Ardelyx, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Financial amounts are in U.S. dollars; dollar figures are in millions unless noted.
Business context
Ardelyx is a biopharmaceutical company focused on kidney and cardiorenal diseases. It reported no product-sale revenue; revenue came from collaborations, licensing milestones and product supply. Tenapanor was approved for IBS-C, but Ardelyx had not commercialized it itself. Its NDA for tenapanor to control serum phosphorus in dialysis patients remained under FDA review.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $6.582 | $1.213 |
| Operating expenses | $38.587 | $22.982 |
| Operating loss | $(32.005) | $(21.769) |
| Net loss | $(33.155) | $(22.373) |
| Net loss per share, basic and diluted | $(0.34) | $(0.25) |
| Net cash used in operating activities | $(44.217) | $(24.946) |
- Revenue included $5.0 million in licensing revenue from a KKC development milestone following initiation of Phase 3 studies in Japan; collaborative development revenue was $1.454 million and product supply revenue was $0.126 million.
- Research and development expense was $20.456 million; general and administrative expense was $17.131 million. Cost of revenue was $1.0 million, primarily payable to AstraZeneca under the termination agreement.
- At March 31, cash and cash equivalents were $84.070 million and short- and long-term marketable securities totaled $94.142 million, for liquid funds of approximately $178.2 million. Management said available funds were expected to cover planned expenditures and obligations for at least 12 months following the filing.
- Loan payable was $51.015 million net of discounts and fees, including $16.667 million classified as current and $34.348 million long-term. The loan’s stated principal outstanding was $50.0 million; maturity was November 2022.
- Total assets were $210.293 million, total liabilities $79.482 million, and stockholders’ equity $130.811 million. Accumulated deficit was $587.920 million.
Material changes versus the prior period
- Revenue rose $5.369 million, or 442.6%, chiefly because of the $5.0 million KKC milestone; there was no comparable milestone revenue in Q1 2020.
- Operating expenses increased 67.9%. R&D rose 29.1%, reflecting OPTIMIZE study costs and higher employee-related expenses. G&A increased 140.0%, largely from hiring and building commercial infrastructure in preparation for a potential U.S. launch.
- Net loss widened by $10.782 million. Despite higher revenue, increased operating costs more than offset the increase.
- Operating cash use increased $19.271 million, reflecting the larger net loss and higher prepayments, including for tenapanor raw materials and production.
- Ardelyx raised $34.272 million net through its at-the-market offering, issuing approximately 4.9 million shares during the quarter. Shares outstanding rose from 93.6 million at year-end to 98.7 million at March 31.
Outlook, risks and unusual items
- On April 29, 2021, after quarter-end, the FDA extended the PDUFA date for the serum-phosphorus NDA by three months to July 29, 2021, after deeming Ardelyx’s response to an FDA information request a major amendment. The request sought additional analyses of clinical data.
- In May 2021, Ardelyx amended its loan agreement to extend the FDA-approval deadline for continued interest-only payments. If approval was not received by July 31, 2021, or a complete response letter was issued, principal payments would begin on the earlier specified date under the amendment.
- The company expected continued substantial operating losses and stated it would need additional capital to complete development and commercialization activities. It had no unutilized credit facility or committed capital source.
- Key risks include the FDA decision and possible additional studies; commercial acceptance, pricing and reimbursement; potential inclusion of oral ESRD drugs in the Medicare dialysis bundle beginning in 2025; reliance on third-party manufacturers; and the company’s ability to fund operations and meet debt obligations. COVID-19 could affect operations, trials, supply and commercialization preparation.
- The company reported an accumulated deficit and no product-sale revenue. It cited diarrhea as a common adverse event in tenapanor trials. No material litigation was pending and no contingent liabilities were accrued at March 31, 2021.
Investor verification priorities
- Track the FDA’s July 29, 2021 action on the serum-phosphorus NDA and any further requests, review delays or approval conditions.
- Verify the loan amendment’s exact payment triggers and resulting principal-payment schedule, as well as the company’s ability to fund operations beyond its stated 12-month liquidity horizon.
- Assess cash burn, commercial-readiness spending and additional financing needs against liquid funds and potential revenue sources.
- Confirm the size and timing of future KKC milestones, supply revenue and any other collaboration receipts; Q1 revenue included a one-time $5.0 million milestone.
- Monitor dilution from equity issuance and the company’s remaining at-the-market offering capacity.
- Evaluate reimbursement and market-access prospects for tenapanor, third-party manufacturing capacity, and potential effects of ESRD drug bundling.