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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 June 30, 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/134e97bba5e8f303ee8877f9a5b5b37a-ardx-20210630_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 August 10, 2021, was 103,119,010.


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ARDELYX, INC.
PAGE
20 
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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)
June 30,
2021
December 31,
2020
Assets    
Current assets:    
Cash and cash equivalents$86,745 $91,032 
Short-term investments85,064 95,452 
Prepaid expenses and other current assets14,683 8,202 
Total current assets186,492 194,686 
Property and equipment, net2,666 1,936 
Long-term investments 2,114 
Right-of-use assets, net14,519 2,274 
Other assets1,305 552 
Total assets$204,982 $201,562 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$2,587 $5,626 
Accrued compensation and benefits5,939 5,672 
Current portion of operating lease liability3,184 2,117 
Loan payable, current portion36,111 4,167 
Deferred revenue1,412 4,177 
Accrued expenses and other current liabilities8,552 6,657 
Total current liabilities57,785 28,416 
Operating lease liability, net of current portion11,548 413 
Loan payable, net of current portion15,133 46,621 
Deferred revenue, non-current2,947  
Total liabilities87,413 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 June 30, 2021 and December 31, 2020, respectively.
  
Common stock, $0.0001 par value; 300,000,000 shares authorized; 102,967,017 and 93,599,975 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.
10 9 
Additional paid-in capital750,664 680,872 
Accumulated deficit(633,109)(554,765)
Accumulated other comprehensive income (loss)4 (4)
Total stockholders’ equity117,569 126,112 
Total liabilities and stockholders’ equity$204,982 $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 June 30,Six Months Ended June 30,
2021202020212020
Revenues:        
Collaborative development revenue$1,310 $1,125 $2,764 $2,300 
Product supply revenue 5 126 43 
Licensing revenue3 706 5,005 706 
Total revenues1,313 1,836 7,895 3,049 
Operating expenses:
Cost of revenue 141 1,000 141 
Research and development26,021 18,864 46,477 34,708 
General and administrative20,124 7,038 37,255 14,176 
Total operating expenses46,145 26,043 84,732 49,025 
Loss from operations(44,832)(24,207)(76,837)(45,976)
Interest expense(1,202)(1,226)(2,302)(2,583)
Other income, net847 477 798 1,230 
Loss before provision for income taxes(45,187)(24,956)(78,341)(47,329)
Provision for income taxes2  3  
Net loss$(45,189)$(24,956)$(78,344)$(47,329)
Net loss per common share, basic and diluted$(0.45)$(0.28)$(0.79)$(0.53)
Shares used in computing net loss per share - basic and diluted100,040,083 89,080,046 98,617,564 88,890,353 
Comprehensive loss:
Net loss$(45,189)$(24,956)$(78,344)$(47,329)
Unrealized gains on available-for-sale securities11 361 8 297 
Comprehensive loss$(45,178)$(24,595)$(78,336)$(47,032)
The accompanying notes are an integral part of these condensed financial statements.

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ARDELYX, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three and Six Months ended June 30, 2021
(Unaudited)
(in thousands, except shares)
Three Months Ended June 30, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders'
Equity
SharesAmount
Balance as of March 31, 202198,688,577 $10 $718,728 $(587,920)$(7)$130,811 
Issuance of common stock under employee stock purchase plan— — — — — — 
Issuance of common stock upon exercise of options194,799 — 543 — — 543 
Issuance of common stock upon vesting of restricted stock units44,684 — — — — — 
Issuance of common stock in at-the-market offering4,038,957 — 28,174 28,174 
Stock-based compensation— — 3,219 — — 3,219 
Unrealized gains on available-for-sale securities— — — — 11 11 
Net loss— — — (45,189)— (45,189)
Balance as of June 30, 2021102,967,017 $10 $750,664 $(633,109)$4 $117,569 

Six Months Ended June 30, 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 options205,306 — 563 — — 563 
Issuance of common stock upon vesting of restricted stock units79,784 — — — — — 
Issuance of common stock in at-the-market offering8,979,744 1 62,445 — — 62,446 
Stock-based compensation— — 6,306 — — 6,306 
Unrealized gains on available-for-sale securities— — — — 8 8 
Net loss— — — (78,344)— (78,344)
Balance as of June 30, 2021102,967,017 $10 $750,664 $(633,109)$4 $117,569 

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









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ARDELYX, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three and Six Months ended June 30, 2020
(Unaudited)
(in thousands, except shares)

Three Months Ended June 30, 2020
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders'
Equity
SharesAmount
Balance as of March 30, 202089,035,096 $9 $650,617 $(482,825)$(44)$167,757 
Issuance of common stock for services42,403 — 310 — — 310 
Issuance of common stock upon exercise of options63,064 — 204 — — 204 
Stock-based compensation— — 2,674 — — 2,674 
Unrealized gains on available-for-sale securities— — — — 361 361 
Net loss— — — (24,956)— (24,956)
Balance as of June 30, 202089,140,563 $9 $653,805 $(507,781)$317 $146,350 

Six Months Ended June 30, 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 for services42,403 — 310 — — 310 
Issuance of common stock upon exercise of options204,615 — 420 — — 420 
Stock-based compensation— — 5,622 — — 5,622 
Unrealized gains on available-for-sale securities— — — — 297 297 
Net loss— — — (47,329)— (47,329)
Balance as of June 30, 202089,140,563 $9 $653,805 $(507,781)$317 $146,350 
The accompanying notes are an integral part of these condensed financial statements.

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ARDELYX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended June 30,
20212020
Operating activities    
Net loss$(78,344)$(47,329)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense787 960 
Amortization of deferred financing costs316 282 
Amortization of deferred compensation for services145 158 
Amortization of (discount) premium on investment securities274 (227)
Non-cash lease expense1,318 1,025 
Stock-based compensation6,306 5,622 
Change in derivative liabilities(713)152 
Non-cash interest associated with debt discount accretion141 257 
Changes in operating assets and liabilities:
Prepaid expenses and other assets(7,379)(2,144)
Accounts payable(3,039)2,025 
Accrued compensation and benefits267 (1,372)
Operating lease liabilities(1,361)(1,251)
Accrued and other liabilities2,607 174 
Deferred revenue182 (2,300)
Net cash used in operating activities(78,493)(43,968)
Investing activities
Proceeds from maturities and redemptions of investments60,550 25,519 
Purchases of investments(48,314)(62,960)
Purchases of property and equipment(1,517)(25)
Net cash provided by (used in) investing activities10,719 (37,466)
Financing activities
Proceeds from issuance of common stock in at-the-market offering, net of issuance costs62,446  
Proceeds from issuance of common stock under equity incentive and stock purchase plans1,041 795 
Net cash provided by financing activities63,487 795 
Net decrease in cash and cash equivalents(4,287)(80,639)
Cash and cash equivalents at beginning of period91,032 181,133 
Cash and cash equivalents at end of period$86,745 $100,494 
Supplementary disclosure of cash flow information:
Cash paid for interest$1,936 $2,146 
Cash paid for income taxes$3 $ 
Supplementary disclosure of non-cash activities:
Right-of-use assets obtained in exchange for lease obligations$14,379 $ 
Issuance of common stock for services$ $311 
The accompanying notes are an integral part of these condensed financial statements.

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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 biopharmaceutical company focused on the discovery, development, and commercialization of innovative first-in-class medicines to improve treatment for people 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 June 30, 2021 and results of operations, changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 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 and six months ended June 30, 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 June 30, 2021, we had cash, cash equivalents and marketable securities of approximately $171.8 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.

On July 28, 2021, we received a Complete Response Letter ("CRL") from the U.S. Food and Drug Administration ("FDA") regarding our New Drug Application ("NDA") for the control of serum phosphorus in adult patients with chronic kidney disease ("CKD") on dialysis in which the FDA noted additional requirements would need to be met in order to obtain approval for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis. On July 29, 2021 we entered into a Fourth Amendment to our Term Loan Agreement which extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021, provided, however, if the FDA does not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on or before October 25, 2021, then the interest-only period will expire and principal repayments will be required to begin on November 1, 2021. Further, on July 29, 2021, our Board of Directors approved, and on August 2, 2021 we began implementing, a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL. For additional information see Note 12, Subsequent Events.

Failure to raise sufficient capital when needed or generate product revenue will further impact our ability to pursue our business strategies and could require us to further delay, scale back or discontinue one or more of our product development programs, commercialization efforts, or other aspects of our business plans.
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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
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. On June 30, 2021, our public float exceeded $700 million and therefore, on December 31, 2021, we will no longer qualify as a “smaller reporting company” and will instead be considered a large accelerated filer. We expect to adopt Topic 326 in the fourth quarter of 2021. We do not expect the adoption of ASU 2016-13 to have a material impact on our financial statements and related disclosures.
NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS
Securities classified as cash, cash equivalents and investments as of June 30, 2021 and December 31, 2020 are summarized below (in thousands):
June 30, 2021
Gross Unrealized
Amortized CostGainsLossesFair Value
Cash and cash equivalents:
Cash$845 $— $— $845 
Money market funds84,650 — — 84,650 
Commercial paper1,250 — — 1,250 
Total cash and cash equivalents86,745 — — 86,745 
Short-term investments
Commercial paper$62,719 $6 $ $62,725 
Corporate bonds16,964 1 (1)16,964 
Asset-backed securities5,376  (1)5,375 
Total short-term investments85,059 7 (2)85,064 
Total cash equivalents and investments$171,804 $7 $(2)$171,809 
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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 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 June 30, 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 June 30, 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 investments in a loss position 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.
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The following table sets forth the fair value of our financial assets and liabilities that are measured or disclosed on a recurring basis by level within the fair value hierarchy (in thousands):
June 30, 2021
Total
Fair Value
Level 1Level 2Level 3
Assets:
Money market funds$84,650 $84,650 $ $ 
Commercial paper63,975  63,975  
Corporate bonds16,964  16,964  
Asset-backed securities5,375  5,375  
Total$170,964 $84,650 $86,314 $ 
Liabilities:
Derivative liability for Exit Fee$663 $ $ $663 
Total$663 $ $ $663 

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 6, are classified as Level 3.
The carrying amounts reflected in the balance sheets for cash equivalents, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both June 30, 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 June 30, 2021 and December 31, 2020.
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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 paid us a non-refundable, non-creditable upfront fee of $10.0 million in two installments as follows: the first installment of $5.0 million within 30 days of November 11, 2019 (the “Effective Date”), and the second installment of $5.0 million on the first anniversary of the Effective Date. The 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 and six months ended June 30, 2021, we recognized $1.3 million and $2.8 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss. During the three and six months ended June 30, 2020, we recognized $1.1 million and $2.3 million, respectively, as collaborative development 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 June 30, 2021 and December 31, 2020 was $1.4 million and $4.2 million, respectively, which is presented in the accompanying condensed balance sheet as deferred revenue. As of June 30, 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 six months ended June 30, 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 received and recognized as revenue as of June 30, 2021, and approximately ¥8.5 billion for commercialization milestones, or approximately $76.5 million at the currency exchange rate on June 30, 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 June 30, 2021.
During the three and six months ended June 30, 2021 we recognized zero and $5.0 million, respectively, as licensing revenue upon the achievement of development milestones. During the three and six months ended June 30, 2020, we
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recognized no 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 hyperphosphatemia. During the three and six months ended June 30, 2021, we recognized zero and $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. During the three and six months ended June 30, 2020, we recognized $5.0 thousand and $43.0 thousand as product supply revenue.
During the three and six months ended June 30, 2021 we received a $2.9 million prepayment 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 June 30, 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 June 30, 2021.
We have recorded no revenue during the three and six months ended June 30, 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 $17.9 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 June 30, 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 June 30, 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 and six months ended June 30, 2021 we recognized and recorded as cost of revenue zero and $1.0 million related to the AstraZeneca Termination Agreement. For the three and six months ended June 30, 2020 we recognized $0.1 million cost of revenue related to the AstraZeneca Termination Agreement.
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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 (in thousands):
Deferred revenue - current
Balance at December 31, 2020$4,177 
Decreases due to revenue recognized in the period for which cash has been received(2,765)
Balance at June 30, 2021$1,412 

Deferred revenue - non-current
Balance at December 31, 2020$ 
Increases to amounts invoiced for which cash has been received2,947 
Balance at June 30, 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 required that if either the FDA does not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before May 31, 2021 or the 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 and July 2021, we and the Lenders entered into additional amendments to the Loan Agreement (“the 2021 Amendments”) which together extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021; provided that if we have not received FDA approval for our NDA for tenapanor for the control of serum phosphorus in adult patients with CDK on dialysis on or before October 25, 2021, the interest-only period will expire and principal repayments shall be required to begin on November 1, 2021. If principal repayments are required to begin prior to December 1, 2021 under the 2021 Amendments, then the first such repayment shall include all payments that would have been due if monthly principal repayment had begun on June 1, 2021. As of June 30, 2021, we have classified our loan payable, current to include all principal payments that would have been due beginning 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, $0.1 million upon closing of the 2020 Amendment and $0.1 million upon closing of the 2021 Amendments. 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
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Term Loan, including our cash. Upon the occurrence and for the duration of an event of default, an additional default interest rate equal to 4% per annum will apply to all amounts owed under the Loan Agreement. As of June 30, 2021, to our knowledge, there were no facts or circumstances in existence that would give rise to an event of default.
As of June 30, 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(378)
Less: Unaccreted value of final fee(853)
Loan payable51,244 
Less: Loan payable, current portion(36,111)
Loan payable, net of current portion$15,133 
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, net in our statements of operations and were as follows for the six months ended June 30, 2021 and 2020 (in thousands):
Six Months Ended June 30,
20212020
Fair value of Exit Fee derivative liability at January 1$1,376 $969 
Change in estimated fair value of derivative liability(713)152 
Fair value of Exit Fee derivative liability at June 30$663 $1,121 

During the three months ended June 30, 2021 we reduced the value of the derivative liability due the receipt of the CRL from the FDA regarding our NDA for the control of serum phosphorus in adult patients with CKD on dialysis.
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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.
During the six months ended June 30, 2021, we entered into an amendment to the lease for our Fremont, California facility that extended the term of the lease to March 2025. The office space consists of 72,500 square feet with the lease terminating in September 2025. We increased the right-of-use asset and lease liability by $11.9 million for the Fremont lease upon commencement of the amendment.
During the six months ended June 30, 2021, we recorded a right-of-use operating lease asset for a new facility in Waltham, Massachusetts under a lease agreement entered into during December 2020 with lease commencement dates during April and May 2021. The office space consists of 12,864 square feet with the lease terminating in June 2026. We have an option to extend the lease term for one additional five year period. This option to extend the lease term has not been included in the calculation since currently the exercise of the option is uncertain and therefore deemed not probable. We recorded a $1.6 million right-of-use asset and lease liability for the Waltham lease upon commencement of the lease.
The following table provides additional details of our facility leases presented in the condensed balance sheet as of June 30, 2021 (dollars in thousands):
Facilities
Right-of-use assets$14,519
Current portion of lease liabilities3,184
Operating lease liability, net of current portion11,548
Total$14,732
Weighted-average remaining life (years)3.90
Weighted-average discount rate6.87 %
Lease costs, which are included in operating expenses in our statements of operations, were as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Operating lease expense$837 $648 $1,510 $1,296 
Cash paid for operating leases$766 $761 $1,554 $1,521 
The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of June 30, 2021 (in thousands):
Remainder of 2021$1,978 
20224,292 
20234,440 
20244,589 
20251,321 
Thereafter252 
Total undiscounted operating lease payments16,872 
Imputed interest expenses(2,140)
Total operating lease liabilities14,732 
Less: Current portion of operating lease liability(3,184)
Operating lease liability, net of current portion$11,548 
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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 six months ended June 30, 2021 we sold 9.0 million shares of our common stock for aggregate gross proceeds of $63.8 million at a weighted average price of $7.10 per share under the Open Market Sales Agreement. We sold 8.2 million shares of our common stock between the dates of November 13, 2020 through February 19, 2021 and 4.0 million shares between the dates of May 11, 2021 through June 18, 2021 for a cumulative total of 12.2 million shares and gross proceeds of $85.4 million at a weighted average sales price of approximately $6.98 per share during the life of the Open Market Sales Agreement. Pursuant to the Open Market Sales Agreement, Jefferies, as our 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-Based Compensation
Stock-based compensation expense recognized for stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PRSUs") and our employee stock purchase program (the "ESPP") are recorded as operating expenses in our condensed statements of operations and comprehensive loss, as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Research and development$1,087 $1,144 $2,179 $2,202 
General and administrative2,132 1,530 4,127 3,420 
Total$3,219 $2,674 $6,306 $5,622 
As of June 30, 2021, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands):
Unrecognized Compensation
 Expense
Average Remaining
 Vesting Period (Years)
Stock options$25,267 2.8
RSUs$6,978 3.6
ESPP$151 0.2
Stock Options
A summary of our stock option activity and related information for the six months ended June 30, 2021 is as follows (in thousands, except dollar amounts):
Number of SharesWeighted Average Exercise Price
Outstanding balance at December 31, 20209,790 $6.76 
Granted3,328 $6.62 
Exercised(205)$2.75 
Forfeited(401)$7.56 
Outstanding balance at June 30, 202112,511 $6.76 
Exercisable at June 30, 20216,043 $7.38 
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Restricted Stock Units
A summary of our RSUs activity and related information for the six months ended June 30, 2021 is as follows (in thousands, except dollar amounts):
Number of RSUsWeighted Average Value at Grant
Outstanding balance at December 31, 2020159 $5.64 
Granted1,088 $6.62 
Vested(80)$6.43 
Forfeited(32)$6.10 
Unvested at June 30, 20211,135 $6.52 
We issued no PRSUs during the six months ended June 30, 2021 and we have no PRSUs outstanding as of June 30, 2021.
Employee Stock Purchase Plan
In February 2021, we sold approximately 0.2 million shares of our common stock under 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. During the six months ended June 30, 2021, we issued no shares of our common stock to members of the board of directors in accordance with the program.
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 three and six months ended June 30, 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 (in thousands, except per share amounts):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Numerator:
Net loss$(45,189)$(24,956)$(78,344)$(47,329)
Denominator:
Weighted average common shares outstanding - basic and diluted100,040