Ardelyx, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. Financial figures below are in U.S. dollars; millions unless noted.
Business context
Ardelyx is a single-segment biopharmaceutical company focused on developing and commercializing tenapanor and other drug candidates. It had not generated revenue from product sales by year-end 2021. IBSRELA (tenapanor) was FDA-approved for adult IBS-C in 2019, with a U.S. launch planned for April 2022. XPHOZAH is tenapanor in development for hyperphosphatemia in adults with CKD on dialysis.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $10.1 | $7.6 |
| Operating expenses | $164.4 | $98.4 |
| Loss from operations | $(154.3) | $(90.8) |
| Net loss | $(158.2) | $(94.3) |
| Net loss per share, basic and diluted | $(1.52) | $(1.05) |
| Net cash used in operating activities | $(152.6) | $(81.4) |
| Cash, cash equivalents and investments at year-end | $116.7 | $188.6 |
Revenue was entirely from collaborations, licensing and product supply—not product sales. FY2021 revenue included a $5.0 million milestone from Kyowa Kirin (KKC) following initiation of Japanese Phase 3 studies. KKC accounted for all FY2021 revenue. No product gross margin was reported because commercial product sales had not begun.
Research and development expense was $91.1 million, up 40% year over year; general and administrative expense was $72.3 million, up 118%, reflecting development/manufacturing spending and commercial launch preparation. The company recorded $6.2 million of restructuring charges. Cash and investments fell 38% year over year. Current assets were $133.6 million and current liabilities $52.8 million at December 31, 2021; total liabilities were $67.3 million and stockholders’ equity $82.6 million.
At year-end, $32.3 million of the 2018 loan was classified as current. In November 2021, Ardelyx made a $16.7 million principal payment after the FDA CRL affected the loan’s interest-only terms. Subsequent to year-end, a new senior secured facility funded $27.5 million on February 23, 2022, with a further $22.5 million conditional on FDA approval of the hyperphosphatemia indication by December 31, 2022 and achievement of product-revenue milestones. The initial funding was intended in part to repay the prior loan.
Material changes and developments
- Revenue rose 33% in 2021, principally due to the KKC $5.0 million milestone, while operating expenses increased 67% and net loss widened by $63.9 million.
- Operating cash use increased by $71.1 million. Financing activities provided $83.0 million, including $101.1 million net proceeds from at-the-market stock sales, partly offset by $19.4 million of loan principal repayments.
- Two 2021 restructurings reduced the workforce; the October plan eliminated the internal research organization. The company retained 28 employees for the IBSRELA launch, and reported 86 full-time employees at year-end.
- The auditor issued an unqualified opinion on the financial statements but included an explanatory paragraph stating that recurring losses and liquidity raised substantial doubt about the company’s ability to continue as a going concern. Management said year-end cash and investments alone were insufficient for its next 12 months of plans and relied on the IBSRELA launch, potential milestones, capital-market access and spending controls. The auditor and management reported effective internal control over financial reporting as of year-end.
Outlook, risks and unusual items
- IBSRELA: Management planned a U.S. launch in April 2022. Commercial success depends on uptake, pricing, payer coverage and reimbursement, manufacturing supply, and the company’s ability to build and operate a commercial organization. Reported common adverse reactions in trials included diarrhea, abdominal distension, flatulence and dizziness.
- XPHOZAH: The FDA’s July 2021 CRL agreed that the submitted data showed efficacy in lowering serum phosphorus but characterized the treatment effect as small and of unclear clinical significance. The CRL called for another adequate and well-controlled trial; the February 2022 appeal denial described a possible resubmission route using additional analyses without a new trial. Ardelyx appealed to the FDA’s Office of New Drugs on February 18, 2022 and expected a decision in April if accepted. Approval, timing, cost and the eventual regulatory path remained uncertain.
- Other programs and collaborations: RDX013’s next steps depended on final Phase 2 analyses, formulation work and funding. KKC planned to file a Japanese marketing application in the second half of 2022. Potential collaboration milestones and royalties are contingent and are not assured.
- Funding and capital structure: Ardelyx expected continued substantial operating losses and stated it would need additional financing. The 2022 loan is secured by substantially all assets other than intellectual property and includes restrictive covenants, fees and a conditional second tranche. Equity financing may dilute shareholders.
- Listing and litigation: Nasdaq notified the company on February 28, 2022 that it did not meet the $1.00 minimum bid-price requirement; it had until August 29, 2022 to regain compliance. A putative securities class action filed in July 2021 alleges misleading statements concerning tenapanor; the company said it believed the claims were without merit and recorded no related accrual.
- Other significant exposures include reliance on third-party manufacturers, uncertain reimbursement, potential inclusion of oral ESRD-related drugs in Medicare’s dialysis bundle beginning in 2025 absent further action, and continuing development, regulatory, competitive and intellectual-property risks.
Important facts for investors to verify
- IBSRELA launch timing, prescriptions, net sales, payer access and any subsequent changes to commercial plans.
- FDA outcome and required next steps for the XPHOZAH application, including whether a new trial is required and the cost and timeline of any path to approval.
- Cash burn, liquidity runway, financing access and the conditions for drawing the additional $22.5 million under the 2022 loan facility.
- Loan repayment obligations, covenants, collateral and any default or material-adverse-change developments.
- Nasdaq bid-price compliance status, the securities litigation’s progress, and any subsequent material legal or regulatory developments.