ITEM 7. 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 our financial statements and related notes included elsewhere in this report. This discussion and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectationsand 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,” “we,” “us,” “our” and “the Company” refer to Ardelyx, Inc.

EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS

We are a biopharmaceutical company founded with a mission to discover, develop and commercialize innovative, first-in-class medicines that meet significant unmet medical needs. We developed a unique and innovative platform that enabled the discovery of new biological mechanisms and pathways to develop potent and efficacious therapies that minimize the side effects and drug-drug interactions frequently encountered with traditional, systemically absorbed medicines. The first molecule we discovered and developed was tenapanor, a minimally absorbed, first-in-class, oral, small molecule therapy. Tenapanor, branded as IBSRELA®, is approved in the U.S. for the treatment of adults with IBS-C. Tenapanor, branded as XPHOZAH®, is approved in the U.S. to reduce serum phosphorus in adults with CKD on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

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Below is a summary of our product sales, net by product for the years ended December 31 and total cash, cash equivalents and short-term investments as of December 31:

Cash, cash equivalents and short-term investments $ 250,100 $ 184,299

IBSRELA and XPHOZAH product sales have continually grown since their respective commercial launches. IBSRELA net sales growth was attributed to patient demand for this first-in-class therapy as well as increased product awareness achieved through the IBSRELA field-based team. XPHOZAH’s commercial launch has been met with a strong response from the prescribing community and net sales continued to increase during 2024, the first full year of commercialization. As of January 1, 2025, we no longer receive reimbursement for XPHOZAH from Medicare Part D following the decision by the Centers of Medicare and Medicaid Services to eliminate Medicare Part D reimbursement to transition oral only therapies, including XPHOZAH, into the End Stage Renal Disease Prospective Payment System. Patient access to XPHOZAH remains through a prescription written by a qualifying healthcare provider through our ArdelyxAssist specialty pharmacy partner. Patients who do not have affordable access will be evaluated for eligibility to receive XPHOZAH fulfilled by our Ardelyx patient assistance program.

The increase in our cash, cash equivalents and short-term investment was attributed to higher product sales, net and incremental borrowings. During 2024, we amended the 2022 Loan Agreement with SLR and drew an additional $100.0 million in debt as discussed in Note 9. Borrowing. We expect that we will increasingly rely on cash generated from operations to fund our operating plan. We believe our existing cash, cash equivalents and short-term investments, and cash generated from operations will be sufficient to satisfy our anticipated cash needs for operations for at least the next few years. Our access to additional capital, including our ability to source cash from future equity sales and debt financing, provides us financial flexibility to execute our principal strategy as discussed below.

Strategy

We are committed to our mission of discovering, developing and commercializing first-in-class medicines that address unmet patient needs. Our principal strategy is to maintain our commercial momentum with our current products while identifying additional assets that leverage our core capabilities, including clinical, developmental and regulatory expertise and commercial excellence while maintaining a solid financial foundation, to support our future growth.

Our priorities include: (i) accelerating IBSRELA growth momentum; (ii) executing our XPHOZAH strategy to grow utilization; (iii) building a pipeline focused on areas of unmet patient need; and (iv) continuing to deliver strong commercial and financial performance.

RECENT ACCOUNTING PRONOUNCEMENTS

A summary of recent accounting pronouncements that we have adopted or may expect to adopt is included in Note 2. Summary Of Significant Accounting Policies in the notes to our financial statements, included in Part II, Item 8, of this Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A detailed discussion of our significant accounting policies can be found in Note 2. Summary Of Significant Accounting Policies, in the notes to our financial statements, included in Part II, Item 8, of this Annual Report on Form 10-K. The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Our critical accounting policies are those that significantly affect our financial condition and results of operations and require the most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain.

While we believe that our estimates, assumptions and judgments are reasonable, they are based on information available when the estimate or assumption was made. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

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Revenue Recognition

The application of ASC 606 Revenue from Contracts with Customers substantially impacts our reported results, particularly product sales, net, which requires certain estimates in determining the transaction price. Total revenues are recognized following a five-step model: (i) identify the customer contract; (ii) identify the contract’s performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when or as a performance obligation is satisfied.

Product Sales, Net

GTN adjustments are primarily a function of sales volume, payor mix, contractual or legislative discounts and rebates. The transaction price for product sales, net is reduced for estimates of variable consideration related to GTN adjustments for discounts and chargebacks, rebates, wholesaler and GPO fees, copay assistance and returns. Except for certain wholesaler and GPO fees and discounts, which are based on contracts, these adjustments involve estimation and judgment. The GTN adjustments for rebates, copay assistance and chargebacks are impacted by our estimate of payor mix, which requires significant judgment. We consider legal interpretations of applicable laws and regulations, historical experience, current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel in determining our estimates. Estimates are assessed each period and adjusted as required to revise information or actual experience.

Discounts and chargebacks:

Our U.S. business participates in programs with government entities, the most significant of which are the U.S. Department of Defense and the U.S. Department of Veterans Affairs, and other parties, including covered entities under the 340B program, whereby pricing on products is extended below wholesaler list price to participating entities. These entities purchase products through wholesalers at the lower program price and the wholesalers then charge us the difference between their acquisition cost and the lower program price. Accounts receivable is reduced for the estimated amount of unprocessed chargeback claims attributable to a sale (typically within a two to four week time lag).

Our Customers may also receive prompt pay discounts for payment within a specified period, generally approximating two percent of the invoiced sales price. Our payment terms are generally 30 to 60 days. We expect discounts to be earned when offered and we deduct the full amount of these discounts from product sales when revenue is recognized.

Accounts receivable is reduced for the estimated amount of fees and cash discount at the time of sale and the discount is typically taken by the customer within contractual terms.

Rebates, wholesaler and GPO fees:

Our U.S. business participates in state government Medicaid and Medicare programs and other qualifying Federal and state government programs requiring discounts and rebates to participating state and local government entities. All discounts and rebates provided through these programs are included in our Medicaid and Medicare rebate accruals. Medicaid rebates have also been extended to drugs used in managed Medicaid plans. The estimated amount of unpaid or unbilled rebates and discounts is presented as a liability. Settlement of Medicare and Medicaid accruals can lag for multiple quarters due to extensive time delays between recording an accrual and subsequent receipt of an invoice. Due to this lag, adjustments can incorporate revision of several prior quarters. Through December 31, 2024, we paid a 70% discount to CMS when the Medicare Part D beneficiaries were in the coverage gap. Beginning in 2025, as part of the Medicare Part D redesign within the IRA, there is a $2,000 cap for out-of-pocket costs for Medicare Beneficiaries and manufacturers are responsible for 10% of costs up to the cap and 20% after the cap is reached.

Wholesaler and GPO administrative fees are a significant portion of our GTN adjustments, however, since they are based on contracts, they require inherently less estimation.

Copay assistance and returns:

Patients who have commercial insurance may receive copay assistance when product is dispensed by pharmacies to patients. We estimate the amount of copay assistance provided to eligible patients based on the terms of the program and redemption information provided by third-party claims processing organizations. We also estimate the amount of copay assistance that we will provide to patients associated with product we have sold but has not yet been dispensed to commercial patients, which requires significant estimation and judgment. Our estimates are recorded in accrued expenses and other current liabilities on the balance sheets.

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Considering the timing of our respective product launches, and limited experiences with returns, we are primarily reliant on historical sales returns of similar products, such as those within the same product line, similar therapeutic area, similar distribution model, estimated levels of inventory in the distribution channel and projected demand. We increasingly rely on our products’ actual returns history and other factors, including levels of our inventory in the distribution channel and estimated shelf life, to estimate our returns. Our estimates are recorded in accrued expenses and other current liabilities on the balance sheets.

Use of Information from External Sources:

Information from external sources is used to estimate GTN adjustments. Our estimate of inventory at the wholesalers is based on the historical inventory experience, as well as our analysis of third-party information, including written and oral information obtained from certain wholesalers with respect to their inventory levels and sell-through to customers and our internal information. The inventory information received from wholesalers is a product of their recordkeeping process and excludes inventory held by intermediaries to whom they sell, such as retailers and hospitals. We also use information from external sources to identify prescription trends, patient demand and average selling prices. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information was itself in the form of estimates and reflect other limitations including lags between the date as of which third-party information is generated and the date on which we receive third-party information.

RESULTS OF OPERATIONS

Revenue

Our revenue to date has been generated primarily through a combination of product sales and payments in connection with license, research and development collaborative agreements with our various collaboration partners. In the future, we may generate revenue from a combination of our own product sales 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 many factors as described in Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K.

Below is a summary of our total revenues:

(a) Percent change is not meaningful.

Below is a summary of our product sales, net by product:

Year Ended December 31,

Product sales, net

Product sales, net:

The increase in IBSRELA product sales, net in 2024 and 2023 was due to higher demand since its commercial launch in March 2022, reflecting continued increase in awareness and prescriber experience. In addition, the increase in 2024 was attributable to the completion of our field-base team expansion.

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The increase in XPHOZAH product sales, net in 2024 and 2023 was due to higher demand since its commercial launch in November 2023. As of January 1, 2025, we no longer receive reimbursement for XPHOZAH from Medicare Part D following the decision by the Centers of Medicare and Medicaid Services to eliminate Medicare Part D reimbursement to transition oral only therapies, including XPHOZAH, into the End Stage Renal Disease Prospective Payment System. Patient access to XPHOZAH remains through a prescription written by a qualifying healthcare provider through our ArdelyxAssist specialty pharmacy partner. Patients who do not have affordable access will be evaluated for eligibility to receive XPHOZAH fulfilled by our Ardelyx patient assistance program.

Product supply revenue:

The increase in product supply revenue in 2024 and 2023 was due to product supply shipments to our collaboration partners, primarily Kyowa Kirin, under our respective commercial supply agreements in support of non-US launches.

Licensing revenue:

Licensing revenue is primarily impacted by the timing of regulatory and commercial milestone achievements from our out-licensing partners, as well as sales-based royalties received from Knight. The 2023 licensing revenue included $30.0 million in payments received under the Kyowa Kirin Agreement, following Kyowa Kirin’s submission to the Japanese MHLW for the NDA for tenapanor in the improvement of hyperphosphatemia in adult patients with CKD on dialysis; and a $5.0 million payment under the Fosun Agreement, following the NDA acceptance by China’s Center for Drug Evaluation of the NMPA for tenapanor in the control of serum phosphorus in adult patients with CKD on hemodialysis and the U.S. FDA approval of XPHOZAH to reduce serum phosphorus in adults with CKD on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

Non-cash royalty revenue:

Non-cash royalty revenue in 2024 was attributable to royalties from Kyowa Kirin for sales of PHOZEVEL in Japan since its launch in February 2024, which we remitted to HCR upon receipt in accordance with the HCR Agreement.

GTN Adjustments

We recognize product sales net of GTN adjustments that are further described in Note 6. Revenue and the “Critical Accounting Policies and Estimates” caption in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Reconciliation of gross product sales to product sales, net by GTN adjustment category is as follows:

Year Ended December 31,

GTN adjustment percentage 25.6 % 27.5 % 27.9 %

GTN adjustments are primarily a function of sales volume, payor mix, contractual or legislative discounts and rebates. Adjustments to provisions for product sales made in prior periods due to changes in estimates were not significant for any of the years presented. The decrease in GTN adjustment percentage in 2024 was primarily due to a higher percentage of sales which had a more favorable GTN rate. The reduction was mainly due to lower sales subjected to copay assistance and contractual chargebacks which had higher GTN adjustment percentages. We expect GTN adjustment percentages to increase in the future due to unfavorable payor mix shifts associated with loss of XPHOZAH Medicare Part D reimbursement beginning January 1, 2025.

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The activities and ending reserve balances for each significant category of GTN adjustments on product sales, net, which constitute variable consideration, were as follows:

Adjustments to prior period provisions recorded in the current period were not material.

Expenses

Below is a summary of our cost of goods sold, operating expenses, interest expense, non-cash interest expense related to the sale of future royalties and other income, net:

Cost of Goods Sold

Cost of product sales consists of the cost of commercial goods sold to our Customers and includes the cost of materials, third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process and indirect overhead costs. Other cost of revenue consists of the cost of materials sold to our international partners under product supply agreements, certain costs related to capacity expansion at current and future CMOs, as well as payments due to AstraZeneca based on sales of tenapanor. See the “AstraZeneca” caption in Note 7. Collaboration And Licensing Agreements for further detail.

Cost of product sales:

The increase in cost of product sales in 2024 and 2023 was due to higher product sales. A portion of the costs of IBSRELA and XPHOZAH units recognized as revenue during the years ended December 31, 2024 and 2023 were expensed as research and development expenses in periods prior to the commencement of capitalization of inventory costs for each respective product as discussed in Note 2. Summary Of Significant Accounting Policies. The cost associated with inventory sold but previously expensed as research and development was $6.3 million, $4.4 million and $1.9 million in 2024, 2023 and 2022, respectively. The value of inventory on hand as of December 31, 2024 and 2023 that was previously expensed as research and development was approximately $15.6 million and $21.8 million, respectively.

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Other cost of revenue:

The increase in other cost of revenue in 2024 and 2023 was primarily due to higher AstraZeneca royalties, driven by higher product sales, net of tenapanor. In 2023, AstraZeneca royalties attributed to licensing revenue had a greater impact on the obligation than royalties from product sales, net. Other cost of revenue related to the AstraZeneca Termination Agreement was $34.7 million, $12.4 million and $3.6 million in 2024, 2023 and 2022, respectively. The remaining future royalty obligation to AstraZeneca was $12.1 million as of December 31, 2024. In addition, the increase in other cost of revenue was due to higher product supply revenue and costs associated with that revenue.

Research and Development

Research and development activities include research and early discovery, preclinical and clinical development, drug formulation and medical support to marketed products. External R&D expenses include research and development expenses incurred under agreements with outside consultants, third-party CROs and investigative sites where a substantial portion of our clinical studies are conducted, and with CMOs where our clinical supplies are produced; employee-related expenses, which include salaries, bonuses, benefits, travel and stock-based compensation; expenses associated with supplies and materials consumed in connection with our research operations; 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.

Below is a summary of our research and development expenses:

The increase in R&D expenses in 2024, including other R&D expenses, primarily reflected increased medical engagement with scientific communities in the areas of gastroenterology and nephrology related to our marketed products. The increase in external R&D expenses was also attributable to clinical trial and pharmacovigilance activities. The increase in employee-related R&D expenses was the result of increases in headcount and personnel costs, including an increase in stock-based compensation expenses totaling $6.0 million and $0.4 million in 2024 and 2023, respectively.

R&D expenses in 2023 remained relatively stable as compared to 2022, however, the focus of 2023 activities primarily shifted towards medical and pharmacovigilance efforts supporting our marketed products. Whereas, in 2022, activities focused more on clinical activities in preparation for the respective regulatory approvals.

Selling, General and Administrative

Selling, general and administrative expenses relate to sales and marketing, finance, human resources, legal and other administrative activities, including information technology investments. Selling, general and administrative expenses consist primarily of personnel costs, outside professional services, marketing, advertising and legal expenses, facilities costs not otherwise allocated to research and development and other general and administrative costs.

The increase in selling, general and administrative expenses in 2024 and 2023 was primarily due to increased commercialization and administrative costs to support net sales growth of IBSRELA and XPHOZAH and to support our strategy. The increases consisted of external spending for disease awareness initiatives, patient affordability, access support and related patient awareness, as well as increased commercial infrastructure and increased legal fees incurred related to the Company’s lawsuit against CMS in 2024. The increase was also attributable to increases in headcount and related personnel costs, including an increase in stock-based compensation expense totaling $17.8 million and $2.4 million in 2024 and 2023, respectively.

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Interest Expense

Interest expense represents the interest associated with our loan agreements.

The increase in interest expense in 2024 and 2023 was due to a higher loan balance resulting from the term loan draws in each respective year: $50.0 million for the Term D Loan in October 2024, $50.0 million for the Term C Loan in March 2024, and $22.5 million for the Term B Loan in October 2023.

Non-Cash Interest Expense Related to the Sale of Future Royalties

Non-cash interest expense related to the sale of future royalties represents the imputed interest expense on our deferred royalty obligation related to the sale of future royalties using the effective interest method. Non-cash interest expense is impacted by the outstanding balance of the deferred royalty obligation, which increases from milestone payments received from HCR under the sale of future royalties agreement and imputed interest accrued on the outstanding deferred royalty obligation, and decreases as royalties received from Kyowa Kirin related to the sale of tenapanor for cardiorenal indications in Japan are subsequently remitted to HCR. Refer to Note 8. Deferred Royalty Obligation Related To The Sale Of Future Royalties for further detail.

The increase in non-cash interest expense related to the sale of future royalties in 2024 and 2023 was due to the increasing outstanding balance of the deferred royalty obligation attributed to the upfront milestones received from HCR, including the $10.0 million upfront payment received in June 2022 and the $5.0 million milestone payment received in October 2023 as a result of Kyowa Kirin’s receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan in February 2024 and imputed interest accrued on the outstanding balance. In 2024, we began to receive royalties from Kyowa Kirin which were remitted to HCR, thereby reducing the outstanding deferred royalty obligation.

Other Income, Net

Other income, net consists of interest income earned on our cash, cash equivalents and short-term investments, the periodic revaluation of the exit fees related to our loan agreements, as well as currency exchange gains and losses.

The increase in other income, net in 2024 and 2023 primarily reflected higher income on our investments, resulting from both higher interest rates and larger investment balances throughout the periods.

Provision for Income Taxes

Our provision for income taxes includes current and deferred tax, including foreign withholding taxes paid on payments received from certain collaboration partners. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their income tax bases, as well as from net operating loss and tax credit carryforwards. Our deferred tax assets continue to be fully offset by a valuation allowance, including deferred tax assets related to our net operating loss and tax credit carryforwards, which may be subject to annual limitations as a result of ownership changes that may have occurred or could occur in the future.

Refer to Note 2. Summary Of Significant Accounting Policies for further discussion of our significant accounting policies.

LIQUIDITY AND CAPITAL RESOURCES

Below is a summary of our cash, cash equivalents and short-term investments:

We regularly assess our cash position and our working capital needs to execute our strategy. Our primary uses of cash to date have been to fund research and development expenditures related to our development of tenapanor and to support the commercialization of our marketed products. We have funded our operations primarily from the sale of common stock, product sales, funds from our collaboration partnerships, funds from our loan agreements with SLR, as well as sales of future royalties to HCR. We expect that we will increasingly rely on cash generated from operations to fund our operating plan while maintaining financial flexibility from our ability to source cash from future equity sales and debt financing.

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Under a registration statement filed in 2020, we had the ability to sell up to $150.0 million of our common stock through Jefferies, as our sales agent. As of March 2023, we had received the maximum gross proceeds of $150.0 million at a weighted average share price of approximately $1.57.

In January 2023, we filed a registration statement on Form S-3, which became effective in January 2023, containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings; and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies, deemed to be “at-the-market offerings” (2023 Open Market Sales Agreement). Pursuant to the 2023 Open Market Sales Agreement, Jefferies, as sales agent, may receive a commission of up to 3.0% of the gross sales price for shares of common stock sold under the 2023 Open Market Sales Agreement. As of December 31, 2024, we have completed sales pursuant to the 2023 Open Market Sales Agreement resulting in the issuance of 16.8 million shares of our common stock and receipt of gross proceeds of $70.0 million at a weighted average sales price of approximately $4.17.

We have a loan and security agreement (as amended, the 2022 Loan Agreement) with SLR. The 2022 Loan Agreement provides a total of $200.0 million, of which $150.0 million has been drawn as of December 31, 2024 to support our ongoing operations and the commercial launches of IBSRELA and XPHOZAH. The borrowings under the 2022 Loan Agreement bear interest at SOFR plus a spread based on our public debt rating. We classify outstanding borrowings under the 2022 Loan Agreement as long-term based on the maturity date of the loan. All the term loans mature on July 1, 2028. See Note 9. Borrowing for further discussion.

We believe our available cash, cash equivalents and short-term investments as of December 31, 2024 will be sufficient to fund our planned operations for at least a period of one year from the issuance of these financial statements. 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 may change and we may require significant additional capital to fund our operations. There are no assurances that our efforts to meet our operating cash flow requirements will be successful. If our current cash, cash equivalents and short-term investments as well as our plans to meet our operating cash flow requirements are not sufficient to fund necessary expenditures and meet our obligations following the issuance of these financial statements, our liquidity, financial condition and business prospects will be materially affected.

Our future funding requirements will depend on many factors as described in Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K.

CASH FLOW ACTIVITIES

The following table summarizes our cash flows activities:

Cash Flows from Operating Activities

Net cash used in operating activities decreased in 2024 compared to 2023, primarily due to cash generated from higher product sales, net, partially offset by working capital cash uses to support our commercial growth. Net working capital cash outflows were driven primarily by increases in customer credit and inventory purchases, which were partially offset by increases in accounts payable and accruals.

Net cash used in operating activities increased in 2023 compared to 2022,primarily due to working capital cash uses to support our commercial launches, partially offset by cash generated from higher product sales, net from such launches. Net working capital cash outflows were driven primarily by increases in customer credit, upfront payments to CMOs for the commercial manufacturing of IBSRELA and XPHOZAH and increased prepaid selling and marketing spending.

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Cash Flows from Investing Activities

Net cash used in investing activities for 2024 and 2023 was primarily impacted by the timing of our investment maturities and purchases. In 2023, net investment purchases were significantly higher when compared to other reported periods. To a lesser extent, the 2024 cash used for investing activities included property, plant and equipment purchases associated with our new leased facility and build outs of existing facilities.

Cash Flows from Financing Activities

Net cash provided by financing activities decreased in 2024 compared to 2023, primarily due to $99.5 million net proceeds from the Term C Loan and Term D Loan and proceeds from the issuance of common stock under our equity incentive and stock purchase plans in 2024 which were less than $119.2 million received in 2023 from the issuance of common stock pursuant to at the market offerings. We have not received any proceeds under the 2021 Open Market Sales Agreement in 2024.

Net cash provided by financing activities increased in 2023 compared to 2022, primarily due to higher net proceeds from issuance of our common stock pursuant to the at the market offerings of $47.6 million, as well as net proceeds received of $22.4 million from drawing the Term B Loan as compared to net expenditure of $6.1 million in 2022 in conjunction with entering into the 2022 Loan Agreement and repaying the principal outstanding under the 2018 Loan. This increase was partially offset by lower net proceeds from the sale of future royalties to HCR of $5.0 million.

SMALLER REPORTING COMPANY AND LARGE ACCELERATED FILER STATUS

As a non-accelerated filer, we were not required to obtain an opinion of our independent auditors with respect to our internal controls over financial reporting for the year ended December 31, 2022. On June 30, 2023, our public float exceeded $700.0 million and therefore since January 1, 2024, we are considered a large accelerated filer. This Annual Report on Form 10-K includes an opinion of Ernst & Young LLP, our independent auditors with respect to our internal control over financial reporting as of December 31, 2024.

ITEM 7A. 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. 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 December 31, 2024, we had cash, cash equivalents and short-term investments of $250.1 million, which consisted of bank deposits and money market funds, as well as high quality fixed income instruments including commercial paper, U.S. government-sponsored agency bonds, U.S. treasury securities, corporate bonds, Yankee bonds and asset-backed securities. 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 AAA/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 2022 Loan Agreement, which bear interest at SOFR plus a spread based on our public debt rating. A hypothetical increase in one-month CME Term SOFR of 100 basis points above the current one-month CME Term SOFR rate would have increased our interest expense by approximately $1.0 million for the year ended December 31, 2024. As of December 31, 2024, we had an aggregate principal amount of $150.0 million outstanding pursuant to our 2022 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, Japanese yen 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, non-cash royalty revenue related to the sale of future royalties, assets and liabilities associated with a limited number of manufacturing activities.

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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 December 31, 2024, we had no open forward foreign currency exchange contracts.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ARDELYX, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 64

Balance Sheets 66

Statements of Operations and Comprehensive Loss 67

Statements of Stockholders’ Equity 68

Statements of Cash Flows 69

Notes to Financial Statements 70

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Ardelyx, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Ardelyx, Inc. (the “Company”) as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 20, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009.

Boston, MA

February 20, 2025

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ARDELYX, INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

December 31,

Assets

Current assets

Prepaid expenses and other current assets 11,096 8,408

Prepaid commercial manufacturing, non-current — 4,235

Liabilities and stockholders’ equity

Current liabilities

Current portion of operating lease liability 1,562 4,435

Accrued expenses and other current liabilities 34,642 15,041

Operating lease liability, net of current portion 1,023 1,725

Deferred revenue, non-current 7,232 8,644

Commitments and contingencies (Note 19)

Stockholders’ equity

Accumulated other comprehensive income 57 224

Total liabilities and stockholders’ equity $ 435,754 $ 297,579

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

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ARDELYX, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

Year Ended December 31,

Revenues

Non-cash royalty revenue related to the sale of future royalties 2,692 — —

Cost of goods sold

Operating expenses

Provision for income taxes 266 547 8

Comprehensive loss

Unrealized (losses) gains on available-for-sale securities (167) 278 (48)

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

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ARDELYX, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Shares Amount

Issuance of common stock upon exercise of options 14,080 — 7 — — 7

Unrealized losses on available-for-sale securities — — — — (48) (48)

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

Issuance of common stock upon exercise of options 225,988 — 365 — — 365

Unrealized gains on available-for-sale securities — — — — 278 278

Issuance of common stock for services 40,549 — 257 — — 257

Unrealized losses on available-for-sale securities — — — — (167) (167)

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

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ARDELYX, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Non-cash royalty revenue related to the sale of future royalties (2,692) — —

Gain on sale of equipment — — (1,260)

Changes in operating assets and liabilities

Investing activities

Proceeds from sale of property and equipment — — 1,798

Purchases of property and equipment (1,011) (344) (55)

Financing activities

Proceeds from the sale of future royalties, net of issuance costs — 5,000 9,581

Payment of the exit fees (1,000) (1,500) —

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

Supplementary disclosure of cash flow information

Cash paid for income taxes $ 266 $ 51 $ 6

Supplementary disclosure of non-cash activities

Right-of-use assets obtained in exchange for lease obligations $ 1,010 $ 339 $ —

Issuance of common stock for services $ 257 $ 337 $ 390

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

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

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ARDELYX, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1.NATURE OF OPERATIONS

We operate in one business segment, which is the development and commercialization of biopharmaceutical products. Refer to Note 17. Segment Reporting for further segment reporting information.

NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Certain prior year amounts have been reclassified to conform to the current year presentation.

Refer to the Summary of Abbreviated Terms at the end of this Annual Report on Form 10-K for definitions of terms used throughout the document.

Use of Estimates

The preparation of financial statements requires management to make estimates, judgments and assumptions. The most significant assumptions are estimates used in our revenue gross-to-net accruals and other assumptions. 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.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments purchased with an original maturity date of 90 days or less and are recognized at cost, which approximates fair value.

Short-Term Investments

Short-term investments consist of debt securities classified as available-for-sale and have maturities greater than 90 days, but less than one year, from the date of acquisition. Short-term investments are carried at fair value based upon quoted market prices or other observable market data. Unrealized (losses) gains on available-for-sale securities are included in accumulated other comprehensive income on our balance sheets. The cost of available-for-sale securities sold is based on the specific-identification method.

Marketable debt securities are reviewed for impairment by determining whether the decline in their market value below carrying value is other-than-temporary. This assessment considers the intent and ability to retain the investment for a period of time sufficient for an anticipated recovery in market value, the duration and extent that the market value has been below cost, and the investee’s financial condition. Other-than-temporary impairments and credit losses are recorded in the statements of operations and comprehensive loss.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. We are exposed to credit risks in the event of default by the counterparties to the extent of the amount recorded in our balance sheets. Cash, cash equivalents and short-term investments are invested through banks and other financial institutions in the U.S.

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Foreign Currency

Our business is conducted in U.S. dollars; however, a portion of our expense and capital activities are transacted in foreign currencies which are subject to exchange rate fluctuations that can affect cash or earnings. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. All gains and losses on these foreign currency transactions are recorded in other income, net in our statements of operations and comprehensive loss.

Property and Equipment

Expenditures for property and equipment are capitalized at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, ranging from three to five years for laboratory equipment and office equipment and furniture. Leasehold improvements are amortized over the lesser of the estimated useful lives or the related remaining lease term.

Impairment of Long-Lived Assets

The carrying values of long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the asset may not be recoverable. An impairment loss is recognized when the total of estimated future undiscounted cash flows, expected to result from the use of the asset and its eventual disposition, are less than the asset’s carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value.

Income Taxes

The asset and liability method of accounting is used for income taxes. Deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized.

Accounts Receivable

Accounts receivable are stated at amortized cost less allowance for credit losses. The allowance for credit losses reflects our best estimate of future losses over the contractual life of outstanding accounts receivable and is determined on the basis of historical experience, specific allowances for known troubled accounts, other currently available information including customer financial condition and both current and forecasted economic conditions. To date, we have determined that an allowance for doubtful accounts is not required. As of December 31, 2024, our accounts receivable balance was comprised of $56.7 million from commercial customers and $1.0 million from our collaboration partners. As of December 31, 2023, our accounts receivable balance was comprised of $17.1 million from commercial customers and $4.9 million from our collaboration partners.

Inventory

Inventory costs incurred are capitalized after regulatory approval, or if based on management’s judgment, future commercialization is considered probable and future economic benefit is expected to be realized. We began to capitalize inventory costs associated with IBSRELA during the fourth quarter of 2021, when our intent to commercialize IBSRELA was established and we commenced preparation for the launch of IBSRELA. We began to capitalize inventory costs associated with XPHOZAH during the fourth quarter of 2023, following approval by the U.S. FDA to market XPHOZAH in the U.S. Inventory costs incurred prior to regulatory approval were expensed as research and development.

Inventories are stated at the lower of cost or estimated net realizable value with cost determined under the specific identification method. A portion of inventory that represents product that is not expected to be sold or used within the next 12 months is classified as non-current assets on our balance sheets.

Revenue Recognition

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Product Sales, Net Recognition

The transaction price for product sales, net is reduced for estimates of variable consideration related to GTN adjustments for discounts and chargebacks, rebates, wholesaler and GPO fees, copay assistance and returns. Except for certain wholesaler and GPO fees and discounts, which are based on contracts, these adjustments involve estimation and judgment. The GTN adjustments for rebates, copay assistance and chargebacks are impacted by our estimate of payor mix, which requires significant judgment. We consider legal interpretations of applicable laws and regulations, historical experience, current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel in determining our estimates.

Estimates are assessed each period and adjusted as required to revise information or actual experience. Changes in estimates recorded through December 31, 2024 have not been material.

Licensing Revenue Recognition

Licensing revenue and product supply revenue result from our collaboration and licensing agreements as discussed in Note 7. Collaboration And Licensing Agreements. Goods and services in these agreements may include the grant of licenses for use of our intellectual property and manufacturing services. Significant judgment is required to determine whether promised goods and services represent distinct performance obligations, which are identified and separated when the other party can benefit from the rights, goods or services either on their own or together with other readily available resources and when the rights, goods or services are not highly interdependent or interrelated.

Transaction prices for these arrangements may include non-refundable, up-front license fees; research, development, regulatory and commercial milestone payments; payments for manufacturing supply services; and future royalties on net sales of licensed products. Variable consideration is included in the transaction price only to the extent significant reversal of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Significant judgment is required in estimating variable consideration for each performance obligation identified in the contract. This judgment involves assessing factors outside of our influence, including market conditions, development timelines, likelihood of regulatory success, reimbursement rates for personnel costs, forecasted revenues, potential limitations on the selling price of the product, discount rates, lack of relevant past experience and a large number and broad range of possible amounts. The most likely amount method is used to estimate contingent development, regulatory and sales-based milestones because the ultimate outcomes are binary in nature. The expected value method is used to estimate royalties because a broad range of potential outcomes exists, except in instances where the royalties relate to a license. For arrangements with multiple separable performance obligations, the transaction price assigned to each distinct performance obligation is reflective on the relative stand-along selling price and recognized at a point in time upon the transfer of control.

Collaboration agreements typically include: (i) licensing intellectual property to a third party with no further performance obligations and (ii) arrangements that include both a license and an additional performance obligation to supply product upon the request of the third party. Out-licensing arrangements that contain a single performance obligation are satisfied upon execution of the agreement, when development and commercialization rights are transferred to a third party. Upfront fees are immediately recognized as licensing revenue. Contingent development and regulatory milestones are assessed each period for likelihood of achievement, however, they are typically constrained and recognized when uncertainty is subsequently resolved for the full amount of the milestone and included in licensing revenue. Licensing revenue also includes sales-based milestones and royalties, which are recognized when the milestone is achieved or when the subsequent sales occur.

Certain collaboration agreements also include contingent performance obligations to supply commercial product to the third party upon its request. The license and supply obligations are accounted for as separate distinct performance obligations as the third party can benefit from the license either on its own or together with the other supply resources readily available to it and the other obligations in the contract. Consideration for the supply obligation is based upon stipulated cost-plus margin contractual terms which represent a standalone selling price. The supply consideration is recognized as product supply revenue at a point in time upon transfer of control of the product to the third party. After considering the stand-alone selling price of these supply arrangements, the upfront fees, contingent development, regulatory and sales-based milestones and royalties are allocated to the license.

When two or more contracts are entered into with the same customer at or near the same time, we evaluate the contracts to determine whether the contracts should be accounted for as a single arrangement. Contract modifications due to the addition of distinct promised goods or services with price increases consistent with stand-alone selling prices are accounted for as a separate contract. Contract modifications that are not considered a separate contract and containing remaining goods or services distinct from the goods or services transferred on or before the date of the contract modification are accounted for as a termination of the existing contract and the subsequent creation of a new contract. Contract modifications not considered a

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separate contract and containing remaining goods or services not distinct are accounted for as an add-on to the existing contract and as an adjustment to revenue on a cumulative catch-up basis.

Accrued Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses, which involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with our service providers and make adjustments if necessary.

Service fee accruals are estimated based on the period over which each component of service will be performed, with vendor input if appropriate. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrued or prepaid expense balance, accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period.

Retirement Savings Plan

We offer retirement saving plans through our 401(k) plan, which is available to all full-time employees. In June 2023, we expanded the benefit with the inclusion of a company matching contribution.We contribute to tax-qualified retirement plans for the benefit of employees who meet certain eligibility requirements and choose to participate in the plans. Participating employees specify the percentage of salary they wish to contribute from their compensation, and we make matching contributions. We recognized compensation costs from our contributions of $1.1 million and $0.2 million in 2024 and 2023, respectively.

Stock-Based Compensation

Stock-based compensation expense is recognized for all stock-based payment awards made to employees, non-employees and directors based on estimated fair values. The grant date fair value of the awards is determined using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period and is reduced for estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Non-cash Interest Expense on Deferred Royalty Obligation

Non-cash interest expense related to the sale of future royalties represents imputed interest expense on our deferred royalty obligation related to the sale of future royalties using the effective interest method.

Leases

Operating leases are included in right-of-use assets, current portion of operating lease liability, and operating lease liability, net of current portion on our balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use our incremental borrowing rate based on information available at the lease commencement date. Operating lease right-of-use assets also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate a lease when it is reasonably certain that we will exercise any such option. Lease expense is recognized on a straight-line basis over the expected lease term. We have elected not to separate lease and non-lease components, such as common area maintenance charges, and instead account for these as a single lease component.

Net Loss per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration of potential shares of common stock. Diluted net loss per common share in the periods presented is the same as basic net loss per common share because the effects of potentially dilutive securities are antidilutive due to net loses recognized for each period presented.

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Recent Accounting Pronouncements

New Accounting Pronouncements - Recently Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. This Update requires publicly traded entities to provide enhanced disclosures about significant segment expenses regularly reviewed by the chief operating decision maker, including publicly traded entities with a single reportable segment. The amendments in this update were effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted the ASU in the fourth quarter of 2024 and determined that its adoption did not have a material impact on our financial statements. Refer to Note 17. Segment Reporting for additional information.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, an amendment which modifies the measurement and recognition of credit losses for most financial assets and certain other instruments. The amendments in this Update provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted on a prospective basis for annual financial statements that have not yet been issued or made available for issuance. Management is currently assessing the impact of this standard on our financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement (Topic 220) - Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. ASU No. 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. Management is currently assessing the impact of this standard on our financial statements.

NOTE 3.CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Securities classified as cash, cash equivalents and short-term investments as of December 31, 2024 and 2023 were as follows:

Gross Unrealized

(in thousands) Amortized Cost Gains Losses Fair Value

Cash and cash equivalents

Short-term investments

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Gross Unrealized

(in thousands) Amortized Cost Gains Losses Fair Value

Cash and cash equivalents

Short-term investments

Realized gains or losses have not been significant and are included in other income, net, in our statements of operations and comprehensive loss.

Unrealized losses in 2024 and 2023 were not material. We determined that none of our available-for-sale securities were other-than-temporarily impaired as of December 31, 2024 and 2023, and no investment was in a continuous unrealized loss position for more than one year. Therefore, we believe that it is more likely than not that the investments will be held until maturity or a forecasted recovery of fair value.

Based on our procedures under the expected credit loss model, including an assessment of unrealized losses in our portfolio, we concluded that any unrealized losses on our marketable securities were not attributable to credit and, therefore, we have not recorded an allowance for credit losses as of December 31, 2024 and 2023.

NOTE 4. FAIR VALUE MEASUREMENTS

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:

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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:

Assets

Liabilities

Derivative liabilities for exit fee $ — $ — $ — $ — $ 675 $ — $ — $ 675

Total $ — $ — $ — $ — $ 675 $ — $ — $ 675

The 2022 Exit Fee valuation as of December 31, 2023 as defined and discussed in Note 10. Derivative Liabilities, was classified as Level 3. During 2024, the conditions for payment of the 2022 Exit Fee were met and the $1.0 million contract amount was fully valued and settled accordingly.

Fair Value of Debt

The principal outstanding under our term loan is subject to a variable interest rate and therefore, we believe the carrying amount of the term loan approximates fair value. See Note 9. Borrowing for a description of the Level 2 inputs used to estimate the fair value of the liability.

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of December 31, 2024 and is based on our current estimate of future royalties and commercialization milestones expected to be paid to us by Kyowa Kirin over the life of the agreement. See Note 8. Deferred Royalty Obligation Related To The Sale Of Future Royalties for a description of the Level 3 inputs used to estimate the fair value of the liability.

NOTE 5. INVENTORY

Inventory consisted of the following:

December 31,

Reported as

Prepaid commercial manufacturing with third-party CMOs not included in inventory was $16.4 million and $23.2 million at December 31, 2024 and 2023, respectively. There were no prepayments expected to be converted into inventory after 12 months at December 31, 2024, compared to $4.2 million at December 31, 2023.

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NOTE 6. REVENUE

Disaggregation of total revenues by nature is as follows:

Year Ended December 31,

Non-cash royalty revenue related to the sale of future royalties 2,692 — —

Product Sales, Net

Total product sales, net was as follows:

Year Ended December 31,

Product sales, net

Product sales, net approximated 95.7%, 66.3% and 29.9% of total revenues in 2024, 2023 and 2022, respectively. Products are primarily sold to wholesalers, GPOs and specialty pharmacies, and to a lesser extent, directly to retailers, hospitals, clinics and government agencies. Customer orders are generally fulfilled within a few days from receipt. Contractual performance obligations are fulfilled once control of product is transferred to our customer, which occurs when our customer receives the product and obtains legal title. At this point, our customers are able to direct the use of and obtain substantially all of the remaining benefits of the product.

GTN Adjustments

Wholesalers, GPOs and specialty pharmacies are initially invoiced at contract list prices. Wholesalers and GPOs may also receive prompt pay discounts for payment within a specified period, generally approximating two percent of the invoiced sales price. Our payment terms are generally 30 to 60 days. At the time of recognition, revenue is reduced from contract list price for estimates of variable consideration related to GTN adjustments for chargebacks and cash discounts, rebates, wholesaler and GPO fees, and copay assistance and returns. These GTN adjustments are attributed to governmental programs such as Medicare, Medicaid and the 340B program, which involve various pricing implications, including mandatory discounts and discounts when Medicare Part D beneficiaries are in the coverage gap. Chargebacks and specialty pharmacies fees are reflected as reductions to receivables and are typically settled within contractual terms through credits to our customers. All other GTN adjustments are reflected as a liability and settled through cash payments to our customer or government payor program, typically over various time periods that may span for multiple quarters. Significant judgment is required to estimate certain of our GTN adjustments, considering factors such as legal interpretations of applicable laws and regulations, historical experience, payor mix (e.g., Medicare or Medicaid), current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel.

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The activities and ending reserve balances for each significant category of GTN adjustments on product sales, net, which constitute variable consideration, were as follows:

Adjustments to prior period provisions recorded in the current period were not material.

Geographic Information and Concentrations

Revenues are attributed to geographical areas based on the location at which we earned revenue for product sales of IBSRELA and XPHOZAH or the domicile of our collaboration partners. A summary of our revenues by geographic area is as follows:

Year Ended December 31,

International

(1)Revenues from the United States are primarily comprised of amounts earned from sales of IBSRELA and XPHOZAH, as well as the upfront license fee from the METiS Agreement.

(2)Revenues from Asia Pacific are primarily comprised of amounts earned in accordance with the Kyowa Kirin Agreement and the Fosun Agreement.

(3)Revenues from North America are comprised of amounts earned from Canada in accordance with the Knight Agreement.

Gross product sales from Customers and revenues from collaboration partners, each accounting for more than 10% of total revenues, were as follows:

Year Ended December 31,

Customers

Collaboration partners

NOTE 7. COLLABORATION AND LICENSING AGREEMENTS

We out-licensed to external partners the development of tenapanor and commercialization of tenapanor through agreements with Kyowa Kirin in Japan, Fosun Pharma in China and Knight in Canada for the development and commercialization of tenapanor for certain indications in their respective territories. We recognize revenue from such arrangements as licensing revenue, product supply revenue or non-cash royalty revenue related to the sale of future royalties. Our significant accounting policies for such revenue streams are as follows:

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Licensing revenue includes:

•upfront license fees, as well as developmental, regulatory and commercialization milestone payments. We assess upfront and milestone payments using the most likely amount method, including variable payments only when it is probable that no significant revenue reversal will occur. Upfront license fees are recognized upon receipt. Milestones tied to external factors, such as regulatory approvals, are considered probable when those accomplishments are achieved.

•sales-based royalties, other than non-cash royalty revenue related to the sale of future royalties as discussed below, are recognized when sales occur or when related performance obligations are met.

Product supply revenue includes drug substance or drug supply revenue received from our out-licensing agreements. Product supply revenue is recognized when control of goods is transferred upon delivery. Advanced payments from partners for drug substance are recognized as deferred revenue until delivery.

Non-cash royalty revenue related to the sale of future royalties includes royalties earned and received under the Kyowa Kirin Agreement, which are remitted to HCR upon receipt, pursuant to the HCR Agreement as discussed in Note 8. Deferred Royalty Obligation Related To The Sale Of Future Royalties.

The following table summarizes total revenue by collaboration partner:

Year Ended December 31,

Licensing revenue

Fosun Pharma — 5,000 —

Product supply revenue

Fosun Pharma — 29 9

Non-cash royalty revenue related to the sale of future royalties

Kyowa Kirin $ 2,692 $ — $ —

Kyowa Kirin

We granted Kyowa Kirin an exclusive license (Kyowa Kirin Agreement) to develop and commercialize certain NHE3 inhibitors including tenapanor in Japan for the treatment of cardiorenal diseases and conditions, excluding cancer, in exchange for future royalties defined below, an upfront license fee of $30.0 million, and potential future development and regulatory milestones up to $55.0 million, of which $35.0 million has been received and recognized as revenue to date, as well as approximately ¥8.5 billion for commercialization milestones, or approximately $54.0 million at the currency exchange rate on December 31, 2024. In addition, we are eligible to receive royalties on net sales of tenapanor in Japan throughout the term of the agreement. Under a Commercial Supply Agreement, we supply tenapanor drug substance that will be used to satisfy Kyowa Kirin’s commercial needs which includes advanced payments for reimbursement of costs plus a reasonable overhead for the supply of product. In February 2024, Kyowa Kirin announced the launch of tenapanor, marketed as PHOZEVEL®, for patients with CKD with hyperphosphatemia in Japan.

The Kyowa Kirin Agreement was amended to reduce the royalty rate Kyowa Kirin would pay on tenapanor sales in Japan from high teens to low double digits for a two-year period of time following the first commercial sale in Japan, and then to mid-single digits for the remainder of the royalty term (2022 Amendment). As consideration for reduction in the royalty rate, Kyowa Kirin agreed to pay us up to an additional $40.0 million payable in two tranches, with the first payment due following Kyowa Kirin’s filing with the Japanese MHLW of its application for marketing approval for tenapanor and the second payment due following Kyowa Kirin’s receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, both of which occurred as of September 30, 2023. As discussed in Note 8. Deferred Royalty Obligation Related To The Sale Of Future Royalties, future royalties and commercial milestone payments we may receive under the license, as amended, will be remitted to HCR pursuant to the HCR Agreement.

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The following table presents changes in our current and non-current deferred revenue balances, which are all attributable to Kyowa Kirin:

(in thousands) Current Non-Current Current Non-Current

Product supply delivered (9,836) — (4,586) —

Fosun Pharma

We have an exclusive license agreement with Fosun Pharma (Fosun Agreement) for the development, commercialization and distribution of tenapanor in China for both hyperphosphatemia and IBS-C. The Fosun Agreement granted exclusive license rights to Fosun Pharma in exchange for an upfront license fee of $12.0 million, recognized upon execution of the agreement, and potential regulatory milestone payments up to $113.0 million, of which $8.0 million has been received and recognized to date. In addition, we are eligible to receive 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%.

Knight

We have an exclusive license agreement with Knight (Knight Agreement) for the development, commercialization and distribution of tenapanor in Canada for hyperphosphatemia and IBS-C. The Knight Agreement granted exclusive license rights to Knight in exchange for an upfront license fee of $2.3 million, recognized upon execution, and potential regulatory and commercialization milestones up to CAD 22.2 million, or approximately $15.4 million at the currency exchange rate on December 31, 2024, of which $0.7 million has been received and recognized to date. In addition, we are eligible to receive royalties ranging from the mid-single digits to the low twenties throughout the term of the agreement and a transfer price for manufacturing supply services.

METiS

We have an exclusive license agreement with METiS Therapeutics Inc., (METiS Agreement) for the development and commercialization of a portfolio of TGR5 agonist compounds that we discovered and developed for all therapeutic areas in exchange for an upfront license fee of $0.8 million, recognized upon execution in 2023. In addition, we may be eligible to receive development and commercialization milestone payments worth up to $243.0 million. We are also eligible to receive royalties ranging within the mid-single digits throughout the term of the agreement.

AstraZeneca

In June 2015, we entered into a termination agreement with AstraZeneca (AstraZeneca Termination Agreement) pursuant to which we have agreed to pay AstraZeneca (i) future royalties at a royalty rate of 10% of net sales of tenapanor or other NHE3 products by us or our licensees, and (ii) 20% of non-royalty revenue received from a new collaboration partner should we elect to license, or otherwise provide rights to develop and commercialize tenapanor or other NHE3 products, up to a maximum of $75.0 million in aggregate for (i) and (ii). Royalty expense recognized under this agreement as other cost of revenue on our statements of operations and comprehensive loss was $34.7 million, $12.4 million and $3.6 million in 2024, 2023 and 2022, respectively. As of December 31, 2024, we have recognized $62.3 million of the total $75.0 million outstanding royalty obligation.

NOTE 8. DEFERRED ROYALTY OBLIGATION RELATED TO THE SALE OF FUTURE ROYALTIES

In June 2022, we and HCR entered into the HCR Agreement in which HCR agreed to pay up to $20.0 million in exchange for royalty payments and commercial milestone payments that we may receive under our Kyowa Kirin License Agreement. See Note 7. Collaboration And Licensing Agreements for further detail. The $20.0 million is payable as follows:

•$10.0 million upfront upon agreement execution, received in June 2022;

•$5.0 million upon Kyowa Kirin’s receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, received in October 2023; and

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•$5.0 million in the event net sales by Kyowa Kirin in Japan exceed a certain annual target level by the end of 2025.

The HCR Agreement is effective until terminated by the mutual agreement of the parties and contains customary representations and warranties and customary affirmative and negative covenants.

Payments received from HCR are recorded as a deferred royalty obligation on our balance sheets. Due to our ongoing manufacturing obligations under the Kyowa Kirin Agreement, we account for the proceeds as imputed debt and therefore recognize royalties earned under the Kyowa Kirin Agreement as non-cash royalty revenue. In conjunction with the HCR Agreement, we incurred approximately $0.4 million in transaction costs, which, along with the deferred royalty obligation, are being amortized as non-cash interest expense over the estimated life of the HCR Agreement using the effective interest method, which is based on the imputed interest rate derived from estimated amounts and timing of future royalty payments to be received from Kyowa Kirin. The deferred royalty obligation will be effectively repaid over the life of the HCR Agreement as we remit royalties paid to us from Kyowa Kirin, recorded as non-cash royalty revenue related to the sale of future royalties, to HCR. We periodically assess the estimated royalty payments from Kyowa Kirin and, to the extent that the amount or timing of such payments is materially different than our original estimates, we prospectively adjust the imputed interest rate and the related amortization of the deferred royalty obligation.

A summary of financial information related to the HCR Agreement is as follows:

Year Ended December 31,

Beginning deferred royalty obligation $ 20,179 $ 11,254 $ —

Upfront payment, net of transaction costs — — 9,581

Regulatory approval milestone — 5,000 —

Non-cash interest expense related to sale of future royalties 7,088 3,924 1,673

Royalty distributed to HCR (1,740) — —

Other — 1 —

NOTE 9.BORROWING

Long-term borrowing was as follows:

December 31,

Principal

Term C Loan 50,000 — 4.25% + 0.022% + SOFR (subject to a floor of 4.7%)

Term D Loan 50,000 — 4.00% + 0.022% + SOFR (subject to a floor of 4.7%)

Adjustments to principal value

Unamortized discount and debt issuance costs (1,136) (912)

Accreted value of final fee 1,989 734

Less: Current portion of long-term debt — —

Long-term debt, net of current portion $ 150,853 $ 49,822

On February 23, 2022 (Closing Date), we entered into a loan and security agreement with SLR (2022 Loan Agreement) as collateral agent (Agent) and the lenders listed in the 2022 Loan Agreement (collectively, the 2022 Lenders), which was subsequently amended in August 2022 (the First Amendment) and February 2023 (the Second Amendment). The 2022 Loan Agreement, as amended, provided for a senior secured loan facility (the Term A Loan) funded on the Closing Date and Term B Loan borrowable on or prior to December 20, 2023; provided that (i) we received approval by the U.S. FDA for our NDA for

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XPHOZAH by November 30, 2023, and (ii) we achieved certain product revenue milestone targets described in the 2022 Loan Agreement. We met the requirements to borrow Term B Loan and subsequently drew it in October 2023.

In October 2023, we entered into a Third Amendment (the Third Amendment) with the 2022 Lenders. The Third Amendment provided us with the option to draw the Term C Loan by March 15, 2024, contingent upon having drawn the Term B Loan; and provided us with the option to draw the Term D Loan of uncommitted capital by December 31, 2026, subject to approval by the Agent’s investment committee. We provided the Agent with notice of our decision to draw the Term C Loan in February 2024 and received the proceeds in March 2024.

In October 2024, we entered into a Fourth Amendment (the Fourth Amendment) with the 2022 Lenders. The Fourth Amendment, among other things, provided for the immediate draw of the Term D Loan on the closing date of the Fourth Amendment and provides us with the option to draw an additional $50.0 million of committed capital by June 30, 2025 (the Term E Loan and together with the Term A, B, C and D Loans, the Five Loans). The interest rate for the Term E Loan will be 4.00% plus a SOFR value equal to 0.022% plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website, subject to a SOFR floor of 4.7%. We drew the Term D Loan in October 2024.

Under the Fourth Amendment, the maturity date for the Five Loans was extended to July 1, 2028 (the Maturity Date) and the period under which we are permitted to make interest-only payments on the Five Loans was extended to the Maturity Date.

We paid fees of $0.2 million, $0.1 million, $0.3 million and $0.3 million on each funding date of the Term A, Term B, Term C and Term D Loans, respectively. In addition, we will be obligated to pay 0.5% of the aggregate original principal amount of the Term E Loan commitment, which shall be due on the earliest of (1) the funding of the Term E Loan, (2) June 30, 2025, or (3) the prepayment, refinancing, substitution or replacement of any of the Five Loans on or prior to the date immediately preceding June 30, 2025.

We are obligated to pay a final fee equal to 4.95% of the aggregate original principal amount of the Five Loans, to the extent such loans are funded, upon the earliest to occur of the maturity date, the acceleration of the Five Loans, and the prepayment, refinancing, substitution, or replacement of the Five Loans. The total unaccreted final fee was $5.4 million and $1.7 million at December 31, 2024 and December 31, 2023, respectively.

We may voluntarily prepay all amounts outstanding under the Five Loans, subject to a prepayment premium of 2% of the outstanding principal amount of the Five Loans if prepaid through and including October 17, 2025 or 1% of the outstanding principal amount of the Five Loans if prepaid after October 17, 2025 and prior to the maturity date. The Five Loans are secured by substantially all of our assets, except for our intellectual property and certain other customary exclusions. Additionally, as discussed in Note 10. Derivative Liabilities, in connection with the Term A and Term B Loans (Original Loans), we paid an exit fee in the amount of $1.0 million in October 2024.

The 2022 Loan Agreement, as amended, contains customary representations and warranties that place restrictions on disposition of assets, granting liens, occurring additional debt and other matters, as well as customary events of default. We have agreed to not allow our cash, cash equivalents and available-for-sale investments to be less than the eighty percent (80%) of the outstanding balance of the Five Loans for any period in which our net revenue from the sale of any products, calculated on a trailing six (6) month basis and tested monthly, is less than sixty percent (60%) of the outstanding balance of the Five Loans. We have concluded that the provisions that could cause acceleration of the principal repayment are remote as of December 31, 2024.

As of December 31, 2024, our total future payment obligation related to the outstanding balance of the Five Loans, excluding interest payments, was $157.4 million, which is due on July 1, 2028.

NOTE 10. DERIVATIVE LIABILITIES

2018 Exit Fee

In October 2023, we received approval from the U.S. FDA for XPHOZAH to reduce serum phosphorus in adults with CKD on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy. In connection with a previous loan agreement (2018 Loan), we became obligated to pay an exit fee of $1.5 million, which was paid in 2023.

2022 Exit Fee

The 2022 Loan Agreement obligated us to pay an exit fee in the amount of 2% of the Original Loans funded (2022 Exit Fee) upon (i) any change of control transaction or (ii) our achievement of net revenue from the sale of any products equal to or

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greater than $100.0 million, measured on a six (6) months basis (Revenue Milestone), tested monthly at the end of each month. The 2022 Exit Fee was accounted for as a freestanding derivative and recorded at fair value. The estimated fair value of the 2022 Exit Fee of $0.7 million was recorded as a derivative liability and included in accrued expenses and other current liabilities at December 31, 2023. The Revenue Milestone was achieved in the second quarter of 2024, resulting in a $1.0 million payment in October 2024 to settle the obligation. The Term C and Term D Loans do not contain an exit fee obligation.

The fair value of the derivative liability was determined using a discounted cash flow analysis and was classified as a Level 3 measurement within the fair value hierarchy since our valuation utilized significant unobservable inputs prior to June 30, 2024. Specifically, the key assumptions included in the calculation of the estimated fair value of the 2022 Exit Fee derivative liability included: (i) our estimates of both the probability and timing of achieving the Revenue Milestone and (ii) the probability and timing of funding the Term B Loan, which was dependent upon (a) approval by the U.S. FDA for our NDA for the control of serum phosphorus in adult patients with CKD on dialysis by November 30, 2023, and (b) achievement of certain product revenue milestone targets. As of December 31, 2023, uncertainty around all of the noted valuation estimates had been removed, as the Term B Loan had been funded, the U.S. FDA had approved our NDA for the control of serum phosphorus in adult patients with CKD on dialysis prior to November 30, 2023, and we had achieved the Revenue Milestone.

Changes in the fair value of recurring measurements are presented as other income, net in our statements of operations and comprehensive loss and were as follows:

Changes in estimated fair value

Fair value of exit fee derivative liabilities at December 31, $ — $ 675

NOTE 11.LEASES

Our lease obligation is comprised of operating leases for our offices and research facilities with remaining lease terms ranging from two months to four years and each containing customary rent escalation clauses. Our leases contain one renewal, at our option, which is generally for a five-year period. We have not included these renewal periods in the calculation of the right-of-use asset and lease liability since it is uncertain whether we will exercise the renewal option.

Our leased offices and research facilities in Fremont, California expired on February 10, 2025 and our sub-lease agreement for office space at that facility, entered into with Chronus Health in 2023 expired on February 1, 2025.

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The following table provides additional details of our facility leases presented in our balance sheets:

($ in thousands) December 31,

Current portion of lease liabilities 1,562 4,435

Operating lease liability, net of current portion 1,023 1,725

Weighted-average remaining term (in years) 1.8 1.6

Weighted-average discount rate 6.5 % 6.8 %

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

Year Ended December 31,

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of December 31, 2024:

(in thousands) Operating Leases

Thereafter 21

Total undiscounted operating lease payments 2,745

Imputed interest expenses (160)

Total operating lease liabilities 2,585

Less: Current portion of operating lease liability (1,562)

Operating lease liability, net of current portion $ 1,023

NOTE 12.STOCKHOLDERS’ EQUITY

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NOTE 13. EQUITY INCENTIVE PLANS

2008 Plan

The 2008 Stock Incentive Plan (2008 Plan), which governed the granting of stock options, stock purchase rights and other equity awards, was terminated in June 2014 for future awards. When the 2014 Equity Incentive Award Plan (2014 Plan) was approved by the board of directors and stockholders on June 18, 2014, all remaining shares available for future award under the 2008 Plan were transferred to the 2014 Plan, as discussed below.

2014 Plan

The 2014 Equity Incentive Plan (2014 Plan), effective on June 18, 2014, provided for the stock-based compensation awards, including stock options, stock appreciation rights, restricted stock, service-based RSUs, performance-based RSUs, deferred stock, deferred stock units, dividend equivalents, stock payments and performance awards. The 2014 Plan initially reserved 1.5 million shares, including the 35 thousand shares remaining for future awards under the 2008 Plan, with up to 1.2 million additional shares which could be added from forfeited or lapsed awards from the 2008 Plan. The 2014 Plan allowed for an annual increase in the number of shares available for issuance on the first day of each year through 2024, equal to the lesser of four percent (4.0%) of our outstanding common stock on the last day of the immediately preceding year or a smaller amount determined by the board of directors (2014 Plan evergreen provision).

On June 14, 2024, stockholders approved the Amended and Restated 2014 Equity Incentive Award Plan (2014 A&R Plan). The key provisions pursuant to the 2014 A&R Plan include: (1) 19.0 million shares were added to the total existing share reserve; (2) the 2014 Plan evergreen provision was removed such that any increase to the total number of shares that may be issued must be approved by our stockholders; and (3) the limit of shares that may be issued upon exercise of incentive stock options was increased from 10.7 million to 58.5 million shares. In addition to increases resulting from repurchases, forfeitures, expirations and cancellations of awards under the 2008 Plan, shares reserved for issuance under the 2014 A&R Plan will be increased by the number of shares subject to awards granted under the Inducement Plan, as discussed below, that are repurchased, forfeited, expire or are cancelled on or after June 14, 2024. As a result, no new awards will be made under the Inducement Plan after June 14, 2024. As of December 31, 2024, approximately 18.1 million shares of our common stock were available for future issuance under the 2014 A&R Plan.

2016 Plan

In November 2016, our board of directors approved the 2016 Employment Commencement Incentive Plan (Inducement Plan) under which 1.0 million shares were reserved. In January 2021, January 2022, December 2022 and January 2024, 0.5 million, 2.0 million, 3.0 million and 5.8 million shares, respectively, were added to the Inducement Plan. As of December 31, 2024, 8.8 million shares of our common stock were subject to inducement grants that were issued pursuant to the Inducement Plan. As of December 31, 2024, approximately 3.9 million shares of our common stock were available for future issuance under the 2016 Plan.

Stock Options

A summary of our stock option activity and related information during the year ended December 31, 2024 is as follows:

Number of Shares(in thousands) Weighted-Average Exercise Price per Share

The aggregate intrinsic value represents the difference between the total pre-tax value (i.e., the difference between our stock price and the exercise price) of stock options outstanding as of December 31, 2024, based on our common stock closing price of $5.07 per share, which would have been received by the option holders if all their in-the-money options had been exercised as of that date.

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The intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 was $19.6 million, $1.1 million and $30 thousand, respectively. The total fair value of options vested during the years ended December 31, 2024, 2023 and 2022 was $61.0 million, $24.9 million and $7.0 million, respectively.

The weighted-average grant-date estimated fair value of options granted during the years ended December 31, 2024, 2023 and 2022 was $6.22, $2.36 and $0.63 per share, respectively. The estimated grant date fair value of employee stock options was calculated using the Black-Scholes option-pricing model, based on the following weighted-average assumptions:

Year Ended December 31,

Expected term (in years) 5.4 5.1 4.9

Risk-free interest rate 4.0 % 3.8 % 2.2 %

Dividend yield — % — % — %

Expected Term—We estimate the expected term of our options based upon historical exercises and post-vesting termination behavior.

Expected Volatility—We use the historic volatility of our own stock over the retrospective period corresponding to the expected remaining term of the options, or the period since our shares were first quoted on The Nasdaq Global Market, if that is shorter, to compute our expected stock price volatility.

Risk-Free Interest Rate—The risk-free interest rate assumption is based on the zero-coupon U.S. treasury instruments on the date of grant with a maturity date consistent with the expected term of our stock option grants.

Dividend Yield—To date, we have not declared or paid any cash dividends and do not have any plans to do so in the future. Therefore, we use an expected dividend yield of zero.

Restricted Stock Units

A summary of our RSUs activity and related information for the year ended December 31, 2024 is as follows:

Number of RSUs(in thousands) Weighted-Average Grant Date Fair Value Per Share

Non-vested restricted stock units at December 31, 2023 3,646 $ 3.09

Non-vested restricted stock units at December 31, 2024 8,013 $ 6.59

The total estimated fair value of RSUs vested during the years ended December 31, 2024, 2023 and 2022 was $16.4 million, $3.5 million and $2.6 million, respectively.

Issuance of Common Stock for Services

During the years ended December 31, 2024, 2023 and 2022, we issued approximately 41 thousand, 0.1 million and 0.7 million shares, respectively, of common stock to members of the board of directors who elected to receive stock in lieu of their cash fees under our Non-Employee Director Compensation Program. The shares issued during the years ended December 31, 2024, 2023 and 2022 were valued at $0.3 million, $0.3 million and $0.4 million, respectively, based on the fair value of the common stock on the date of grant.

Employee Stock Purchase Plan

The 2014 ESPP, effective on June 18, 2014, initially reserved approximately 0.2 million shares of common stock for our eligible employees to purchase shares of our common stock at a discount. If approved by the administrator of the ESPP, on the first day of each calendar year through 2024, the number of shares in the reserve increased by an amount equal to the lesser of (i) one percent (1.0%) of the shares of common stock outstanding on the last day of the immediately preceding fiscal year and

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(ii) such number of shares of common stock as determined by the board of directors (2014 ESPP evergreen provision); provided, however, no more than 2.2 million shares of our common stock could be issued under the ESPP.

On June 14, 2024, stockholders approved the Amended and Restated 2014 ESPP (A&R ESPP). The key provisions pursuant to the A&R ESPP include: (1) 3.0 million shares were added to the total existing share reserve and (2) the 2014 ESPP evergreen provision was eliminated and no evergreen increases will be made after June 14, 2024.

During the years ended December 31, 2024, 2023 and 2022, we issued approximately 0.5 million, 0.4 million and 0.3 million shares, respectively, at an average share price of $4.64, $1.85 and $0.63, respectively, pursuant to the ESPP. As of December 31, 2024, approximately 3.7 million shares of our common stock were available for future issuance under the A&R ESPP.

The following table illustrates the weighted-average assumptions for the Black-Scholes option-pricing model used in determining the fair value of ESPP purchase rights granted to our employees:

Year Ended December 31,

Expected term (in years) 0.5 0.5 0.5

Risk-free interest rate 5.0 % 5.3 % 1.9 %

Dividend yield — % — % — %

Stock-based Compensation Expense

Stock-based compensation expense recognized for stock options, RSUs and our ESPP is recorded as operating expenses in our statements of operations and comprehensive loss, as follows:

Year Ended December 31,

A summary of our total unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 31, 2024 is as follows:

NOTE 14. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

December 31,

Laboratory equipment $ 46 $ 46

Office equipment and furniture 2,923 2,433

Total property and equipment, net $ 1,495 $ 1,009

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We recognized depreciation expense in the amount of $0.5 million, $0.6 million and $0.7 million in 2024, 2023 and 2022, respectively.

NOTE 15. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

December 31,

Accrued payments due to AstraZeneca $ 12,077 $ 3,680

Accrued gross to net revenue liabilities 10,112 3,258

Accrued sales and marketing expenses 3,696 3,223

Total accrued expenses and other current liabilities $ 34,642 $ 15,041

NOTE 16. INCOME TAXES

The components of our provision for income taxes were as follows:

Year Ended December 31,

Current

Deferred

Federal — — —

Total deferred — — —

Provision for income taxes $ 266 $ 547 $ 8

A reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:

Year Ended December 31,

Income tax at the federal statutory rate 21.0 % 21.0 % 21.0 %

State taxes, net of federal benefit 4.0 3.4 1.9

Stock based compensation 5.2 0.1 (2.3)

Foreign withholding tax — (0.8) —

Executive compensation disallowed under IRC Sec 162(m) (5.8) (1.9) (1.6)

Change in valuation allowance (25.0) (24.3) (19.7)

Effective tax rate (0.6) % (0.8) % — %

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Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their income tax bases, as well as from net operating loss and tax credit carryforwards. Significant components of our deferred tax assets were as follows:

December 31,

Deferred tax assets

Deferred tax assets net of valuation allowance 598 1,359

Deferred tax liabilities

Deferred tax liabilities (598) (1,359)

Net deferred taxes $ — $ —

Realization of deferred tax assets is dependent on future taxable income, if any, the timing and the amount of which are uncertain. We assess the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant component of objective negative evidence evaluated was our cumulative loss incurred over the three-year period ended December 31, 2024. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2024, 2023 and 2022, a full valuation allowance has been recorded against our deferred tax assets. The valuation allowance increased by $12.4 million in 2024 primarily attributable to net operating loss carryforwards and stock-based compensation. The amount of the deferred tax assets considered realizable could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence, such as cumulative losses, are no longer present. In such cases, additional weight may be given to subjective evidence, such as our projections for growth.

As of December 31, 2024, we had net operating loss carryforwards for federal income tax purposes of approximately $495.0 million, of which approximately $344.8 million can be carried forward indefinitely and the remaining net operating losses begin to expire in 2030, if not utilized. We had approximately $17.8 million of federal research and development tax credit carryforwards and approximately $1.7 million of foreign tax credit carryforwards that begin to expire in 2027, if not utilized.

In addition, we had net operating loss carryforwards for California income tax purposes of approximately $94.7 million that begin to expire in 2030, if not utilized, and state research and development tax credit carryforwards of approximately $9.2 million that do not expire. We had approximately $0.1 million of minimum tax credit carryovers for California income tax purposes that do not expire. We had other state net operating losses of approximately $64.0 million that begin to expire in 2031.

The future utilization of net operating loss and tax credit carryforwards may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future. Due to the existence of the valuation allowance, limitations under Section 382 and 383 will not impact our effective tax rate.

Effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S. tax purposes. The mandatory capitalization requirement did not have a material impact on our deferred tax assets and did not result in a cash tax liability as we have historically elected to capitalize research and development expenses for tax purposes.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

December 31,

Additions based on tax positions related to current year 105 262 460

Additions based on tax positions related to prior year — 99 —

Subtractions based on tax positions related to prior year (811) (811) (811)

We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition at the effective date to be recognized. None of our unrecognized tax benefits would impact the effective tax rate if recognized, because the benefit would be offset by an increase in the valuation allowance.

We have elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2024, 2023 and 2022, we did not recognize accrued interest and penalties related to unrecognized tax benefits. Although the timing and outcome of an income tax audit is highly uncertain, we do not anticipate that the amount of existing unrecognized tax benefits will significantly change during the next 12 months.

We file a U.S. federal income tax return and income tax returns in various state and local jurisdictions. Due to our net operating loss and tax credit carryforwards, the income tax returns remain open to U.S. federal and state tax examinations. We are not currently under examination in any tax jurisdiction.

NOTE 17. SEGMENT REPORTING

We operate in a single reportable segment with a mission to discover, develop and commercialize innovative, first-in-class medicines that meet significant unmet medical needs. A centralized research and development organization, supply chain organization and commercial organization are all responsible for the discovery, development, manufacturing, supply and sale of our products. Our business is also supported by centralized corporate functions. We currently operate primarily in the U.S. and earn revenues from sales of IBSRELA and XPHOZAH, both branded products derived from tenapanor, a molecule developed from our unique and innovative platform. Licensing agreements with international partners are utilized for development and commercialization activities outside the U.S. Currently, we maintain such agreements for certain indications of tenapanor in Japan (Kyowa Kirin), China (Fosun Pharma) and Canada (Knight). Refer to Note 7. Collaboration And Licensing Agreements for further detail. We recognize other revenue in the form of product supply revenue and licensing revenue under the Kyowa Kirin and Knight agreements. Revenue streams associated with the Kyowa Kirin Agreement are subject to a separate agreement where such future royalties and commercial milestones were sold to a third-party. Refer to Note 8. Deferred Royalty Obligation Related To The Sale Of Future Royalties for further information.

Our Chief Executive Officer (CEO) is our Chief Operating Decision Maker (CODM), responsible for allocating resources and assessing Company performance using aggregated financial information. Utilizing aggregated financial information enables the CODM to determine the most appropriate resource allocation across the commercial organization, research and development projects or other initiatives consistent with our long-term corporate wide strategic goals. The CODM primarily uses aggregated net loss as reported on the statements of operations and comprehensive loss to measure segment loss, supplemented by certain additional significant expense details reflected in the table below.

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Detailed information regarding our single operating segment’s significant revenues, expenses and operating loss are as follows:

Year Ended December 31,

Revenues

Less:

(1)“Other revenues” includes revenues from our collaboration partnerships, including license fees, milestone payments, product supply revenue and non-cash royalty revenue related to the sale of future royalties.

(2)Research and development, selling and general administrative expenses herein do not include certain allocated items, such as stock-based compensation expenses.

(3)“Other segment expenses” primarily consists of allocated facilities, information technology, and employee costs of approximately $16.9 million,$12.3 million and $11.4 million in 2024, 2023 and 2022, respectively.

(4)“Other reconciliation items” includes interest expense, non-cash interest expense related to the sale of future royalties, provision for income taxes and other income, net.

NOTE 18. 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 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 years ended December 31, 2024, 2023 and 2022, all potential common shares were determined to be anti-dilutive.

ARDX US Equity

ARDX · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ARDX US Equity☆

ARDX · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ARDX US Equity