

Deferred revenue - current 2023 2022

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

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

Current Non-Current Current Non-Current

Balance at January 1, $ 4,211 $ 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

Decreases due to amounts reclassified as current, to be recognized in the next twelve months ( 3,265 ) —

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

Amounts invoiced as prepayments for product supply 1,182 4,530 42 7,794

Decrease for revenue recognized for product supply ( 4,586 ) — — —

Reclassify amounts to be recognized in the next twelve months 3,265 ( 3,265 ) 3,961 ( 3,961 )

Balance at September 30, $ 4,072 $ 10,290 $ 4,003 $ 8,560

DEFERRED ROYALTY OBLIGATION RELATED TO THE SALE OF FUTURE ROYALTIES

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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.

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 as a result of 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.

In September 2023, we announced that Kyowa Kirin received approval from the Japanese MHLW for the New Drug Application for tenapanor for the improvement of hyperphosphatemia in adult patients with chronic kidney disease on dialysis, which entitles us to the first $ 5.0 million payment under the terms of the HCR Agreement.

We received the payment in October 2023.

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 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.

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.

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 earned 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 Kyowa Kirin.

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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 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.

As of September 30, 2023, our effective interest rate used to amortize the liability is 23.9 %.

During the three and nine months ended September 30, 2023, we recognized approximately $ 0.9 million and $ 2.9 million, respectively, of non-cash interest expense related to the deferred royalty obligation.

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

As of September 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

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.

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) (2018 Loan Agreement) with Solar Capital Ltd.

and Western Alliance Bank (collectively, the 2018 Lenders).

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

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

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

As discussed in Note 9.

Derivative Liability , 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 upon the occurrence of certain conditions (the "2018 Exit Fee").

Our obligations for the 2018 Exit Fee remain outstanding following the full repayment of the 2018 Loan in February 2022.

Our obligations for the 2018 Exit Fee remained outstanding following the full repayment of the 2018 Loan in February 2022 until October 2023 when we received approval from the FDA for XPHOZAH to reduce serum phosphorus in adults with CKD on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

This triggered our obligation to pay the 2018 Exit Fee to the 2018 Lenders and we subsequently paid the 2018 Exit Fee in October 2023.

SLR Investment Corp.

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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 Loan Agreement was subsequently amended in August 2022 (the First Amendment) and February 2023 (the Second Amendment).

We concluded that the First Amendment and the Second Amendment were modifications to the 2022 Loan Agreement.

The 2022 Loan Agreement as amended by the First Amendment and the Second Amendment provided 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 together with the Term A Loan, the 2022 Original Loans).

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 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) 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.

We may voluntarily prepay the outstanding 2022 Loan balance, subject to a prepayment premium of (i) 3 % of the outstanding principal amount of the 2022 Loan if prepaid prior to or on the first anniversary of the Closing Date, (ii) 2 % of the outstanding principal amount of the 2022 Loan if prepaid after the first anniversary of the Closing Date through and including the second anniversary of the Closing Date, or (iii) 1 % of the outstanding principal amount of the 2022 Loan if prepaid after the second anniversary of the Closing Date and prior to the maturity date.

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”).

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").

On October 17, 2023, we entered into a Third Amendment (the Third Amendment) to the 2022 Loan Agreement by and between us and the 2022 Lenders.

The Third Amendment, among other things, (1) provides us with the option to draw an additional $ 50.0 million of committed capital by March 15, 2024 (the Term C Loan);

and (2) provides us with the option to draw up to an additional $ 50.0 million of uncommitted capital by December 31, 2026, subject to approval by the Agent’s investment committee (the Term D Loan and together with the Term A, B, and C Loans, the Four 2022 Loans).

Under the Third Amendment, the maturity date for the Four 2022 Loans is March 1, 2027.

The interest rate for each of the Term A Loan and the Term B Loan is 7.95 % plus a SOFR value equal to 0.022 % plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website, subject to a SOFR floor of one percent.

The interest rate for each of the Term C Loan and the Term D Loan is 4.25 % plus a SOFR value equal to 0.022 % plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website, subject to a SOFR floor of 4.7 %.

In addition, the period under which we are permitted to make interest-only payments on the Four 2022 Loans was extended to December 31, 2026, effective upon our decision to draw the Term B Loan in the amount of $ 22.5 million.

We provided the Agent with notice of our decision to draw the Term B Loan in October 2023 to support the commercial launch of XPHOZAH.

We were obligated to pay $ 0.2 million, upon the closing of the Term A Loan, and we were obligated to pay $ 0.1 million on the funding date of the Term B Loan.

We are obligated to pay $ 0.3 million on the earliest of (1) the funding date of the Term C Loan, (2) March 15, 2024, and (3) the prepayment, refinancing, substitution or replacement of the Term B Loans on or prior to March 15, 2024.

In addition, we will be obligated to pay 0.5 % of the aggregate original principal amount of the Term D Loan commitment, if requested by us and approved by the Agent’s investment committee, which shall be due on the earliest of (1) the funding of the Term D Loan, (2) if we request and the 2022 Lenders provide the Term D Loan commitment, the day immediately preceding the amortization date, and (3) if we request and the 2022 Lenders provide the Term D Loan commitment, the prepayment, refinancing, substitution or replacement of the Term C Loan on or prior to the date immediately preceding the amortization date.

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

We may voluntarily prepay all amounts outstanding under the Four 2022 Loans, subject to a prepayment premium of (i) 3 % of the outstanding principal amount of the Four 2022 Loans if prepaid prior to or on October 17, 2024, (ii) 2 % of the outstanding principal amount of the Four 2022 Loans if prepaid after October 17, 2024 through and including October 17, 2025, or (iii) 1 % of the outstanding principal amount of the Four 2022 Loans if prepaid after October 17, 2025 and prior to the maturity date.

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

Additionally, as discussed in Note 9.

Derivative Liabilities , in connection with the 2022 Original Loans, 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).

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

The 2022 Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock.

We have agreed to not allow our cash and cash equivalents to be less than the eighty percent ( 80 %) of the outstanding 2022 Term Loan balance for any period in which our net revenue from the sale of any products, calculated on a trailing six ( 6 ) month basis and tested monthly, is less than sixty percent ( 60 %) of the outstanding 2022 Loan balance.

In addition, the 2022 Loan Agreement contains customary events of default that entitle the Agent to cause our indebtedness under the 2022 Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the 2022 Term Loan, including our cash.

The 2022 Loan Agreement, as amended, contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock.

We have agreed to not allow our cash and cash equivalents to be less than the eighty percent ( 80 %) of the outstanding Four 2022 Term Loan balance for any period in which our net revenue from the sale of any products, calculated on a trailing six ( 6 ) month basis and tested monthly, is less than sixty percent ( 60 %) of the outstanding Four 2022 Loan balance.

In addition, the 2022 Loan Agreement, as amended, contains customary events of default that entitle the Agent to cause our indebtedness under the 2022 Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Four 2022 Term Loans, including our cash.

Under the 2022 Loan Agreement, an event of default will occur if, among other things, we fail to make payments under the 2022 Loan Agreement, we breach any of our covenants under the 2022 Loan Agreement, subject to specified cure periods with respect to certain breaches, certain Lenders determine that a material adverse change has occurred, we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings, we are unable to pay our debts as they become due or we default on contracts with third parties which would permit the holder of indebtedness to accelerate the maturity of such indebtedness or that could have a material adverse change on us.

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

We have classified the 2022 Loan balance as a current liability as of June 30, 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 condensed financial statements.

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):

We have classified the 2022 Original Loan balance as a non-current liability as of September 30, 2023 due to principal repayments beginning in January 2027.

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

Total repayment obligations $ 28,861

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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 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.

As of September 30, 2023 and December 31, 2022, the estimated fair value of the 2018 Exit Fee was $ 1.5 million and $ 1.2 million, respectively.

In October 2023, we received approval from the FDA for XPHOZAH to reduce serum phosphorus in adults with chronic kidney disease (CKD) on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

This triggered our obligation to pay the 2018 Exit Fee to the 2018 Lenders and we subsequently paid the 2018 Exit Fee in October 2023.

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

Specifically, the key assumptions included in the calculation of the estimated fair value of the derivative 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.

(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.

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

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.

In February 2022, in connection with entering into the 2022 Original Loans, we entered into an agreement, whereby we agreed to pay an exit fee in the amount of 2 % of the 2022 Original 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.

The Term C and Term D Loans do not result in payment of an additional exit fee.

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 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.

As of September 30, 2023 and December 31, 2022, the estimated fair value of the 2022 Exit Fee was $ 0.6 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 adult patients with CKD on dialysis by November 30, 2023, and (b) achievement of certain product revenue milestone targets.

Specifically, the key assumptions included in the calculation of the estimated fair value of the 2022 Exit Fee 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 was 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 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):

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 income (loss) and were as follows for the nine months ended September 30, 2023 and 2022 (in thousands):

Balance at January 1, $ 1,656 $ 698

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2022 Exit Fee 126 58

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

Balance at September 30, $ 2,055 $ 1,127

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 June 30, 2023 December 31, 2022

Facilities September 30, 2023 December 31, 2022

Right-of-use assets $ 6,523 $ 9,295

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Weighted-average discount rate 6.8 % 6.8 %

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 June 30, Six Months Ended June 30,

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

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

2023 2022 2023 2022

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Cash paid for operating lease $ 1,119 $ 1,072 $ 3,316 $ 3,194

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

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

Remainder of 2023 $ 1,165

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Operating lease liability, net of current portion $ 2,887

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

In March 2023, we entered into a sub-lease Agreement (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.

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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.

The term of the Sub-lease expires 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 recognized $ 0.2 million and $ 0.3 million income from the Sub-lease during the three and six months ended June 30, 2023, respectively.

The Sub-lease commenced in April 2023 and we recognized $ 0.2 million and $ 0.5 million of income from the Sub-lease during the three and nine months ended September 30, 2023, respectively.

In August 2023, we entered into an amendment to the lease agreement (the Waltham lease) for our Waltham, Massachusetts facility to expand the leased premises to include an additional 4,247 square feet of office space.

We recorded an additional $ 0.3 million right-of-use asset and lease liability for the Waltham lease upon commencement of the lease.

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 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.

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 (2021 Open Market Sales Agreement) we entered into with Jefferies LLC (Jefferies) , 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.

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.

As of March 2023, we had received the maximum gross proceeds of $ 150.0 million under the 2021 Open Market Sales Agreement, which included 15.5 million shares of our common stock for which we received gross proceeds of $ 51.9 million during the quarter ended March 31, 2023.

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").

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, 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.

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.

During the three months ended September 30, 2023, we completed sales pursuant to the 2023 Open Market Sales Agreement resulting in the issuance of 13.8 million shares of our common stock and receipt of gross proceeds of $ 58.4 million at a weighted average sales price of approximately $ 4.24 per share.

During the nine months ended September 30, 2023, we completed sales pursuant to the 2023 Open Market Sales Agreement resulting in the issuance of 16.8 million shares of our common stock and receipt of gross proceeds of $ 70.0 million at a weighted average sales price of approximately $ 4.17 per share.

EQUITY INCENTIVE PLANS

Stock-Based Compensation

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 June 30, Six Months Ended June 30,

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

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

2023 2022 2023 2022

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Total $ 3,489 $ 1,834 $ 9,600 $ 8,659

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):

As of September 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 six months ended June 30, 2023 is as follows (in thousands, except dollar amounts):

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

Number of Shares Weighted-Average

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Options forfeited or canceled ( 144 ) $ 4.45

Balance at June 30, 2023 21,074 $ 4.18

Exercisable at June 30, 2023 10,269 $ 5.63

Balance at September 30, 2023 21,204 $ 4.18

Exercisable at September 30, 2023 11,209 $ 5.46

Restricted Stock Units

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):

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

RSUs Weighted-Average

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Forfeited ( 56 ) $ 3.17

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

Non-vested restricted stock units at September 30, 2023 2,923 $ 2.67

Employee Stock Purchase Plan

During the six months ended June 30, 2023, we sold approximately 0.2 million shares of our common stock under the ESPP.

During the nine months ended September 30, 2023, we sold approximately 0.4 million shares of our common stock under the ESPP.

The shares were purchased by employees at an average purchase price of $ 1.85 per share resulting in proceeds to us of approximately $ 0.8 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 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

During the nine months ended September 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 INCOME (LOSS) PER SHARE

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of stock-based awards and warrants.

Diluted net loss per common share is computed giving effect to all potential dilutive common shares, including common stock issuable upon exercise of stock options, and unvested restricted common stock and stock units.

As we had net losses for the six months ended June 30, 2023 and 2022, all potential common shares were determined to be anti-dilutive.

As we had net losses for the nine months ended September 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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

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

Weighted average common shares outstanding - basic and diluted 214,951 145,544 211,009 138,280

Net loss per share of common stock - basic and diluted $ ( 0.08 ) $ ( 0.19 ) $ ( 0.21 ) $ ( 0.40 )

Net income (loss) $ 6,629 $ ( 22,893 ) $ ( 37,265 ) $ ( 77,902 )

Weighted average common shares outstanding - basic 222,782 165,105 214,977 147,320

Weighted average common shares outstanding - diluted 227,894 165,105 214,977 147,320

Net income (loss) per share of common stock - basic and diluted $ 0.03 $ ( 0.14 ) $ ( 0.17 ) $ ( 0.53 )

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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

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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.

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.

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

On August 22, 2023, the court cancelled the hearing scheduled for September 14, 2023 on the motion to dismiss the amended complaint and indicated its decision to instead rule on the filed briefs.

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.

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

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.

As of September 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 September 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.

Deferred Royalty Obligation Related to the Sale of Future Royalties) .

We received these payments in October 2023.

On October 17, 2023, we announced that the FDA approved XPHOZAH ® (tenapanor) to reduce serum phosphorus in adults with chronic kidney disease on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

The FDA approval of XPHOZAH results in a number of financial implications that will be recognized in the fourth quarter of 2023 including payment of the 2018 Exit Fee, which was paid in October 2023 (see Note 8.

Borrowing and Note 9.

Derivative Liabilities ), the achievement of a $ 3.0 million development milestone from Fosun Pharma (See Note 6.

Collaboration and Licensing Agreements ), and our ability to draw the Term B Loan from SLR (See Note 8.

Also on October 17, 2023, we entered into a Third Amendment (the Third Amendment) to the 2022 Loan Agreement by and between us and the 2022 Lenders.

The Third Amendment, among other things, (1) provides us with the option to draw an additional $ 50.0 million of committed capital by March 15, 2024 (the Term C Loan);

(2) provides us with the option to draw up to an additional $ 50.0 million of uncommitted capital, subject to approval by the Agent's investment committee (the Term D Loan);

and (3) extends the interest-only period for the Four Loans to December 31, 2026, effective upon our decision to draw the Term B Loan in the amount of $ 22.5 million.

We provided the Agent with notice of our decision to draw the Term B Loan in October 2023 to support the commercial launch of XPHOZAH (See Note 8.

Borrowing for additional information related to borrowing).

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