Ardelyx, Inc. (NASDAQ:ARDX) Q2 2023 Earnings Conference Call August 2, 2023 8:00 AM ET Company Participants Caitlin Lowie - Vice President, Corporate Communications and Investor Relations Mike Raab - President and Chief Executive Officer Susan Rodriguez - Chief Commercial Officer Justin Renz - Chief Financial and Operations Officer Conference Call Participants Yigal Nochomovitz - Citi Research Laura Chico - Wedbush Securities Peyton Bohnsack - TD Cowen Dennis Ding - Jeffries Matthew Kaplan - Ladenburg Thalm ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-36485 ARDELYX, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 26-1303944 (State or Other J ...

Financial Data and Key Metrics Changes - Ardelyx reported net product sales of IBSRELA at $11.4 million for Q1 2023, reflecting a 31% increase from Q4 2022 [6][17] - The cumulative net product sales for IBSRELA since its launch reached $27 million [17] - The net loss for Q1 2023 was approximately $26.8 million, or $0.13 per fully diluted share, compared to a net loss of $28.1 million, or $0.21 per share in Q1 2022 [18] - Total cash, cash equivalents, and short-term investments as of March 31, 2023, were $130.4 million, up from $123.9 million at year-end 2022 [19] Business Line Data and Key Metrics Changes - IBSRELA sales increased by 31% over the previous quarter, indicating strong market uptake [6][9] - The company is preparing for the launch of XPHOZAH, with a resubmission of the NDA on April 17, 2023, and expects a goal review date from the FDA in mid-May [6][7] Market Data and Key Metrics Changes - The IBS-C market is characterized by a significant unmet medical need, with approximately 77% of patients continuing to experience symptoms despite existing treatments [11] - The company anticipates IBSRELA could achieve a mid to high-single digit peak market share, potentially making it a $500 million product at peak [15] Company Strategy and Development Direction - Ardelyx focuses on executing its commercial strategy for IBSRELA and preparing for the launch of XPHOZAH, leveraging insights from nephrology research [6][7] - The collaboration agreement with METiS Therapeutics aims to develop TGR5 agonist compounds, enhancing the company's cash position and pipeline [7][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of IBSRELA and the anticipated launch of XPHOZAH, highlighting strong market interest and unmet needs in both therapeutic areas [6][7][15] - The company is committed to thoughtful funding strategies to maximize shareholder value while preparing for future launches [20][21] Other Important Information - The company reported a significant increase in selling, general, and administrative expenses, primarily due to the commercialization efforts for IBSRELA [18] - The gross-to-net profile for IBSRELA was reported at 33.7% for Q1 2023, with expectations for it to decline over the year [31] Q&A Session Summary Question: Can you help with the math for IBSRELA for the first quarter? - Management noted that growth trajectories from IQVIA and Symphony are comparable, explaining discrepancies in script data [26] Question: What is the gross-to-net for the first quarter? - The gross-to-net was reported at 33.7%, expected to decline to the higher 20% range by year-end due to copay resets and access dynamics [31] Question: What is the anticipated review timeline for hyperphosphatemia? - Management expects a six-month review as the base case, with confirmation expected by mid-month [34] Question: Can you expand on the prescribing breadth for IBSRELA? - Management indicated consistent repeat writing and positive experiences from physicians, contributing to growth [36] Question: How has the intent to prescribe XPHOZAH changed over time? - Recent research indicates high levels of unmet need and awareness for XPHOZAH, with comparable intent to adopt metrics [40] Question: What is the launch preparation status for XPHOZAH? - The company is mobilizing its established marketing and commercial operations to prepare for the launch of XPHOZAH [56]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-36485 ARDELYX, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 26-1303944 (State or Other ...

Financial Data and Key Metrics Changes - Net product sales for IBSRELA in Q4 2022 were $8.7 million, a 78% increase from Q3 2022 sales of $4.9 million [13][23] - Total revenue for IBSRELA for 2022 was $15.6 million, reflecting strong growth momentum [13][23] - Collaboration revenue for the full year 2022 was $36.6 million, compared to $10.1 million in 2021, with a significant portion from milestone payments [23] - Net income for Q4 2022 was approximately $11 million, or $0.06 per fully diluted share, while the net loss for the year was $67.2 million, a reduction from a net loss of $158.2 million in 2021 [25] Business Line Data and Key Metrics Changes - IBSRELA demonstrated significant quarter-over-quarter prescription growth, with over two-thirds of surveyed GIs reporting its unique mechanism of action [8][14] - The company expects to capture a mid to high single-digit share of the 5 million prescription IBS-C market, potentially yielding peak revenue of at least $500 million [10][12] Market Data and Key Metrics Changes - The market for hyperphosphatemia treatment is in need of new alternatives, with 77% of patients unable to maintain target levels despite existing treatments [16] - XPHOZAH is positioned as a first-in-class phosphate absorption inhibitor, addressing a significant unmet need in the market [17] Company Strategy and Development Direction - The company aims to develop innovative first-in-class medicines that meet significant unmet medical needs, with a focus on IBSRELA and XPHOZAH [7][12] - Ardelyx is preparing for the potential launch of XPHOZAH in the second half of 2023, leveraging its established commercial capabilities [18][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future potential of Ardelyx, highlighting the successful commercialization of IBSRELA and the path forward for XPHOZAH [28][62] - The company is focused on maximizing shareholder value while pursuing non-equity solutions for funding [26] Other Important Information - The company has a strong balance sheet with total cash and short-term investments of $123.9 million as of December 31, 2022 [25] - Ardelyx issued its first-ever ESG report, demonstrating its commitment to stakeholder issues [28] Q&A Session Summary Question: What is the latest expectation for cash runway? - Management indicated confidence in funding operations with approximately $121 million in cash as of February 28, 2023, and a cautious approach to spending [30][32] Question: Did anything happen in the Type A meeting that affected the review timeline? - Management maintained a base case expectation of a six-month review for the NDA resubmission, with no new insights suggesting a shorter timeline [33][34] Question: What is the gross to net ratio for IBSRELA? - The gross to net ratio for 2022 was approximately 28%, indicating a stable reduction [39][40] Question: Are there any risks of delays in the review process? - Management expressed confidence in the approval path for XPHOZAH, indicating that the appeal granted suggests a solid path to launch [41][42] Question: What are the preparations for the launch of XPHOZAH? - Preparations are well underway, with established commercial infrastructure and a dedicated nephrology salesforce ready to mobilize [52]

IBSRELA (Tenapanor) for IBS-C - IBSRELA is a first-in-class therapy for Irritable Bowel Syndrome with Constipation (IBS-C) in adults, indicated at 50 mg BID[8, 28] - In clinical trials, diarrhea was a common adverse reaction, occurring in 16% of IBSRELA-treated patients versus 4% in the placebo group[7, 32] - A Spherix survey reported that 60% of surveyed GIs have adopted IBSRELA[13] - IBSRELA recorded $15.6 million in net sales since launch in March 2022 (as of Dec 31, 2022)[19, 39] - The U S IBS-C market has 5 2 million prescriptions for indicated products in 2022[22, 34] and $3 1 billion in sales[24] XPHOZAH (Tenapanor) for Hyperphosphatemia - XPHOZAH is an investigational, first-in-class phosphate absorption inhibitor for hyperphosphatemia treatment, pending FDA review[42] - In clinical trials, diarrhea (47%) was the most common adverse reaction reported in XPHOZAH-treated patients[54] - A Spherix survey reported that 72% of nephrologists reported a high interest in XPHOZAH[59] - Approximately 80% of over 550,000 U S patients with CKD on dialysis require Rx treatment for hyperphosphatemia[42, 45] Corporate Strategy and Financials - Ardelyx is focused on developing and commercializing therapies for unmet needs in established therapeutic areas[15, 74] - Ardelyx had $123.9 million in cash and investments as of December 31, 2022[69]

Financial Performance and Position - The company has incurred an accumulated deficit of $780.1 million as of December 31, 2022, and has not been profitable since its inception in October 2007[109]. - The company expects to continue incurring substantial operating losses as it commercializes IBSRELA and seeks approval for XPHOZAH, with no assurance of future profitability[110]. - The company has substantial net operating loss and tax credit carryforwards, but their future utilization may be limited due to ownership changes[112]. - The revenue potential from IBSRELA is unpredictable and subject to various market factors, which could adversely affect the company's results of operations[122]. - The company may require additional financing to support the commercialization of IBSRELA and the potential launch of XPHOZAH, which could impact its operations if not secured[115]. - As of December 31, 2022, the company had cash, cash equivalents, and short-term investments totaling $123.9 million, consisting of bank deposits, money market funds, and high-quality fixed income instruments[386]. - The company’s borrowings under the 2022 Loan Agreement bear interest at a floating rate of 7.95% plus the greater of 0.10% or the one-month ICE rate, with an aggregate principal amount of $26.7 million outstanding[387]. - The company incurs significant legal, accounting, and compliance costs as a public company, which may affect its financial position and operational efficiency[261]. - The company is subject to Section 404 of the Sarbanes-Oxley Act, requiring substantial expenses and management efforts to ensure effective internal control over financial reporting[262]. - The company may experience immediate dilution if it sells shares of common stock at a discount from the current trading price, potentially leading to a decline in stock price[259]. - The company faces risks associated with the global economic environment, including inflationary pressures and rising interest rates, which could adversely affect its financial performance[265]. Product Development and Commercialization - The company began commercializing its first product, IBSRELA, in March 2022, but has generated limited revenue from product sales to date[108]. - The company plans to address its operating cash flow requirements through current cash, sales from IBSRELA, potential sales from XPHOZAH, and anticipated milestone payments from collaboration partners[110]. - The company is preparing to resubmit its NDA for XPHOZAH following a favorable decision from the FDA regarding its appeal of a Complete Response Letter[116]. - The commercial success of IBSRELA will depend on factors such as market acceptance, coverage and reimbursement by third-party payors, and the effectiveness of the treatment[120]. - The company anticipates launching XPHOZAH in the second half of 2023 if approved, but acknowledges that market acceptance and reimbursement are uncertain[124]. - The commercial success of XPHOZAH will depend on third-party manufacturers' ability to supply adequate product quantities and the content of the FDA-approved label[126]. - The company has limited experience in building a commercial organization, which may adversely affect the commercialization of IBSRELA and XPHOZAH[129]. - Collaboration partnerships for the commercialization of tenapanor are in place, but competition for suitable partners is significant and may delay product development[174]. Regulatory and Compliance Risks - The company faces significant uncertainty regarding the insurance coverage and reimbursement for newly approved products, particularly for XPHOZAH[119]. - The company is subject to extensive governmental price controls and market regulations internationally, which may pressure pricing and usage of IBSRELA and XPHOZAH[132]. - The company is subject to complex regulations regarding the promotion of products for unapproved uses, which could lead to significant legal and financial repercussions[200]. - Disruptions at regulatory agencies like the FDA could hinder timely reviews and approvals, adversely affecting the company's business[194]. - The company must comply with various healthcare laws, including the Anti-Kickback Statute and false claims laws, to avoid significant penalties and operational disruptions[210]. - Changes in healthcare regulations could require additional clinical trials or modifications to manufacturing processes, potentially delaying product approvals[213]. - The company faces risks related to manufacturing processes, including the need for compliance with cGMP regulations and potential delays in regulatory approvals[195]. - Any failure to maintain regulatory compliance could lead to severe consequences, including withdrawal of product approvals and suspension of production[198]. - The company is exposed to misconduct risks from employees and third parties, which could result in significant legal and financial penalties[206]. - Failure to obtain regulatory approvals in foreign jurisdictions could hinder the company's ability to market products internationally[207]. Intellectual Property Risks - The company relies on a combination of legal measures to protect its intellectual property, but these measures may not provide sufficient protection against competitors[227]. - The company faces risks related to patent infringement claims, which could delay or prevent the commercialization of its products[236]. - There is uncertainty regarding the future protection of the company's proprietary rights, including the potential for challenges to its patents[234]. - The company may incur substantial damages if found willfully infringing third-party patents, impacting its commercial success[238]. - The company must navigate complex legal landscapes regarding intellectual property, which could divert management's attention from core business activities[238]. - The company may encounter significant problems in protecting and defending its intellectual property in foreign countries[245]. - The implementation of the European Unified Patent Court may create uncertainties regarding the protection and enforcement of patent rights in Europe[251]. - The company relies on trade secret protection and confidentiality agreements to safeguard proprietary know-how that may not be patentable[244]. Market and Competitive Landscape - The company faces significant competition in the biotechnology and pharmaceutical industries, with competitors having greater resources and name recognition[147]. - XPHOZAH, if approved, will compete with various phosphate binders, including generics available in the U.S.[148]. - The company is aware of at least four other phosphate binders in development, which may pose additional competition[149]. - The trading price of the company's common stock is highly volatile, influenced by various factors including regulatory decisions and commercialization success[256]. - The company cannot guarantee that it will successfully enforce its intellectual property rights, which could negatively impact its business[250]. Operational Risks - The company relies entirely on third-party manufacturers for IBSRELA and XPHOZAH, which poses risks related to compliance and supply chain management[135]. - The ongoing effects of the COVID-19 pandemic may disrupt manufacturing and clinical development activities, impacting the commercialization of products like IBSRELA and XPHOZAH[176][178]. - The company may incur substantial costs and delays if it needs to switch manufacturers due to compliance issues or supply interruptions[199]. - The company does not carry earthquake insurance, which poses a risk to operations in the earthquake-prone San Francisco Bay Area[185]. - The company faces increased scrutiny from regulatory authorities as it expands operations, which may lead to complex compliance issues[160][162]. Data Protection and Cybersecurity - The company must comply with data protection and privacy laws, as failures could adversely affect its business and financial condition[158]. - The company is subject to numerous evolving data protection laws, including HIPAA and CCPA, which impose high compliance costs and potential penalties for violations[160][161][164]. - The California Privacy Rights Act (CPRA), effective January 1, 2023, imposes additional obligations on businesses, increasing the risk of data breach litigation[161]. - The European Union's General Data Protection Regulation (GDPR) imposes fines of up to €20 million or 4% of annual global revenues for noncompliance, creating significant compliance risks[164]. - Cybersecurity risks have increased due to the rise in sophisticated cyberattacks, which could lead to data breaches and significant costs for the company[170][171]. - The company has established measures to safeguard its information technology systems, but vulnerabilities remain due to reliance on third-party vendors[167][169].

Financial Data and Key Metrics Changes - As of September 30, 2022, the company had total cash, cash equivalents, and short-term investments of $90.6 million [25] - Third quarter net product sales of IBSRELA were approximately $4.9 million, with total revenue of approximately $5 million [25] - R&D expenses were $7.5 million for Q3 2022, a decrease of 68.5% compared to $23.7 million for the same quarter in 2021 [26] - SG&A expenses were approximately $18.7 million for Q3 2022, a decrease of 5.3% compared to $19.7 million for the same quarter in 2021 [27] - The net loss for the quarter was $22.9 million or $0.14 per share, compared to $43.6 million or $0.42 per share for the same quarter in 2021 [27] Business Line Data and Key Metrics Changes - IBSRELA is gaining traction with net product sales of nearly $7 million from launch to the end of Q3 2022 [13] - 60% of healthcare providers (HCPs) have seen IBSRELA representatives, with 64% overall awareness level [16] - 90% of aware HCPs rated IBSRELA as an advance versus existing therapies, with 44% identifying as current prescribers [16] Market Data and Key Metrics Changes - The overall script market for IBS-C indicated drugs is about 5 million scripts, with a potential for high single-digit market share at peak [50] - The company is seeing favorable prior authorization rates from payers, indicating a positive access environment for IBSRELA [57] Company Strategy and Development Direction - The company aims to establish IBSRELA as a critical part of the IBS-C treatment armamentarium, leveraging a targeted promotional approach [19] - The strategy includes focusing on HCPs managing high volumes of IBS-C patients and utilizing digital initiatives for engagement [21][22] - The company is preparing for an upcoming regulatory milestone with XPHOZAH, a treatment for controlling serum phosphorus in adult patients with CKD on dialysis [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the traction and momentum of IBSRELA, indicating a clear line of sight to financial breakeven [31] - The company remains committed to being good stewards of capital and is optimistic about the upcoming Advisory Committee meeting for XPHOZAH [31] Other Important Information - The company strengthened its balance sheet with $35 million expected from a recent NDA submission by its Japanese partner, Kyowa Kirin Corporation [9] - The company has completed several important transactions to maintain a strong cash position, including refinancing term loan debt [28] Q&A Session Summary Question: Upcoming Advisory Committee details - The company cannot provide specifics about the Advisory Committee meeting but will have voting questions available two days before the meeting [36] Question: IBSRELA launch cadence and revenue momentum - Management expects consistent growth and is encouraged by the early user base, but specific guidance is not provided at this time [39] Question: Physician awareness and tenapanor - There is a high level of awareness and interest in XPHOZAH among the nephrology community, supported by comprehensive clinical development programs [46] Question: Patient numbers on IBSRELA therapy - The company is not providing specific guidance on patient numbers yet but is compiling metrics regularly [49] Question: Impact of plan resets on sales - The payer policies are stable, and the company is not heavily dependent on the standard D patient segment, which may fluctuate due to plan resets [69]

Financial Performance - Total revenue for the three months ended September 30, 2022, was $4.986 million, a 325% increase compared to $1.173 million in the same period of 2021[175]. - Net product sales for IBSRELA amounted to $4.885 million during the three months ended September 30, 2022, attributed to the commercial launch of the product[175]. - Total revenue for the nine months ended September 30, 2022, was $7.980 million, a 12% decrease from $9.068 million in the same period of 2021[175]. - The decrease in total revenue for the nine months was primarily due to a $5.0 million development milestone earned in the prior year that did not recur[176]. - Product supply revenue decreased by 67.7% to $92,000 in the three months ended September 30, 2022, compared to $285,000 in the same period of 2021[175]. - Licensing revenue increased by 350% to $9,000 in the three months ended September 30, 2022, compared to $2,000 in the same period of 2021[175]. - Collaborative development revenue was $0 for the three months ended September 30, 2022, a decrease of $886,000 compared to $886,000 in the same period of 2021[175]. Operating Expenses - For the three months ended September 30, 2022, total operating expenses decreased by 38% to $26.9 million compared to $43.4 million in the same period of 2021[181]. - Research and development expenses for the three months ended September 30, 2022 were $7.5 million, a decrease of 68% from $23.7 million in the prior year[181]. - Selling, general and administrative expenses decreased by 5% to $18.7 million for the three months ended September 30, 2022, compared to $19.7 million in the same period of 2021[182]. Cash and Liquidity - Cash and cash equivalents as of September 30, 2022 totaled $61.6 million, down 15% from $72.4 million as of December 31, 2021[190]. - Total liquid funds, including cash and short-term investments, decreased by 22% to $90.6 million as of September 30, 2022, compared to $116.7 million at the end of 2021[190]. - As of September 30, 2022, the company had cash, cash equivalents, and investments totaling $90.6 million, consisting of bank deposits, money market funds, and high-quality fixed income instruments[207]. Debt and Financing - The company entered into a 2022 Loan Agreement providing for a senior secured term loan facility with $27.5 million funded at closing and an additional $22.5 million available upon FDA approval and revenue milestones[194]. - The 2022 Loan bears interest at a floating rate of 7.95% plus the greater of 0.10% or the one-month ICE rate, with an outstanding principal amount of $27.5 million as of September 30, 2022[208]. - Net cash provided by financing activities decreased by $11.9 million, with net proceeds from common stock issuance totaling $52.8 million in the nine months ended September 30, 2022, down from $67.2 million in the same period in 2021[204]. Product Development and Regulatory - The first product sales of IBSRELA were recognized in March 2022, targeting the 11 million people in the U.S. affected by IBS-C[134][135]. - The company expects to continue incurring substantial operating losses as it commercializes IBSRELA and seeks approval for XPHOZAH[133]. - XPHOZAH is being developed for the control of serum phosphorus in adult patients with CKD on dialysis, with three Phase 3 trials involving over 1,000 patients meeting their primary endpoints[137]. - The company received a Complete Response Letter from the FDA regarding XPHOZAH, indicating the treatment effect was characterized as "small and of unclear clinical significance"[138]. - The company is evaluating a new formulation for RDX013 after a Phase 2 trial did not meet its primary endpoint but showed proof of concept in lowering serum potassium levels[142]. Inventory and Future Outlook - As of September 30, 2022, the company had approximately $28.8 million of inventory on hand that was previously expensed as research and development[164]. - The company expects revenue fluctuations in future periods based on the success of IBSRELA commercialization and regulatory approvals for other products[163]. - The company anticipates future funding requirements will depend on product revenue generation, collaboration partnerships, and the timing of milestone payments[197]. Other Financial Information - The company incurred an accumulated deficit of $790.8 million as of September 30, 2022, raising substantial doubt about its ability to continue as a going concern[190]. - Interest expense for the three months ended September 30, 2022 was $886,000, a decrease of 27% from $1.2 million in the same period of 2021[184]. - The company recognized a non-cash interest expense related to the sale of future royalties of $831,000 for the three months ended September 30, 2022[187]. - Other income for the three months ended September 30, 2022 increased to $704,000, compared to a loss of $134,000 in the same period of 2021, reflecting unrealized gains on foreign currency[188]. - The company sold 32.6 million shares during the three months ended September 30, 2022, generating gross proceeds of $35.1 million at an average price of approximately $1.08 per share[193]. - The estimated fair value of the 2022 Exit Fee is recorded as a derivative liability, included in accrued expenses and other current liabilities[194]. - The company had no off-balance sheet arrangements as of September 30, 2022[205].