ardx-20210331
000143740212-312021Q1false00014374022021-01-012021-03-310001437402dei:OtherAddressMember2021-01-012021-03-31xbrli:shares00014374022021-05-03iso4217:USD00014374022021-03-3100014374022020-12-31iso4217:USDxbrli:shares0001437402ardx:CollaborativeDevelopmentMember2021-01-012021-03-310001437402ardx:CollaborativeDevelopmentMember2020-01-012020-03-310001437402ardx:ProductSupplyRevenueMember2021-01-012021-03-310001437402ardx:ProductSupplyRevenueMember2020-01-012020-03-310001437402us-gaap:LicenseMember2021-01-012021-03-310001437402us-gaap:LicenseMember2020-01-012020-03-3100014374022020-01-012020-03-310001437402us-gaap:CommonStockMember2020-12-310001437402us-gaap:AdditionalPaidInCapitalMember2020-12-310001437402us-gaap:RetainedEarningsMember2020-12-310001437402us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001437402us-gaap:CommonStockMember2021-01-012021-03-310001437402us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001437402us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001437402us-gaap:RetainedEarningsMember2021-01-012021-03-310001437402us-gaap:CommonStockMember2021-03-310001437402us-gaap:AdditionalPaidInCapitalMember2021-03-310001437402us-gaap:RetainedEarningsMember2021-03-310001437402us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001437402us-gaap:CommonStockMember2019-12-310001437402us-gaap:AdditionalPaidInCapitalMember2019-12-310001437402us-gaap:RetainedEarningsMember2019-12-310001437402us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-3100014374022019-12-310001437402us-gaap:CommonStockMember2020-01-012020-03-310001437402us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001437402us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001437402us-gaap:RetainedEarningsMember2020-01-012020-03-310001437402us-gaap:CommonStockMember2020-03-310001437402us-gaap:AdditionalPaidInCapitalMember2020-03-310001437402us-gaap:RetainedEarningsMember2020-03-310001437402us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100014374022020-03-31ardx:segment0001437402us-gaap:CashMember2021-03-310001437402us-gaap:MoneyMarketFundsMember2021-03-310001437402us-gaap:CommercialPaperMember2021-03-310001437402us-gaap:CorporateDebtSecuritiesMember2021-03-310001437402us-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMember2021-03-310001437402us-gaap:CorporateDebtSecuritiesMember2021-03-310001437402us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2021-03-310001437402us-gaap:AssetBackedSecuritiesMember2021-03-310001437402us-gaap:CashMember2020-12-310001437402us-gaap:MoneyMarketFundsMember2020-12-310001437402us-gaap:CommercialPaperMember2020-12-310001437402us-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMember2020-12-310001437402us-gaap:CorporateDebtSecuritiesMember2020-12-310001437402us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2020-12-310001437402us-gaap:USTreasuryNotesSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:AssetBackedSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-03-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryNotesSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USTreasuryNotesSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryNotesSecuritiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryNotesSecuritiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-12-310001437402us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-12-31ardx:item0001437402srt:MinimumMemberardx:KyowaKirinCo.LtdMemberardx:ResearchCollaborationAndOptionAgreementMember2019-11-012019-11-300001437402ardx:KyowaKirinCo.LtdMemberardx:ResearchCollaborationAndOptionAgreementMember2019-11-012019-11-300001437402ardx:KyowaKirinCo.LtdMemberardx:ResearchCollaborationAndOptionAgreementMember2021-01-012021-03-310001437402ardx:KyowaKirinCo.LtdMemberardx:ResearchCollaborationAndOptionAgreementMember2021-03-310001437402ardx:KyowaKirinCo.LtdMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2017-11-012017-11-300001437402ardx:KyowaKirinCo.LtdMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2017-11-300001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMemberus-gaap:LicenseMember2017-11-012021-03-310001437402ardx:KyowaKirinCo.LtdMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2017-11-012021-03-31iso4217:JPY0001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMemberus-gaap:LicenseMember2021-01-012021-03-310001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMemberus-gaap:LicenseMember2020-01-012020-03-310001437402ardx:ProductSupplyRevenueMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2021-01-012021-03-310001437402ardx:OtherProductOrServicesRevenueMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2020-01-012020-03-310001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2021-01-012021-03-310001437402ardx:ShanghaiFosunPharmaceuticalIndustrialDevelopmentMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInChinaMember2017-12-012017-12-310001437402ardx:ShanghaiFosunPharmaceuticalIndustrialDevelopmentMemberardx:LicenseAgreementDevelopmentCommercializationDistributionInChinaMember2021-01-012021-03-31xbrli:pure0001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInChinaMember2021-01-012021-03-310001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInCanadaMemberardx:KnightTherapeuticsIncMember2018-03-012018-03-310001437402ardx:AstrazenecaMemberardx:AstraZenecaTerminationAgreementMember2015-06-012015-06-300001437402ardx:AstrazenecaMemberardx:AstraZenecaTerminationAgreementMember2015-06-300001437402ardx:AstrazenecaMemberardx:AstraZenecaTerminationAgreementMember2015-06-012021-03-310001437402ardx:AstrazenecaMemberardx:AstraZenecaTerminationAgreementMember2021-01-012021-03-310001437402ardx:AstrazenecaMemberardx:AstraZenecaTerminationAgreementMember2020-01-012020-03-310001437402ardx:ResearchCollaborationAndOptionAgreementMember2020-12-310001437402ardx:ResearchCollaborationAndOptionAgreementMember2021-01-012021-03-310001437402ardx:ResearchCollaborationAndOptionAgreementMember2021-03-310001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2020-12-310001437402ardx:LicenseAgreementDevelopmentCommercializationDistributionInJapanMember2021-03-310001437402us-gaap:LoansPayableMember2018-05-160001437402us-gaap:LoansPayableMember2020-10-092020-10-090001437402us-gaap:LoansPayableMember2020-10-090001437402us-gaap:DebtInstrumentRedemptionPeriodOneMemberus-gaap:LoansPayableMember2020-10-090001437402us-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:LoansPayableMember2020-10-090001437402us-gaap:LoansPayableMemberus-gaap:DebtInstrumentRedemptionPeriodThreeMember2020-10-090001437402us-gaap:OtherContractMember2018-05-310001437402us-gaap:OtherContractMember2021-03-310001437402us-gaap:OtherContractMemberus-gaap:FairValueInputsLevel3Member2021-03-310001437402us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-12-310001437402us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2019-12-310001437402us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-01-012021-03-310001437402us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-01-012020-03-310001437402us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-03-310001437402us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2020-03-310001437402us-gaap:CommonClassAMember2020-07-310001437402ardx:AtMarketOfferingMemberus-gaap:CommonClassAMember2020-07-310001437402ardx:AtMarketOfferingMember2021-01-012021-03-310001437402ardx:AtMarketOfferingMember2020-07-012021-03-310001437402us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001437402us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-03-310001437402ardx:PerformanceBasedRestrictedStockUnitsMember2021-01-012021-03-310001437402ardx:PerformanceBasedRestrictedStockUnitsMember2020-01-012020-03-310001437402ardx:EmployeeStockPurchasePlanMember2021-02-012021-02-280001437402ardx:EmployeeStockPurchasePlanMember2021-02-280001437402srt:DirectorMember2020-01-012020-03-310001437402srt:DirectorMember2021-01-012021-03-310001437402us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-03-310001437402us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-03-310001437402us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-03-310001437402us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-03-310001437402us-gaap:EmployeeStockOptionMember2021-03-310001437402us-gaap:EmployeeStockOptionMember2021-01-012021-03-310001437402us-gaap:RestrictedStockUnitsRSUMember2021-03-310001437402ardx:EmployeeStockPurchasePlanMember2021-03-310001437402ardx:EmployeeStockPurchasePlanMember2021-01-012021-03-31
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to
Commission file number: 001-36485
https://cdn.kscope.io/243a877581187ec7bd8ee6ffbbbe4d62-ardx-20210331_g1.jpg
ARDELYX, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware26-1303944
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No)
34175 Ardenwood Boulevard, Fremont, California 94555
400 Fifth Avenue, Suite 210, Waltham, Massachusetts 02451
(Address of Principal Executive Offices) (Zip Code)
(510) 745-1700
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001ARDXThe Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No 
The number of issued and outstanding shares of the registrant’s Common Stock, $0.0001 par value per share, as of May 3, 2021, was 98,709,188.


Table of Contents
ARDELYX, INC.
PAGE
20 
30 
31 
32 
32 
69 
70 
70 
70 
71 
72 
1

Table of Contents
PART I.            FINANCIAL INFORMATION

ITEM 1.            FINANCIAL STATEMENTS

ARDELYX, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
March 31,
2021
December 31,
2020
Assets    
Current assets:    
Cash and cash equivalents$84,070 $91,032 
Short-term investments94,142 95,452 
Accounts receivable5,783  
Prepaid expenses and other current assets21,381 8,202 
Total current assets205,376 194,686 
Property and equipment, net2,292 1,936 
Long-term investments 2,114 
Right-of-use assets, net1,667 2,274 
Other assets958 552 
Total assets$210,293 $201,562 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$5,378 $5,626 
Accrued compensation and benefits4,348 5,672 
Current portion of operating lease liability1,412 2,117 
Loan payable, current portion16,667 4,167 
Deferred revenue2,723 4,177 
Accrued expenses and other current liabilities11,262 6,657 
Total current liabilities41,790 28,416 
Operating lease liability, net of current portion397 413 
Loan payable, net of current portion34,348 46,621 
Deferred revenue, non-current2,947  
Total liabilities79,482 75,450 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.
  
Common stock, $0.0001 par value; 300,000,000 shares authorized; 98,688,577 and 93,599,975 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.
10 9 
Additional paid-in capital718,728 680,872 
Accumulated deficit(587,920)(554,765)
Accumulated other comprehensive income(7)(4)
Total stockholders’ equity130,811 126,112 
Total liabilities and stockholders’ equity$210,293 $201,562 
The accompanying notes are an integral part of these condensed financial statements.

2

Table of Contents
ARDELYX, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended March 31,
20212020
Revenues:    
Collaborative development revenue$1,454 $1,175 
Product supply revenue126 38 
Licensing revenue5,002  
Total revenues6,582 1,213 
Operating expenses:
Cost of revenue1,000  
Research and development20,456 15,844 
General and administrative17,131 7,138 
Total operating expenses38,587 22,982 
Loss from operations(32,005)(21,769)
Interest expense(1,100)(1,357)
Other income (expense), net(49)753 
Loss before provision for income taxes(33,154)(22,373)
Provision for income taxes1  
Net loss$(33,155)$(22,373)
Net loss per common share, basic and diluted$(0.34)$(0.25)
Shares used in computing net loss per share - basic and diluted97,179,241 88,880,658 
Comprehensive loss:
Net loss$(33,155)$(22,373)
Unrealized (losses) gains on available-for-sale securities(3)(64)
Comprehensive loss$(33,158)$(22,437)
The accompanying notes are an integral part of these condensed financial statements.

3

Table of Contents
ARDELYX, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three Months ended March 31, 2021 and 2020
(Unaudited)
(in thousands, except shares)
Three Months Ended March 31, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders'
Equity
SharesAmount
Balance as of December 31, 202093,599,975 $9 $680,872 $(554,765)$(4)$126,112 
Issuance of common stock under employee stock purchase plan102,208 — 478 — — 478 
Issuance of common stock upon exercise of options10,507 — 20 — — 20 
Issuance of common stock upon vesting of restricted stock units35,100 — — — — — 
Issuance of common stock in at-the-market offering4,940,787 1 34,271 34,272 
Stock-based compensation— — 3,087 — — 3,087 
Unrealized losses on available-for-sale securities— — — — (3)(3)
Net loss— — — (33,155)— (33,155)
Balance as of March 31, 202198,688,577 $10 $718,728 $(587,920)$(7)$130,811 

Three Months Ended March 31, 2020
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders'
Equity
SharesAmount
Balance as of December 31, 201988,817,741 $9 $647,078 $(460,452)$20 $186,655 
Issuance of common stock under employee stock purchase plan75,804 — 375 — — 375 
Issuance of common stock upon exercise of options141,551 — 216 — — 216 
Stock-based compensation— — 2,948 — — 2,948 
Unrealized gains on available-for-sale securities— — — — (64)(64)
Net loss— — — (22,373)— (22,373)
Balance as of March 31, 202089,035,096 $9 $650,617 $(482,825)$(44)$167,757 
The accompanying notes are an integral part of these condensed financial statements.

4

Table of Contents
ARDELYX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended March 31,
20212020
Operating activities    
Net loss$(33,155)$(22,373)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense422 492 
Amortization of deferred financing costs157 112 
Amortization of deferred compensation for services77 89 
Amortization of (discount) premium on investment securities157 (138)
Non-cash lease expense607 502 
Stock-based compensation3,087 2,948 
Change in derivative liabilities36 82 
Non-cash interest associated with debt discount accretion70 127 
Changes in operating assets and liabilities:
Accounts receivable(5,783) 
Prepaid expenses and other assets(13,662)(928)
Accounts payable(248)(1,174)
Accrued compensation and benefits(1,324)(2,502)
Operating lease liabilities(721)(614)
Accrued and other liabilities7,517 (394)
Deferred revenue(1,454)(1,175)
Net cash used in operating activities(44,217)(24,946)
Investing activities
Proceeds from maturities and redemptions of investments35,370 4,000 
Purchases of investments(32,107)(54,858)
Purchases of property and equipment(778)(25)
Net cash provided by (used in) investing activities2,485 (50,883)
Financing activities
Proceeds from issuance of common stock in at-the-market offering, net of issuance costs34,272  
Proceeds from issuance of common stock under equity incentive and stock purchase plans498 591 
Net cash provided by financing activities34,770 591 
Net decrease in cash and cash equivalents(6,962)(75,238)
Cash and cash equivalents at beginning of period91,032 181,133 
Cash and cash equivalents at end of period$84,070 $105,895 
Supplementary disclosure of cash flow information:
Cash paid for interest$963 $1,142 
Cash paid for income taxes$ $2 
Supplementary disclosure of non-cash activities:
Right-of-use assets obtained in exchange for lease obligations$450 $5,810 
The accompanying notes are an integral part of these condensed financial statements.

5

Table of Contents
ARDELYX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(amounts in thousands, except per share amounts and where otherwise noted)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Ardelyx, Inc. (the “Company,” “we,” “us” or “our”) is a specialized biopharmaceutical company focused on discovering, developing and commercializing innovative first-in-class medicines to enhance the lives of patients with kidney and cardiorenal diseases.
We operate in one business segment, which is the research, development and commercialization of biopharmaceutical products.
Basis of Presentation
These condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted. These condensed financial statements have been prepared on the same basis as our most recent annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary to present fairly our financial position at March 31, 2021 and results of operations, changes in stockholders’ equity, and cash flows for the interim periods ended March 31, 2021 and 2020.
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, 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the entire year ending December 31, 2021, or for any other interim period or future year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes thereto. On an ongoing basis, management evaluates its estimates, including those related to recognition of revenue, clinical trial accruals, contract manufacturing accruals, the fair value of assets and liabilities, income taxes and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.
Liquidity
As of March 31, 2021, we had cash, cash equivalents and marketable securities of approximately $178.2 million. We believe our current available cash, cash equivalents marketable securities will be sufficient to fund our planned expenditures and meet our obligations for at least 12 months following the filing of this Report on Form 10-Q. Failure to generate product revenue in a timely manner, or raise sufficient capital when needed, could have a negative impact on our financial condition and our ability to pursue our business strategies and could require us to significantly delay, scale back or discontinue one or more of our product development programs, commercialization efforts, or other aspects of our business plans, and our operating results and financial condition would be adversely affected.
Summary of Significant Accounting Policies
There have been no changes to the significant accounting policies disclosed in our most recent Annual Report on Form 10-K.
Recent Accounting Pronouncements
New Accounting Pronouncements - Recently Adopted
6

Table of Contents
We have adopted no new accounting pronouncements other than those disclosed in our most recent Annual Report on Form 10-K.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, an amendment which modifies the measurement and recognition of credit losses for most financial assets and certain other instruments. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. For smaller reporting companies the guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. Management is currently assessing the impact of this standard on our financial statements.
NOTE 2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Securities classified as cash, cash equivalents and short-term investments as of March 31, 2021 and December 31, 2020 are summarized below (in thousands):
March 31, 2021
Gross Unrealized
Amortized CostGainsLossesFair Value
Cash and cash equivalents:
Cash$2,751 $— $— $2,751 
Money market funds76,676 — — 76,676 
Commercial paper3,500 — — 3,500 
Corporate bonds1,143 — — 1,143 
Total cash and cash equivalents84,070 — — 84,070 
Short-term investments
Commercial paper$73,542 $3 $(4)$73,541 
Corporate bonds15,308  (6)15,302 
U.S. government-sponsored agency bonds3,264   3,264 
Asset-backed securities2,035   2,035 
Total short-term investments94,149 3 (10)94,142 
Total cash equivalents and short-term investments$178,219 $3 $(10)$178,212 
7

Table of Contents
December 31, 2020
Gross Unrealized
Amortized CostGainsLossesFair Value
Cash and cash equivalents:
Cash$781 $— $— $781 
Money market funds88,151 — — 88,151 
Commercial paper2,100 — — 2,100 
Total cash and cash equivalents91,032 — — 91,032 
Short-term investments
Commercial paper$60,631 $2 $(4)$60,629 
Corporate bonds24,547 3 (6)24,544 
U.S. government-sponsored agency bonds9,277 2  9,279 
U.S. treasury notes1,000   1,000 
Total short-term investments95,455 7 (10)95,452 
Long-term investments:
Corporate bonds$2,115 $(1)2,114 
Total cash equivalents and short-term investments$188,602 $7 $(11)$188,598 
We invest excess cash in marketable securities with high credit ratings. These securities consist primarily of money market funds, commercial paper, corporate bonds, asset-backed securities, and U.S. treasury and agency securities and are classified as “available-for-sale.”
All available-for-sale securities held as of March 31, 2021 had contractual maturities of less than one year. Our available-for-sale securities are subject to a periodic impairment review. We consider a debt security to be impaired when the fair value of that security is less than its carrying cost, in which case we would further evaluate the investment to determine whether the security is other-than-temporarily impaired. 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 or creditworthiness of the issuer and any changes thereto, intent to sell, and whether it is more likely than not we will be required to sell the investment before the recovery of its cost basis. If an investment is other-than-temporarily impaired, we write the investment down through the statement of operations to its fair value and establishes that value as the new cost basis for the investment. Management has determined that none of our available-for-sale securities were other-than-temporarily impaired in any of the periods presented, and as of March 31, 2021, 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.
NOTE 3. FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:
Level 1 –
Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. treasuries and trading securities with quoted prices on active markets.
Level 2 –
Valuations based on inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. treasuries and trading securities with quoted prices on active markets.
Level 3 –
Valuations based on unobservable inputs for which there is little or no market data, which require us to develop our own assumptions.
8

Table of Contents
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, 2021
Total
Fair Value
Level 1Level 2Level 3
Assets:
Money market funds$76,676 $76,676 $ $ 
Commercial paper77,041  77,041  
Corporate bonds16,445  16,445  
U.S. government-sponsored agency bonds3,264  3,264  
Asset-backed securities2,035  2,035  
Total$175,461 $76,676 $98,785 $ 
Liabilities:
Derivative liability for Exit Fee$1,412 $ $ $1,412 
Total$1,412 $ $ $1,412 
December 31, 2020
Total
Fair Value
Level 1Level 2Level 3
Assets:
Money market funds$88,151 $88,151 $ $ 
Commercial paper62,729  62,729  
Corporate bonds26,658  26,658  
U.S. government-sponsored agency bonds9,279  9,279  
U.S. treasury notes1,000  1,000  
Total$187,817 $88,151 $99,666 $ 
Liabilities:
Derivative liability for Exit Fee$1,376 $ $ $1,376 
Total$1,376 $ $ $1,376 
Where quoted prices are available in an active market, securities are classified as Level 1. We classify money market funds as Level 1. When quoted market prices are not available for the specific security, we estimate fair value by using benchmark yields, reported trades, broker/dealer quotes and issuer spreads. We classify U.S. government-sponsored agency bonds, U.S. treasury notes, corporate bonds, commercial paper, asset-backed securities and foreign currency derivative contracts as Level 2. In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities such as the Exit Fee, as defined and discussed in Note 4, are classified as Level 3.
The carrying amounts reflected in the balance sheets for cash equivalents, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both March 31, 2021 and December 31, 2020, due to their short-term nature.

Fair Value of Debt
The interest rate of our term loan facility approximates the rate at which we could obtain alternative financing. Therefore, the carrying amount of the term loan facility approximated its fair value at March 31, 2021 and December 31, 2020.
9

Table of Contents
NOTE 4. COLLABORATION AND LICENSING AGREEMENTS
Kyowa Kirin Co., Ltd. (“KKC”)
2019 KKC Agreement
In November 2019, we entered into a research collaboration and option agreement with KKC (the “2019 KKC Agreement”) for research associated with identifying two preclinical compounds that are ready for designation as development compounds (“DCs”), with one compound inhibiting the first undisclosed target (“Program 1”), and a second inhibiting the second undisclosed target (“Program 2”). Pursuant to the 2019 KKC Agreement, upon completion of the research and designation by the research steering committee of one or more DCs, KKC has the right to execute one or more separate collaborative agreements relating to the development and commercialization of one or both DCs in certain specified  territories.
Under the terms of the 2019 KKC Agreement, KKC agreed to pay us a non-refundable, non-creditable upfront fee of $10.0 million, payable as follows: the first installment of $5.0 million within 30 days of November 11, 2019 (the “Effective Date”), and the second installment of $5.0 million on the first anniversary of the Effective Date, unless the 2019 KKC Agreement is earlier terminated by KKC due to material breach by us. The term of the 2019 KKC Agreement commenced on the Effective Date and ends on the earliest of: (i) 2 years following the Effective Date, (ii) the nomination of a program DC for both programs, (iii) the nomination of one program DC and the decision by the parties to cease research for the other program, or (iv) the decision by the parties to cease research for both programs.
During the three months ended March 31, 2021, we recognized $1.5 million as revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss. The aggregate amount of the transaction price allocated to our partially unsatisfied performance obligations as of March 31, 2021 was $2.7 million which is presented in the accompanying condensed balance sheet as deferred revenue. As of March 31, 2021, we expect to recognize the remaining transaction price allocated to our partially unsatisfied performance obligations over the remaining research terms, which is currently expected to extend through the end of 2021. There were no significant changes in estimates associated with the 2019 KKC Agreement during the three months ended March 31, 2021.
2017 KKC Agreement
In November 2017, we entered into an exclusive license agreement with KKC (the “2017 KKC Agreement”), for the development, commercialization, and distribution of tenapanor in Japan for cardiorenal indications. We granted KKC an exclusive license to develop and commercialize certain sodium hydrogen exchanger 3 (“NHE3”) inhibitors including tenapanor in Japan for the treatment of cardiorenal diseases and conditions, excluding cancer. We retained the rights to tenapanor outside of Japan, and also retained the rights to tenapanor in Japan for indications other than those stated above. Pursuant to the 2017 KKC Agreement, KKC is responsible for all costs and expenses incurred in the development and commercialization of tenapanor for all licensed indications in Japan. We are responsible for supplying the tenapanor drug substance for KKC’s use in development and commercialization throughout the term of the 2017 KKC Agreement, provided that KKC may exercise an option to manufacture the tenapanor drug substance under certain conditions.
We assessed these arrangements in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments (“ASC 606”) and concluded that the contract counterparty, KKC, is a customer. Under the terms of the 2017 KKC Agreement, we received $30.0 million in upfront license fees, which was recognized as revenue when the agreement was executed. Based on our assessment, management determined that the license and the manufacturing supply services were its material performance obligations at the inception of the 2017 KKC Agreement, and as such, each of the performance obligations is distinct.
In addition to the up-front license fee received of $30.0 million, we may be entitled to receive up to $55.0 million in total development milestones, of which $10.0 million has been recognized as revenue and $5.0 million has been received as of March 31, 2021, and approximately ¥8.5 billion for commercialization milestones, or approximately $76.5 million at the currency exchange rate on March 31, 2021, as well as reimbursement of costs plus a reasonable overhead for the supply of product and high-teen royalties on net sales throughout the term of the agreement. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at March 31, 2021.
During the three months ended March 31, 2021 and 2020, we recognized $5.0 million and zero, respectively, as licensing revenue upon the achievement of development milestones. The $5.0 million development milestone recognized during the three months ended March 31, 2021 related to the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for
10

Table of Contents
hyperphosphatemia. During the three months ended March 31, 2021, we recognized $0.1 million as product supply revenue related to the manufacturing supply of tenapanor and other materials to KKC pursuant to the 2017 KKC Agreement. Similarly, for the three months ended March 31, 2020, $13.0 thousand was recognized as product supply revenue.
During the three months ended March 31, 2021 we recorded a $2.9 million prepayment that is due to us from KKC for the manufacturing of tenapanor drug substance. The prepayment is reflected within prepaid and other current assets and deferred revenue, non-current on our condensed balance sheet as of March 31, 2021.
Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun Pharma”)
In December 2017, we entered into an exclusive license agreement with Fosun Pharma (the “Fosun Agreement”), for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C. 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 upfront license fees which was recognized as revenue when the agreement was executed. Based on management’s 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 is distinct.  
We may be entitled to additional development and commercialization milestones of up to $110.0 million, as well as reimbursement of cost plus a reasonable overhead for the supply of product and tiered royalties on net sales ranging from the mid-teens to 20%. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at March 31, 2021.
We have recorded no revenue during the three months ended March 31, 2021 related to the Fosun Agreement.
Knight Therapeutics, Inc. (“Knight“)  
In March 2018, we entered into an exclusive license agreement with Knight (the “Knight Agreement”), for the development, commercialization and distribution of tenapanor in Canada for hyperphosphatemia and IBS-C. We assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Knight, is a customer. Based on management’s 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 is distinct. Under the terms of the agreement, we received a $2.3 million nonrefundable, one-time upfront payment in March 2018 and are eligible to receive additional development and commercialization milestone payments worth up to $17.6 million. We are also eligible to receive royalties throughout the term of the agreement, and a transfer price for manufacturing services. The variable consideration related to the remaining development milestone payments has not been included in the transaction price as they were fully constrained at March 31, 2021.
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 another NHE3 inhibitor, up to a maximum of $75.0 million in aggregate for (i) and (ii). As of March 31, 2021, to date in aggregate, we have recognized $11.6 million of the $75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $10.6 million. For the three months ended March 31, 2021 we recognized and recorded as cost of revenue $1.0 million related to the AstraZeneca Termination Agreement. For the three months ended March 31, 2020 we recognized no cost of revenue related to the AstraZeneca Termination Agreement.
Deferred Revenue
The following tables present changes in our current and non-current deferred revenue balances during the reporting period. The current deferred revenue balance is attributable entirely to the 2019 KKC Agreement and the non-current deferred revenue balance is attributable entirely to the 2017 KKC Agreement.
11

Table of Contents
Deferred revenue - current
Balance at December 31, 2020$4,177 
Decreases due to revenue recognized in the period for which cash has been received(1,454)
Balance at March 31, 2021$2,723 

Deferred revenue - non-current
Balance at December 31, 2020$ 
Increases to amounts invoiced, for which cash has not yet been received2,947 
Balance at March 31, 2021$2,947 
NOTE 5. BORROWING
Solar Capital and Western Alliance Bank Loan Agreement
On May 16, 2018, we entered into a loan and security agreement (the “Loan Agreement”), with Solar Capital Ltd. and Western Alliance Bank (collectively the “Lenders”). The Loan Agreement provides for a $50.0 million term loan facility with a maturity date of November 1, 2022 (the “Term Loan”).
On October 9, 2020, we and the Lenders entered into an amendment to the Loan Agreement (“the 2020 Amendment”) to extend the date through which we are permitted to make interest-only payments on the Term Loan by twelve months to December 1, 2021. The 2020 amendment also requires that if either the FDA does not approve our New Drug Application ("NDA") for tenapanor for the control of serum phosphorus in adult patients with chronic kidney disease ("CKD") on dialysis on or before May 31, 2021 or the U.S. Food and Drug Administration ("FDA") issues a CRL with respect to our NDA Number 213931, then we are to begin principal payments on the earlier of June 1, 2021 or the first day of the month immediately following the date that the FDA issues us a CRL. On April 29, 2021, the FDA extended the Prescription Drug User Fee Act ("PDUFA") date for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis by three months to July 29, 2021, making it unlikely that the FDA would approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before May 31, 2021.
In May 2021, we and the Lenders entered into an additional amendment to the Loan Agreement (“the 2021 Amendment”) to extend the date by which FDA approval is required in order to continue interest-only payments through December 1, 2021. The 2021 Amendment requires that if either the FDA does not approve our NDA Number 213931 for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before July 31, 2021 or the FDA issues a complete response letter (“CRL”) for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis, then we are to begin principal payments on the earlier of August 1, 2021 or the first day of the month immediately following the date that the FDA issues us a CRL. If principal repayments are required to begin prior to December 1, 2021 under the 2021 Amendment then the first principal repayment would include all payments that would have been due if principal repayment had begun on June 1, 2021.
We paid a closing fee of 1% of the Term Loan, or $0.5 million, upon the closing of the Term Loan, and $0.1 million upon closing of the 2020 Amendment. Under the Term Loan, we are also obligated to pay a final fee equal to 4.95% of the Term Loan upon the earliest to occur of the maturity date, the acceleration of the Term Loan, the prepayment or repayment of the Term Loan or the termination of the Loan Agreement. We may voluntarily prepay the outstanding Term Loan, subject to a prepayment premium of (i) 3% of the principal amount of the Term Loan if prepaid prior to or on the first anniversary of the Closing Date, (ii) 2% of the principal amount of the Term 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 principal amount of the Term Loan if prepaid after the second anniversary of the Closing Date and prior to the maturity date. The Term Loan is secured by substantially all our assets, except for our intellectual property and certain other customary exclusions. Additionally, in connection with the Term Loan, we entered into the Exit Fee Agreement, as discussed in Note 6.
The Loan Agreement also contains customary events of default that entitle the Lender to cause us indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loan, including our cash. Upon the occurrence and for the duration of an event of default, an additional default interest
12

Table of Contents
rate equal to 4% per annum will apply to all amounts owed under the Loan Agreement. As of March 31, 2021, to our knowledge, there were no facts or circumstances in existence that would give rise to an event of default.
As of March 31, 2021, our future payment obligations related to the Term Loan, excluding interest payments and the Exit Fee, are as follows (in thousands):
Total repayment obligations$52,475 
Less: Unamortized discount and debt issuance costs(449)
Less: Unaccreted value of final fee(1,011)
Loan payable51,015 
Less: Loan payable, current portion(16,667)
Loan payable, net of current portion$34,348 
NOTE 6.  DERIVATIVE LIABILITY
Exit Fee
In May 2018, in connection with entering into the Loan Agreement, as defined and discussed in Note 5, we entered into an agreement pursuant to which we agreed to pay $1.5 million in cash (the “Exit Fee”) upon any change of control transaction in respect of the Company or if we obtain both (i) FDA approval of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis and (ii) FDA approval of tenapanor for the treatment of patients with irritable bowel syndrome with constipation (“IBS-C”), which was obtained on September 12, 2019 when the FDA approved IBSRELA® (tenapanor), a 50 milligram, twice daily oral pill for the treatment of IBS-C in adults (the “Exit Fee Agreement”). Notwithstanding the prepayment or termination of the Term Loan, as defined and discussed in Note 5, our obligation to pay the Exit Fee will expire on May 16, 2028. We concluded that the Exit Fee is a freestanding derivative which should be accounted for at fair value on a recurring basis. The estimated fair value of the Exit Fee is recorded as a derivative liability and included in accrued expenses and other current liabilities on the accompanying condensed balance sheets.
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 liability 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 (or a comparable successor rate if LIBOR no longer exists). Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the derivative liability and it is estimated that a 10% 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.
Changes in the fair value of recurring measurements included in Level 3 of the fair value hierarchy are presented as other income (expense), net in our statements of operations and were as follows for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Fair value of Exit Fee derivative liability at January 1$1,376 $969 
Change in estimated fair value of derivative liability36 82 
Fair value of Exit Fee derivative liability at March 31$1,412 $1,051 
NOTE 7. LEASES
All of our leases are operating leases and each contain customary rent escalation clauses. Certain of the leases have both lease and non-lease components. We have elected to account for each separate lease component and the non-lease components associated with that lease component as a single lease component for all classes of underlying assets.
13

Table of Contents
The following table provides additional details of our facility leases presented in the condensed balance sheet as of March 31, 2021 (dollars in thousands):
Facilities
Right of use assets$1,667
Current portion of lease liabilities1,412
Operating lease liability, net of current portion397
Total$1,809
Weighted-average remaining life (years)1.60
Weighted-average discount rate11.23 %
Lease costs, which are included in operating expenses in our statements of operations, were as follows (in thousands):
Three Months Ended March 31,
20212020
Operating lease expense$673 $648 
Cash paid for operating leases$1,565 $760 
The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of March 31, 2021:
Remainder of 2021$1,463 
Thereafter469 
Total undiscounted operating lease payments1,932 
Imputed interest expenses(123)
Total operating lease liabilities1,809 
Less: Current portion of operating lease liability(1,412)
Operating lease liability, net of current portion$397 

NOTE 8. STOCKHOLDERS’ EQUITY
At the Market Offerings Agreement
In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020, containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings; and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $100.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies LLC, deemed to be “at the market offerings.” During the three months ended March 31, 2021, we sold 4.9 million shares of our common stock for aggregate gross proceeds of $35.0 million at a weighted average price of $7.09 per share under the Open Market Sales Agreement. In aggregate during the life of the Open Market Sales Agreement, and as of March 31, 2021, we have sold 8.2 million shares of our common stock for gross proceeds of $56.7 million at a weighted average sales price of approximately $6.91 per share. Pursuant to the Open Market Sales Agreement, Jefferies, as sales agent, receives a commission of up to 3.0% of the gross sales price for shares of common stock sold under the Open Market Sales Agreement.
NOTE 9. EQUITY INCENTIVE PLANS
Stock Option Plan
During the three months ended March 31, 2021, options were granted to employees and members of the board of directors to purchase 2.8 million shares of our common stock. The weighted-average grant-date estimated fair value of options granted during the three months ended March 31, 2021 was $6.51.
14

Table of Contents
During the three months ended March 31, 2021, options were exercised to purchase 10.5 thousand shares of our common stock, resulting in net proceeds of approximately $0.5 million. During the three months ended March 31, 2020, options were exercised to purchase 0.1 million shares of or common stock, resulting in net proceeds of approximately $0.6 million.
Restricted Stock Units
During the three months ended March 31, 2021, we granted 0.9 million restricted stock units (“RSUs”) to our employees that will vest upon employees’ continued service relationship with us. During the three months ended March 31, 2020, we granted 0.9 million restricted stock units to our employees.  
During both the three months ended March 31, 2021 and March 31, 2020, we granted no performance-based restricted stock units ("PRSUs") to our employees.
Employee Stock Purchase Plan
In February 2021, we sold 0.2 million shares of our common stock under our employee stock purchase program (the "ESPP"). The shares were purchased by employees at a purchase price of $5.84 per share resulting in proceeds to us of approximately $1.4 million.
Issuance of Common Stock for Services
Under Our Amended and Restated Non-Employee Director Compensation Program, members of our board of directors may elect to receive shares of our stock in lieu of their cash fees. For the three months ended March 31, 2021 and 2020, we issued no shares of our common stock to members of the board of directors in accordance with the program.
Stock-Based Compensation
Stock-based compensation expense recognized for stock options, RSUs, PRSUs and the ESPP are recorded as operating expenses in our condensed statements of operations and comprehensive loss, as follows:
Three Months Ended March 31,
20212020
Research and development$1,092 $1,058 
General and administrative1,995 1,890 
Total$3,087 $2,948 
As of March 31, 2021, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following:
Unrecognized Compensation
 Expense
Average Remaining
 Vesting Period (Years)
Stock options$25,723 3.1
RSUs$6,246 3.7
ESPP$399 0.4
NOTE 10. NET 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
15

Table of Contents
three months ended March 31, 2021 and 2020, all potential common shares were determined to be anti-dilutive. The following table sets forth the computation of net loss per common share:
Three Months Ended March 31,
20212020
Numerator:
Net loss$(33,155)$(22,373)
Denominator:
Weighted average common shares outstanding - basic and diluted97,179,241 88,880,658 
Net loss per share - basic and diluted$(0.34)$(0.25)
For the three months ended March 31, 2021, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 13.0 million.
For the three months ended March 31, 2020, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 11.9 million.
NOTE 11. CONTINGENCIES
From time to time we may be involved in claims arising in connection with our business. Based on information currently available, management believes that the amount, or range, of reasonably possible losses in connection with any pending actions against us would not be material to our financial condition or cash flows, and no contingent liabilities were accrued as of March 31, 2021 or 2020.
NOTE 12.  SUBSEQUENT EVENTS
On April 29, 2021, the FDA extended the PDUFA date for our NDA for tenapanor for control of serum phosphorus in adult patients with CKD on dialysis by three months to July 29, 2021.
In May 2021, we entered into an amendment to our loan and security agreement (the “Loan Agreement”), with Solar Capital Ltd. and Western Alliance Bank (collectively the “Lenders”) to extend the date by which FDA approval is required in order to continue interest-only payments through December 1, 2021. Please see Note 5. Borrowing for additional information.
ITEM 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed financial statements and notes thereto included elsewhere in this report and with the audited financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2020. This discussion and analysis and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason. Unless the context requires otherwise, the terms “Ardelyx”, “Company”, “we”, “us”, and “our” refer to Ardelyx, Inc.
OVERVIEW
We are a specialized biopharmaceutical company focused on discovering, developing and commercializing innovative first-in-class medicines to enhance the lives of patients with kidney and cardiorenal diseases. This includes patients with chronic kidney disease ("CKD") on dialysis suffering from elevated serum phosphorus, or hyperphosphatemia; and CKD patients and/or heart failure patients with elevated serum potassium, or hyperkalemia. Tenapanor has a unique mechanism of action and acts locally in the gut to inhibit the sodium hydrogen exchanger 3, or NHE3. This results in the tightening of the epithelial cell junctions, thereby significantly reducing paracellular uptake of phosphate, the primary pathway of phosphate absorption.
16

Table of Contents
OUR PRODUCT PIPELINE
Tenapanor: A New Approach for The Control of Serum Phosphorus in CKD Patients on Dialysis
Our portfolio is led by the development of tenapanor, a first-in-class medicine for the control of serum phosphorus in adult patients with CKD on dialysis. Tenapanor for the control of serum phosphorus has a unique mechanism of action and acts locally in the gut to inhibit the sodium hydrogen exchanger 3 (“NHE3”). This results in the tightening of the epithelial cell junctions, thereby significantly reducing paracellular uptake of phosphate, the primary pathway of phosphate absorption. On April 29, 2021, the U.S. Food and Drug Administration (“FDA”) determined that a submission we made in response to an information request from the FDA constituted a major amendment to our New Drug Application (“NDA”) for tenapanor for the control of serum phosphorus, resulting in a three-month extension of the PDUFA date to July 29, 2021. The FDA’s information request included a request for additional analyses of our clinical data.
We have exclusive rights to tenapanor in the U.S. and we have established agreements with Kyowa Kirin Co., Ltd. (“KKC”) in Japan, Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun Pharma”) in China and Knight Therapeutics, Inc. (“Knight“) in Canada for the development and commercialization of tenapanor for certain indications in their respective territories.
In December 2019, we reported statistically significant topline efficacy results from our second monotherapy Phase 3 clinical trial, the PHREEDOM trial, which evaluated tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. The PHREEDOM trial followed a successful monotherapy Phase 3 clinical trial completed in 2017, the BLOCK trial, which achieved statistical significance for the primary endpoint. The only adverse event reported in these Phase 3 trials in less than 5% of patients was diarrhea, with an incidence rate of 52% in the PHREEDOM trial and 39% in the BLOCK trial, with most incidences in each trial being mild to moderate in nature. PHREEDOM is a one-year study with a 26-week open-label treatment period and a 12-week double-blind, placebo-controlled randomized withdrawal period followed by a 14-week open-label safety extension period. An active safety control group, for safety analysis only, received sevelamer, open-label, for the entire 52-week study period. Patients completing the PHREEDOM trial from both the tenapanor arm and the sevelamer active safety control arm had the option to participate in NORMALIZE, an ongoing open-label 18-month extension study.
In June 2020, we announced positive results from a planned interim data analysis from our ongoing NORMALIZE extension study evaluating tenapanor, as monotherapy or in combination with sevelamer, to achieve serum phosphorus levels in the normal range (2.5 – 4.5 mg/dL) in patients with CKD on dialysis. The NORMALIZE extension study allowed patients from our PHREEDOM study to continue therapy with tenapanor and enabled those patients in the PHREEDOM safety control arm receiving sevelamer carbonate to transition to tenapanor. The data from the planned interim analysis demonstrated that the use of tenapanor as monotherapy or in combination with sevelamer carbonate produces a significant phosphorus-lowering effect with a mean serum phosphorous reduction of 2.33 mg/dL, from a mean baseline phosphorus of 7.27 mg/dL at the beginning of the PHREEDOM trial to a mean of 4.94 mg/dL at the time of this analysis. Of the 171 patients in this interim analysis who completed up to 9 months of treatment in this extension study, up to 47.4% achieved a normal serum phosphorus level, and of those, the majority were on tenapanor alone or tenapanor with low dose sevelamer of three or fewer sevelamer tablets per day. These data represent a 58% improvement in the rate of patients who achieve a normal serum phosphorus level, as compared to current treatment practice data as reported in the April 2020 Dialysis Outcomes Practice Patterns Study (“DOPPS”) Practice Monitor. The DOPPS data demonstrate that, with currently available treatments, only 30% of patients have serum phosphorous levels less than 4.6 mg/dL. The only adverse event reported in greater than 5% of patients in NORMALIZE was diarrhea, with an incidence rate of 23.3%.
In September 2019, we reported positive results from the AMPLIFY trial, a Phase 3 study evaluating tenapanor in patients with CKD on dialysis who had uncontrolled hyperphosphatemia despite phosphate binder treatment. In this trial, approximately twice the number of patients achieved the serum phosphorus treatment goal of less than 5.5 mg/dL with tenapanor and phosphate binders versus phosphate binders alone. The only adverse event with a placebo-adjusted rate greater than 3% was diarrhea, with an incidence rate of 43%, with most being mild to moderate in nature.
In June 2020, our partner KKC, a Japan-based global specialty pharmaceutical company exclusively developing tenapanor in Japan, presented results from a Phase 2 trial of tenapanor at the European Renal Association-European Dialysis and Transplant Association annual meeting (“ERA-EDTA 2020”). The trial was designed to evaluate if, with tenapanor, patients with hyperphosphatemia undergoing hemodialysis could achieve at least a 30% decrease in mean pill burden while maintaining their serum phosphorus level. The study results were statistically significant, with 71.6% (p<0.001) of patients achieving at least a 30% reduction in mean pill burden. The overall mean reduction in phosphate binder usage was 80% (reduction from 14.7 to 3.0 pills per day), while maintaining serum phosphorus control. The mean phosphorus level of patients entering the study on treatment with binders was 5.2 mg/dL at baseline and 4.7 mg/dL at the end of the 26-week study.
17

Table of Contents
Tenapanor is the first therapy for phosphate management that blocks phosphorus absorption at the primary pathway of uptake. It is not a phosphate binder. Tenapanor is a novel, potent, small molecule, that has been shown in phase 3 studies to treat hyperphosphatemia as monotherapy and as a dual mechanism approach.
IBSRELA® (tenapanor) for Irritable Bowel Syndrome with Constipation (IBS-C)
In addition to the development of tenapanor for hyperphosphatemia, we have developed tenapanor for the treatment of patients with irritable bowel syndrome with constipation (“IBS-C”). In September 2019, we received FDA approval of IBSRELA® (tenapanor) for the treatment of IBS-C in adults. IBS-C is a burdensome gastrointestinal (“GI”) disorder. It is characterized by significant abdominal pain, constipation, straining during bowel movements, bloating and/or gas.
RDX013 Program: Small Molecule for Treating Hyperkalemia
We are also advancing a small molecule potassium secretagogue program, RDX013, for the potential treatment of hyperkalemia. Hyperkalemia is a common problem in patients with heart and kidney disease, particularly in patients taking common blood pressure medications known as renin-angiotensin-aldosterone system (“RAAS”) inhibitors. Similar to what we have done with tenapanor in developing a non-binder approach for the treatment of elevated serum phosphate levels, RDX013 is designed to target the underlying biological mechanisms of potassium secretion to lower elevated potassium. While currently available therapies are all ion exchange agents, RDX013 is a first in class approach that exerts its effects by amplifying the underlying pathways of potassium secretion in the colon.
Since commencing operations in October 2007, substantially all our efforts have been dedicated to our research and development (“R&D”) activities, including developing our clinical product candidate tenapanor and developing our proprietary drug discovery and design platform. We have not generated any revenues from product sales. As of March 31, 2021, we had an accumulated deficit of $587.9 million.
We expect to continue to incur substantial operating losses for the foreseeable future as a result of costs associated with the following activities: our continued development of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis; our preparations for, and if approved, the commercialization of tenapanor in the United States for the control of serum phosphorus in adult patients with CKD on dialysis, or for any related indication, including significantly increased personnel costs associated with our commercial team; the performance of certain activities required as a result of our NDA approval of tenapanor for IBS-C; the continued development of RDX013 and the advancement of our research programs into the preclinical stage. To date, we have funded our operations from the sale and issuance of common stock and convertible preferred stock, funds from our collaboration partnerships, which includes license fees, milestones and product supply revenue, as well as funds from our Loan Agreement with Solar Capital Ltd. and Western Alliance Bank.
RDX020 Program: Small molecule for Treating Metabolic Acidosis
We have an ongoing discovery program targeting the inhibition of bicarbonate exchange inhibitor for the treatment of metabolic acidosis, a highly prevalent comorbidity in CKD patients that is strongly correlated with disease progression and adverse outcomes. We have identified lead compounds that are potent, selective and proprietary inhibitors of bicarbonate secretion.
Impact of COVID-19
The global COVID-19 pandemic has impacted the operational decisions of companies worldwide. It also has created and may continue to create significant uncertainty in the global economy. We have undertaken measures to protect our employees, partners, collaborators, and vendors, some of which impact our normal operations. To date, we have been able to continue our operations with our workforce, most of whom are working remotely, and our pre-existing infrastructure that supports secure access to our internal systems. If, however, the COVID-19 pandemic has a substantial impact on the productivity of our employees, our ability to successfully prepare for the commercial launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis, including our ability to hire and successfully integrate into the company the new personnel required to prepare for such launch, or our ability to progress our research and development efforts, the results of our operations and overall financial performance may be adversely impacted. The extent of the impact from the COVID-19 pandemic on our business will depend largely on future developments that are highly uncertain and cannot be predicted. For a discussion of risks of COVID-19 relating to our business, see “Part II: Other Information-Item 1A.- Risk Factors- Risks Related to Our Business- The ongoing COVID-19 pandemic, or any other outbreak of epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows.” As of the date of issuance of this financial report, we are not aware of any specific event or circumstance that would require updates to our estimates and
18

Table of Contents
judgments or revisions to the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Critical accounting policies are those that require significant judgment and/or estimates by management at the time that financial statements are prepared such that materially different results might have been reported if other assumptions had been made. These estimates form the basis for making judgments about the carrying values of assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates.
The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our financial statements presented in this report are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K filed with the SEC on March 8, 2021. There have been no significant changes to our critical accounting policies as disclosed in our most recently filed Annual Report on Form 10-K during the three months ended March 31, 2021.
Recent Accounting Pronouncements
A summary of recent accounting pronouncements that we have adopted or may expect to adopt is included in Note 1 – Organization and Basis of Presentation to our condensed financial statements (see Part I, Item 1 Notes to Condensed Financial Statements, of this Quarterly Report on Form 10-Q).
Financial Operations Overview
Revenue
Our revenue to date has been generated primarily through license, research and development collaborative agreements with various collaboration partners. We have not generated any revenue from commercial product sales. In the future, we may generate revenue from a combination of our own product sales, if regulatory approval is received, and payments in connection with our current or future collaborative partnerships, including license fees, other upfront payments, milestone payments, royalties and payments for drug product and/or drug substance. We expect that any revenue we generate will fluctuate in future periods as a result of, among other factors: whether we receive regulatory approval for tenapanor for the control of serum phosphorus in CDK patients on dialysis, and if such approval is received, the timing of such approval and the extent to which we are successful in our efforts to commercialize tenapanor for such indication; the timing and progress of goods and services provided pursuant to our current or future collaborative partnerships; our or our collaborators’ achievement of preclinical, clinical, regulatory or commercialization milestones, to the extent achieved; the timing and amount of any payments to us relating to the aforementioned milestones; and the extent to which any of our product candidates are approved and successfully commercialized by a collaboration partner. If our current collaboration partners or any future collaboration partners fail to obtain regulatory approval for tenapanor, our ability to generate future revenue from our product sales or from our collaborative arrangements, and our results of operations and financial position, would be materially and adversely affected. Our past revenue performance is not necessarily indicative of results to be expected in future periods.
Cost of Revenue
Cost of revenue currently represents payments due to AstraZeneca, which under the terms of a termination agreement entered into in 2015 is entitled to (i) future royalties at a rate of 10% of net sales of tenapanor or other NHE3 products by us or our licensees, and (ii) 20% of non-royalty revenue received from our collaboration partners should we elect to which we provide rights to develop and commercialize tenapanor or certain other NHE3 inhibitors. We have agreed to pay AstraZeneca up to a maximum of $75.0 million in the aggregate for (i) and (ii). We recognize these expenses as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to AstraZeneca. To date, we have recognized an aggregate of $11.6 million as cost of revenue under the AZ Termination Agreement since 2017.
Research and Development
19

Table of Contents
We recognize all research and development expenses as they are incurred to support the discovery, research, development and manufacturing of our product candidates. Research and development expenses include, but are not limited to, the following:
external research and development expenses incurred under agreements with consultants, third-party contract research organizations ("CROs") and investigative sites where a substantial portion of our clinical studies are conducted, and with contract manufacturing organizations where our clinical supplies are produced;
expenses associated with supplies and materials consumed in connection with our research operations;
•    expenses associated with producing tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis prior to FDA approval;
•    other costs associated with research, clinical development and regulatory activities; and
employee-related expenses, which include salaries, bonuses, benefits, travel and stock-based compensation;
facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization expense, information technology expense and other supplies.
We expect to continue to make substantial investments in research and development activities as we further progress the development of tenapanor, particularly if the FDA should require additional clinical trials in connection with our NDA for the control of serum phosphorus in adult patients with CKD on dialysis, RDX013 and our other product candidates, as we advance our research programs into the preclinical stage and as we continue our early stage research. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. On April 29, 2021, the FDA determined that a submission we made in response to an information request from the FDA constituted a major amendment to our NDA for tenapanor for the control of serum phosphorus, resulting in a three-month extension of the PDUFA date to July 29, 2021. The FDA’s information request included a request for additional analyses of our clinical data. The FDA may act on our application either by issuing an approval letter or by issuing a Complete Response Letter (“CRL”). Should we wish to pursue our application after receiving a CRL, we can, if possible, resubmit the application with information that addresses the questions or issues identified by the FDA in order to support approval. Resubmissions are subject to review period targets, which vary depending on the underlying submission type and the content of the resubmission. We may not succeed in achieving marketing approval for our product candidates, including tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. The probability of success of each of the product candidates may be affected by numerous factors, including preclinical data, clinical data, the regulatory process, market acceptance, sufficient third-party coverage or reimbursement, our ability to access capital on acceptable terms, competition, manufacturing capability and commercial viability.
We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, ongoing assessment as to each product candidate’s commercial potential, and our ability to access capital on acceptable terms. We will need to raise additional capital to complete the development and commercialization of tenapanor. If we are unable to access capital on a timely basis and on terms that are acceptable to us, we may be forced to restructure certain aspects of our business or identify and complete one or more strategic collaborations or other transactions in order to fund the development or commercialization of tenapanor, the development of RDX013 or certain of our product candidates through the use of alternative structures.
General and Administrative
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, for certain of our executives, our board members, and our finance, legal, business development, market development, commercial and support staff. Other general and administrative expenses include facility related costs and professional fees for legal, accounting and audit, investor relations, other consulting services and allocated facility-related costs not otherwise included in research and development expenses.
We anticipate that our general and administrative expenses will increase in the future primarily because of increased pre-commercial and commercial activities, personnel costs and professional fees for services to support the potential launch and commercialization of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis.
Interest Expense
20

Table of Contents
Interest expense represents the interest paid on our loan payable.
Other Income, net
Other income, net consists of interest income earned on our cash and cash equivalents and available-for-sale investments, the periodic revaluation of the exit fee related to our loan and currency exchange gains and losses.
RESULTS OF OPERATIONS
The results of operations are not necessarily indicative of the results to be expected for the year ending December 31, 2021, for any other interim period, or for any other future year.
Comparison of the three months ended March 31, 2021 and 2020
Revenue
Below is a summary of our total revenue (dollar amounts in thousands):
Three Months Ended March 31,Change
20212020$%
Collaborative development revenue$1,454 $1,175 $279 23.7 %
Product supply revenue126 38 88 231.6 %
Licensing revenue5,002 — 5,002 (a)
Total revenues$6,582 $1,213 $5,369 442.6 %
(a) Percent change is not meaningful.
The increase to total revenues during the three months ended March 31, 2021 as compared to the same period in 2020 is primarily attributable to a $5.0 million development milestone which we earned upon the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia. There was no comparable revenue during the three months ended March 31, 2020.
Operating Expenses
Below is a summary of our operating expenses (dollars in thousands):
Three Months Ended March 31,Change
20212020$%
Cost of revenue$1,000 $— $1,000 (a)
Research and development20,456 15,844 4,612 29.1 %
General and administrative17,131 7,138 9,993 140.0 %
Total operating expenses$38,587 $22,982 $15,605 67.9 %
(a) Percent change is not meaningful.
Cost of revenue
The increase in cost of revenue for the three months ended March 31, 2021 was for payment due to AstraZeneca under the AZ Termination Agreement related to the development milestone we earned upon the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia.
21

Table of Contents
Research and Development
Below is a summary of our research and development expenses (dollars in thousands):
Three Months Ended March 31,Change
20212020$%
External R&D expenses$11,508 $9,197 $2,311 25.1 %
Employee-related expenses7,220 4,994 2,226 44.6 %
Facilities, equipment and depreciation expenses1,284 1,593 (309)(19.4)%
Other444 60 384 640.0 %
Total research and development expenses$20,456 $15,844 $4,612 29.1 %
                            
The increase in our external R&D expenses for the three months ended March 31, 2021 is primarily the result of clinical study costs from the advancement of our OPTIMIZE study which were partially offset by lower costs for the PHREEDOM clinical study. The increase in our employee-related expenses for the three months ended March 31, 2021 is related to recruiting, compensation and benefits expenses for our research and development workforce.
General and Administrative
The increase in general and administrative expenses for the three months ended March 31, 2021 was primarily due to an increase in costs associated with building and staffing our commercial infrastructure and teams as we prepare for the U.S. launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. The increase consisted of headcount and related personnel costs and an increase in external spending for disease awareness initiatives, commercial infrastructure and strategy, partially offset by a decrease in stock-based compensation costs related to performance-based restricted stock units.
Other Income (Expense), net
Below is a summary of our other income (expense), net (dollars in thousands):
Three Months Ended March 31,Change
20212020$%
Interest expense$(1,100)$(1,357)$257 (18.9)%
Other income (expense), net(49)753 (802)(106.5)%
Total other income (expense), net$(1,149)$(604)$(545)90.2 %
Interest Expense
The decrease in interest expense for the three months ended March 31, 2021 was primarily due to lower interest rates on our variable-rate term loan.
Other Income, net
The decrease in other income (expense), net for the three months ended March 31, 2021 was primarily due to a decrease in investment income and an increase to the exit fee accretion related to our term loan agreement.
22

Table of Contents
Liquidity and Capital Resources
Below is a summary of our cash, cash equivalents and marketable securities (in thousands):
March 31, 2021December 31, 2020
Cash and cash equivalents$84,070 $91,032 
Marketable securities - current94,142 95,452 
Marketable securities - non-current— 2,114 
Total liquid funds$178,256 $188,642 
As of March 31, 2021, we had cash, cash equivalents and marketable securities totaling $178.2 million compared to $188.6 million as of December 31, 2020.
In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020, containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings; and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $100.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies LLC, deemed to be “at the market offerings.” During the three months ended March 31, 2021, we sold 4.9 million shares of our common stock for aggregate gross proceeds of $35.0 million at a weighted average price of $7.09 per share under the Open Market Sales Agreement. In aggregate during the life of the Open Market Sales Agreement, and as of March 31, 2021, we have sold 8.2 million shares of our common stock for gross proceeds of $56.7 million at a weighted average sales price of approximately $6.91 per share. Pursuant to the Open Market Sales Agreement, Jefferies, as sales agent, receives a commission of up to 3.0% of the gross sales price for shares of common stock sold under the Open Market Sales Agreement.
Our primary sources of cash have been from the sale and issuance of common stock (in both public offerings and private placements) and private placements of convertible preferred stock, funds from our collaboration partnerships and funds from our loan agreement. Our primary uses of cash are to fund operating expenses, primarily research and development expenditures and pre-commercial expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
Funding Requirements
We believe that our existing capital resources as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months following our financial statement issuance date. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In particular, our operating plan can change, and we may require significant additional capital to fund our operations, including to support the development, commercialization and manufacturing efforts for tenapanor. We may seek to obtain such additional capital through debt financings, credit facilities, additional equity offerings and/or strategic collaborations. We currently have no unutilized credit facility or committed sources of capital, and there can be no assurances that such sources of capital will be available to us when needed or on acceptable terms. There are numerous risks and uncertainties associated with research, development and commercialization initiatives, and actual results could vary materially as a result of a number of factors, many of which are outside of our control. Our future capital requirements are difficult to forecast and will depend on many factors, including:
the FDA’s actions and decisions with respect to the NDA submitted to the FDA on June 30, 2020 to request marketing authorization for tenapanor for the control of serum phosphorus in adult CKD patients on dialysis, including the FDA’s actions after the three-month extension of the PDUFA date to July 29, 2021;
•    our ability to successfully commercialize tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for another other related indication, if approved, either alone or with one or more collaboration partners;
•    the sales price and the availability of adequate third-party reimbursement for tenapanor, if approved;
•    the manufacturing costs of our product candidates, and the availability of one or more suppliers for our product candidates at reasonable costs, both for clinical and commercial supply;
23

Table of Contents
•    the selling and marketing costs associated with tenapanor, including the cost and timing of maintaining our sales and marketing capabilities;
•    our ability to maintain our existing collaboration partnerships and to establish additional collaboration partnerships, in-license/out-license, joint ventures or other similar arrangements and the financial terms of such agreements;
•    the timing, receipt, and amount of sales of, or royalties on, tenapanor, if any;
•    the cash requirements of any future acquisitions or discovery of product candidates;
•    the number and scope of preclinical and discovery programs that we decide to pursue or initiate, and any clinical trials we decide to pursue for other product candidates, including RDX013;
•    the time and cost necessary to respond to technological and market developments;
•    the costs of filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights, including litigation costs and the outcome of such litigation, including costs of defending any claims of infringement brought by others in connection with the development, manufacture or commercialization of tenapanor or any of our product candidates; and
•    the payment of interest and principal related to our loan and security agreement entered into with Solar Capital and Western Alliance Bank in May 2018, as amended in October 2020.
Please see the risk factors set forth in Part II, Item 1A, Risk Factors, in this Quarterly Report on Form 10-Q for additional risks associated with our capital requirements.
CASH FLOW ACTIVITIES
The following table summarizes our cash flows (in thousands):
Three Months Ended March 31,
20212020
Cash used in operating activities$(44,217)$(24,946)
Cash (used in) provided by investing activities2,485 (50,883)
Cash provided by financing activities34,770 591 
Net decrease in cash and cash equivalents$(6,962)$(75,238)

Cash Flows from Operating Activities
Net cash used in operating activities during the three months ended March 31, 2021 increased by $19.3 million as a result of our increased net loss for the period. The increased net loss was primarily driven by costs associated with building and staffing our commercial infrastructure and teams as we prepare for the U.S. launch of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. An increase of $12.7 million of cash used in prepaid expenses and other assets which was primarily for prepayments for raw materials and production of tenapanor also contributed to the increase in net cash used during the three months ended March 31, 2021.
Cash Flows from Investing Activities
Net cash provided by investing activities increased by $53.4 million as a our investment maturities increased to fully offset the cost to purchase investments. During the three months ended March 31, 2020, investment purchases exceeded maturities by approximately $50.9 million.
Cash Flows from Financing Activities
Net cash provided by financing activities increased by $34.2 million due to net proceeds from issuance of our common stock pursuant to the Open Market Sales Agreement, or at-the-market offering.
24

Table of Contents
Off-Balance Sheet Arrangements
As of March 31, 2021 and 2020, respectively, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K as promulgated by the SEC.
ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. We are subject to market risks, including interest rate fluctuation exposure through our investments, in the ordinary course of our business. However, the goals of our investment policy are the preservation of capital, fulfillment of liquidity needs and fiduciary control of cash. To achieve our goal of maximizing income without assuming significant market risk, we maintain our excess cash and cash equivalents in money market funds and short-term debt securities. Because of the short-term maturities of our cash equivalents, we do not believe that a decrease in interest rates would have any material negative impact on the fair value of our cash equivalents.
As of March 31, 2021, we had cash, cash equivalents and marketable securities of $178.2 million, which consist of bank deposits and money market funds, as well as high quality fixed income instruments including corporate bonds, commercial paper, and asset-backed securities collateralized by non-mortgage consumer receivables. The credit rating of our short-term investments must be rated A-1/P-1, or better by Standard and Poor’s and Moody’s Investors Service. Asset-backed securities must be rated AAA/Aaa. Money Market funds must be rated AAAm/Aaa. Such interest-earning instruments carry a degree of interest rate risk. However, because our investments are high quality and short-term in duration, we believe that our exposure to interest rate risk is not significant and that a 10% movement in market interest rates would not have a significant impact on the total value of our portfolio, as noted above. We do not enter into investments for trading or speculative purposes.
We are subject to interest rate fluctuation exposure through our borrowings under the Loan Agreement and our investment in money market accounts which bear a variable interest rate. Borrowings under the Loan Agreement bear interest at a rate equal to one-month London Interbank Offered Rate (“LIBOR”), plus 7.45% per annum. A hypothetical increase in one-month LIBOR of 100 basis points above the current one-month LIBOR rates would have increased our interest expense by approximately $0.1 million for the three months ended March 31, 2021. As of March 31, 2021, we had an aggregate principal amount of $50.0 million outstanding pursuant to our Loan Agreement.
Foreign Currency Risk. The majority of our transactions are denominated in U.S. dollars. However, we do have certain transactions that are denominated in currencies other than the U.S. dollar, primarily Swiss francs and the euro, and we therefore are subject to foreign exchange risk. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of expenses, assets and liabilities associated with a limited number of manufacturing activities.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge foreign currency exchange rate exposure in a manner that entirely offsets the earnings effects of changes in foreign currency exchange rates. The counterparties to our forward foreign currency exchange contracts are creditworthy commercial banks, which minimizes the risk of counterparty nonperformance.
As of March 31, 2021, we had no open forward foreign currency exchange contracts.
ITEM 4.       CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our principal executive officer and principal accounting and financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2021. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal accounting and financial officer have concluded that, as of March 31, 2021, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25

Table of Contents
We have not experienced any material impact to our internal controls over financial reporting, despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation to minimize the impact on the design and operating effectiveness of our internal controls over financial reporting.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
PART II.       OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS
From time to time, we may be involved in legal proceedings arising in the ordinary course of business. As of March 31, 2021, 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, 2021.
ITEM 1A.     RISK FACTORS
Our business involves significant risks, some of which are described below. You should carefully consider these risks, as well as other information in this Quarterly Report on Form 10-Q, including our condensed financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, cash flows, the trading price of our common stock and our growth prospects. Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Summary of Principal Risks Related to Our Business
•    We are substantially dependent on the success of our lead product candidate, tenapanor, which may not receive regulatory approval for the control of serum phosphorus in adult patients with CKD on dialysis or for any other related indication, and if approved, may not be successfully commercialized for such indication. On April 29, 2021, the U.S. Food and Drug Administration (“FDA”) determined that a submission we made in response to an information request from the FDA constituted a major amendment to our New Drug Application (“NDA”) for tenapanor for the control of serum phosphorus, resulting in a three-month extension of the PDUFA date to July 29, 2021. The FDA’s information request included a request for additional analyses of our clinical data. The FDA may act on our application by issuing either an approval letter or a Complete Response Letter (“CRL.”). Should we wish to pursue our application after receiving a CRL, we may, if possible, resubmit the application with information that addresses the questions or issues identified by the FDA in order to support approval. Resubmissions are subject to review period targets, which vary depending on the underlying submission type and the content of the resubmission.
•    Even if we are successful in obtaining regulatory approval for tenapanor for the control of serum phosphorus or for any other related indication, and tenapanor is ultimately commercialized for any approved indications, tenapanor may never achieve market acceptance, sufficient third-party coverage or reimbursement, or commercial success, which will depend, in part, upon the degree of acceptance among physicians, patients, patient advocacy groups, health care payors and the medical community. Additionally, if the number of patients in the market for tenapanor for the approved indication or the price that the market can bear is not as significant as we estimate, or if we are not able to secure adequate coverage and reimbursement for tenapanor, we may not generate sufficient revenue from sales of tenapanor.
•    Third-party payor coverage and reimbursement status of newly-approved products are uncertain. Failure to obtain or maintain adequate coverage and reimbursement for tenapanor, if approved, could limit our ability to market tenapanor for the approved indication and decrease our ability to generate revenue. For example, certain policies of the Biden
26

Table of Contents
administration with respect to drug pricing or reimbursement may impact our business and industry. While there is significant uncertainty related to the insurance coverage and reimbursement of newly approved products in general in the United States, there is additional uncertainty related to insurance coverage and reimbursement for drugs, like tenapanor, which, if approved, will be marketed for the approved indication for adult patients with CKD on dialysis. If we are successful in obtaining regulatory approval to market tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for any other related indication, our ability to generate and sustain future revenues from sales of tenapanor for such indication, may be dependent upon whether and when tenapanor, along with other oral end-stage renal disease (“ESRD”) related drugs without an injectable or intravenous equivalent, are bundled into the ESRD prospective payment system, and the manner in which such introduction into the ESRD prospective payment system may occur.
•    We have hired sales and marketing leadership and employees with technical expertise, and we are required to train, retain and incentivize those sales and marketing personnel. The FDA has extended our PDUFA date to July 29, 2021, and there can be no assurances that we will be successful in retaining our sales and marketing leadership or other key employees necessary for commercial launch throughout this extension, or that we will be able to replace any such leadership or other sales personnel that may leave the Company. Retaining and incentivizing our commercial personnel throughout our extended PDUFA date and thereafter will continue to be expensive and time consuming.
•    We rely completely on third parties to manufacture tenapanor and our other product candidates. If they are unable to comply with applicable regulatory requirements, unable to source sufficient raw materials, experience manufacturing or distribution difficulties or are otherwise unable to manufacture sufficient quantities to meet demand, our commercialization of tenapanor, if approved, and our development efforts for tenapanor, RDX013 and our other product candidates may be materially harmed.
•    We have a limited operating history, have incurred significant losses since our inception and will incur losses in the future, which makes it difficult for us to assess our future viability.
•    We have never generated any revenue from product sales and may never be profitable. Our ability to generate future revenue from product sales or pursuant to milestone payments is dependent upon many factors, including, but not limited to, obtaining regulatory approvals for tenapanor for the control of serum phosphorus or for any other related indication, and establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate supply of product to support the market demand for tenapanor; and obtaining market acceptance of tenapanor as a viable treatment option for the indications for which it is approved and commercialized.
•    We will require substantial additional financing to achieve our goals, and the inability to access this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our pre-commercialization efforts for tenapanor and our other product development and platform development activities
•    We may not be successful in our efforts to develop RDX013 or expand our pipeline of product candidates, as a result of numerous factors, which may include the inability to access capital necessary to fund such efforts on acceptable terms.
•    We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources.
•    The COVID-19 pandemic continues to rapidly evolve. The extent to which the pandemic may impact our business, manufacturing, preclinical development activities, preclinical studies, planned and ongoing clinical trials, as well as regulators' review of applications will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as, the duration of the pandemic, travel restrictions and actions to contain the pandemic or treat its impact, such as social distancing, quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. Specifically, while our Phase 3 clinical development of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for another other related indication is complete, we have ongoing and planned clinical trials for tenapanor or may be required to conduct additional clinical trials, that may be delayed as a result of the restrictions placed on access to dialysis centers during the COVID-19 pandemic or regulators' review of our applications.
27

Table of Contents
Other potential impacts of the COVID-19 pandemic on our various clinical trials, including our ongoing Phase 2 clinical trial for RDX013, include delays or difficulties in any planned clinical site initiation, including difficulties in obtaining Institutional Review Board approvals, recruiting clinical site investigators and clinical site staff, delays or difficulties in enrolling patients, interruption of planned key clinical trial activities, such as clinical trial site data monitoring due to diversion of resources at clinical sites or limitation on travel imposed by federal or state governments.
•    Our operating activities may be restricted as a result of covenants related to the indebtedness under our loan and security agreement and we may be required to repay the outstanding indebtedness in an event of default, which could have a materially adverse effect on our business.
•    Our products or product candidates may cause undesirable side effects or have other properties that could delay our clinical trials, or delay or prevent regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any regulatory approval that is achieved. If we or others identify undesirable side effects caused by any product candidate following receipt of marketing approval, the ability for us or a collaboration partner to achieve or maintain market acceptance of the approved product could be materially affected and could result in the loss of significant revenue to us, which would materially and adversely affect our results of operations and business.
•    The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, including tenapanor for the control of serum phosphorus, or any related indication, our business will be substantially harmed. Even if we receive regulatory approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, any product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
Principal Risks Related to Our Business
We are substantially dependent on the success of our lead product candidate, tenapanor, which may not receive regulatory approval for the control of serum phosphorus or for any other related indication or be successfully commercialized for hyperphosphatemia or IBS-C.
To date, we have invested a significant amount of our efforts and financial resources in the research and development of tenapanor, which is currently our lead product candidate. The commercial success of tenapanor will depend on a number of factors, including whether tenapanor’s safety and efficacy profile is satisfactory to the FDA and foreign regulatory authorities to gain marketing approval for the control of serum phosphorus, or any other related indication. On April 29, 2021, the FDA determined that a submission we made in response to an information request from the FDA constituted a major amendment to our NDA, resulting in a three-month extension of the PDUFA date to July 29, 2021. The FDA’s information request included a request for additional analyses of our clinical data. The FDA may act on our application by issuing an approval letter or a CRL. Should we wish to pursue an application after receiving a CRL, we may, if possible, resubmit the application with information that addresses the questions or issues identified by the FDA in order to support approval. Resubmissions are subject to review period targets, which vary depending on the underlying submission type, the content of the resubmission and regulators' ability to conduct the review. If we are successful in obtaining approval for tenapanor for the control of serum phosphorus, or for a related indication, the commercial success of tenapanor will depend on a number of additional factors, including the following:
•    the ability of the third-party manufacturers we contract with to provide an adequate (in amount and quality) supply of product to support the market demand for tenapanor for the treatment of IBS-C, and/or if approved, tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for another other related indication, particularly in light of the effects of the COVID-19 pandemic;
•    whether or not the content and breadth of the label approved by the FDA or foreign regulatory authorities may materially and adversely impact our ability or the ability of our collaboration partners to commercialize the product for the approved indication, or for any other indication;
•    whether we will be required to conduct clinical trials in addition to those anticipated to obtain regulatory approval or adequate commercial pricing;
•    the prevalence and severity of adverse side effects of tenapanor;
•    the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities;
28

Table of Contents
•    our ability, either alone, or with a collaboration partner, to successfully commercialize tenapanor, if approved for marketing and sale by the FDA or foreign regulatory authorities, including educating physicians and patients about the benefits, administration and use of tenapanor;
•    achieving and maintaining compliance with all regulatory requirements applicable to tenapanor;
•    acceptance of tenapanor as safe, effective and well-tolerated by patients and the medical community;
•    our ability, alone or with collaboration partners, to manage the complex pricing and reimbursement negotiations associated with marketing the same product at different doses for separate indications for tenapanor for the treatment of IBS-C, and, if approved, for the control of serum phosphorus in adult patients with CKD on dialysis or for another other related indication;
•    the availability, perceived advantages, relative cost, relative safety and relative efficacy of tenapanor compared to alternative and competing treatments;
•    obtaining and sustaining an adequate level of coverage and reimbursement for tenapanor by third-party payors;
•    enforcing intellectual property rights in and to tenapanor;
•    avoiding third-party interference, opposition, derivation or similar proceedings with respect to our patent rights, and avoiding other challenges to our patent rights and patent infringement claims; and
•    a continued acceptable safety and tolerability profile of tenapanor following approval.
As tenapanor is a first-in-class drug, there is a higher likelihood that approval may not be attained as compared to a class of drugs with approved products. Although tenapanor met the primary endpoints in all of the three Phase 3 clinical trials evaluating tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis, the FDA requested additional analyses of the clinical data submitted in our NDA in order to more fully evaluate our clinical data, including as compared to approved therapies. The submission of the new analyses was determined to be a major amendment to our NDA, and resulted in a three month extension of our PDUFA date. There can be no assurances that we will receive regulatory approval to market tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for any other related indication. The FDA, after consideration of our submission may issue a CRL. Further, it may not be possible or practicable to demonstrate, or if approved, to market tenapanor on the basis of certain of the benefits we believe tenapanor possesses. If the number of patients in the market for tenapanor based on the approved indication or the price that the market can bear is not as significant as we estimate, or if we are not able to secure adequate coverage and reimbursement for tenapanor, we may not generate sufficient revenue from sales of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for any other related indication, if approved, or for IBS-C if commercialized. There can be no assurance that tenapanor will ever be successfully commercialized or that we will ever generate income from sales of tenapanor. If we are not successful in obtaining approval for tenapanor for the control of serum phosphorus or for any other related indication, or we are not successful in commercializing tenapanor, or are significantly delayed in doing so, our business will be materially harmed.
Even if we are successful in obtaining regulatory approval for tenapanor for the control of serum phosphorus or for any other related indication, and tenapanor is ultimately commercialized for any approved indications, tenapanor may never achieve market acceptance, sufficient third-party coverage or reimbursement, or commercial success, which will depend, in part, upon the degree of acceptance among physicians, patients, patient advocacy groups, health care payors and the medical community.
Market acceptance of tenapanor for IBS-C and, in the event that marketing approval is obtained, for the control of serum phosphorus or for another other related indication, depends on a number of factors, including:
•    the breadth and content of the approved label, and the clinical indications for which it is approved;
•    the efficacy demonstrated in our clinical trials;
•    with respect to tenapanor for the control of serum phosphorus or for another other related indication, whether tenapanor, along with other oral only medications, are included in the bundled prospective payment system for the treatment of ESRD patients, and the time and manner in which such transition is achieved;
29

Table of Contents
•    the prevalence and severity of any side effects and overall safety and tolerability profile of the product;
•    advantages over new or traditional or existing therapies, including recently approved therapies or therapies that the physician community anticipate will be approved;
•    acceptance by physicians, major operators of clinics and patients of tenapanor as a safe, effective and well-tolerated treatment;
•    relative convenience and ease of administration of tenapanor;
•    the potential and perceived advantages of tenapanor over current treatment options or alternative treatments, including future alternative treatments;
•    the cost of treatment in relation to alternative treatments and the willingness to pay for tenapanor, if approved, on the part of physicians and patients;
•    the availability of alternative products and their ability to meet market demand; and
•    the quality of our relationships with patient advocacy groups.
Any failure of tenapanor to achieve market acceptance, sufficient third-party coverage or reimbursement, or commercial success for any approved indications would adversely affect our results of operations.
If we are not able to retain our sales and marketing leadership and other key employees during the extended PDUFA date, and we are not able to replace any lost personnel we may not be able to commercialize tenapanor or any of our other product candidates.
If approved, we currently plan to commercialize tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis or for another related indication, on our own. We have hired sales leadership and sales employees with technical expertise, and we are required to train, retain and incentivize those sales personnel. The FDA has extended our PDUFA date to July 29, 2021, and there can be no assurances that we will be successful in retaining our sales and marketing leadership or other key employees necessary for commercial launch throughout this extension, or that we will be able to replace any such leadership or other sales personnel that may leave the Company. Retaining and incentivizing our commercial personnel throughout our extended PDUFA date and thereafter will continue to be expensive and time consuming. Even if we are able to retain our key sales and marketing leadership during this extended PDUFA date, and tenapanor is approved for the control of serum phosphorus in adult patients with CKD on dialysis, or any related indication, as a company, we have no prior experience in the marketing, sale and distribution of pharmaceutical products and there are significant risks involved in managing and retaining a sales organization, including our ability to secure the capital necessary to fund such efforts on acceptable terms, provide adequate training to sales and marketing personnel, comply with regulatory requirements applicable to the marketing and sale of drug products and effectively manage a geographically dispersed sales and marketing team.
If we fail to maintain or replace our internal sales, marketing and distribution capabilities, we may need to delay the commercialization of tenapanor for the control of serum phosphorus or for another other related indication, if approved, or such commercialization could be adversely impacted.
Third-party payor coverage and reimbursement status of newly-approved products are uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our products, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The pricing, coverage and reimbursement of our product candidates, if approved, must be adequate to support a commercial infrastructure. The availability and adequacy of coverage and reimbursement by governmental and private payors are essential for most patients to be able to afford treatments such as ours, assuming approval. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid for by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations, or reimbursed by government authorities, private health insurers, and other third-party payors. If coverage and reimbursement are not available, or are available only to limited levels, we, or our collaboration partners, may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a return on our investment.
30

Table of Contents
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about coverage and reimbursement for new drugs are typically made by the Centers for Medicare & Medicaid Services (“CMS”), an agency within the United States Department of Health and Human Services responsible for administering the Medicare program, as CMS decides whether and to what extent a new drug will be covered and reimbursed under Medicare. Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for products such as ours.
There is increased uncertainty related to insurance coverage and reimbursement for drugs, like tenapanor, which, if approved, will be marketed for the control of serum phosphorus in CKD patients on dialysis or for another other related indication. In January 2011, CMS implemented a new prospective payment system for dialysis treatment. Under the ESRD prospective payment system, CMS generally makes a single bundled payment to the dialysis facility for each dialysis treatment that covers all items and services routinely required for dialysis treatments furnished to Medicare beneficiaries in Medicare-certified ESRD facilities or at their home, including the cost of certain routine drugs. The inclusion of oral medications without injectable or intravenous equivalents in the bundled payment was initially delayed until January 1, 2014 and through several subsequent legislative actions was delayed until January 1, 2025. As a result, absent further legislation or regulation on this matter, beginning in 2025, oral ESRD-related drugs without injectable or intravenous equivalents may be included in the ESRD bundle and separate Medicare payment for these drugs will no longer be available, as is the case today under Medicare Part D. While it is too early to project the full impact that bundling may have on tenapanor and our business should tenapanor be brought into the bundle in 2025, or at any time, we may be unable to sell tenapanor, if approved, to dialysis providers on a profitable basis if third-party payors reduce their current levels of payment, or if our costs of production are higher than levels necessary for an appropriate gross margin after payment of all discounts, rebates and chargebacks.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, Japan, China and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medicinal products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, these caps may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
We rely completely on third parties to manufacture tenapanor and our other product candidates. If they are unable to comply with applicable regulatory requirements, unable to source sufficient raw materials, experience manufacturing or distribution difficulties or are otherwise unable to manufacture sufficient quantities to meet demand, our commercialization of tenapanor, if approved, and our development efforts for tenapanor, RDX013 and our other product candidates may be materially harmed.
We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture tenapanor or any of other our product candidates on a commercial scale, or to manufacture our drug supplies for use in the conduct of our nonclinical and clinical studies. The facilities used by our contract manufacturers to manufacture our drug supply are subject to inspection by the FDA. Our ability to control the manufacturing process of our product candidates is limited to the contractual requirements and obligations we impose on our contract manufacturer. Although they are contractually required to so do, we are completely dependent on our contract manufacturing partners for compliance with the regulatory requirements, known as current Good Manufacturing Practice requirements (“cGMPs”), for manufacture of both active drug substances and finished drug products.
The manufacture of pharmaceutical products requires significant expertise and capital investment. Manufacturers of pharmaceutical products often encounter difficulties in commercial production. These problems may include difficulties with production costs and yields, quality control, including stability of the product and quality assurance testing, and shortages of qualified personnel, as well as compliance with federal, state and foreign regulations and the challenges associated with complex supply chain management. Even