ARDELYX, INC. quarterly report, Q1 FY2024

Ardelyx, Inc. — Q1 2024 Form 10-Q

Reporting period: Three months ended March 31, 2024; balance-sheet amounts are as of March 31, 2024. Ardelyx is a biopharmaceutical company commercializing IBSRELA for IBS-C and XPHOZAH for adults with CKD on dialysis. XPHOZAH was approved in October 2023 and launched in November 2023.

Financial performance and position

Metric	Q1 2024	Q1 2023
Total revenue	$46.0 million	$11.4 million
Net product sales	$43.5 million	$11.4 million
Operating loss	$24.7 million	$26.1 million
Net loss	$26.5 million	$26.8 million
Net loss per share, basic and diluted	$0.11	$0.13
Net cash used in operating activities	$35.7 million	$44.8 million

Product sales comprised IBSRELA $28.4 million and XPHOZAH $15.2 million. Total revenue also included $2.1 million of product-supply revenue and $0.4 million of non-cash royalty revenue.
Gross profit was $38.9 million, or approximately 84.5% of revenue, based on reported revenue less cost of goods sold of $7.1 million. Operating expenses were $63.6 million; SG&A was $53.0 million and R&D was $10.6 million.
Cash, cash equivalents and short-term investments totaled $202.6 million at quarter-end, up from $184.3 million at December 31, 2023. Cash and cash equivalents alone were $36.1 million.
Long-term debt, net of discount and issuance costs, was $99.8 million; principal outstanding was $100.0 million. The company drew the $50.0 million Term C loan in March. The facility matures March 1, 2027, with interest-only payments permitted through December 31, 2026 and principal repayments beginning January 2027.
Accumulated deficit was $872.7 million. Total liabilities were $191.5 million and stockholders’ equity was $150.9 million.
Calculated net loss margin was approximately 57.6% of revenue; operating loss margin was approximately 53.6%.

Material changes versus Q1 2023

Revenue increased 305% to $46.0 million, chiefly reflecting higher IBSRELA sales and initial XPHOZAH sales. Product sales rose 283% to $43.5 million.
SG&A increased 98% to $53.0 million, primarily from commercialization of both products, personnel costs, disease-awareness initiatives and commercial infrastructure.
R&D increased 16% to $10.6 million; the filing cites employee-related and other cost increases, partly offset by lower external R&D spending.
Net loss was broadly similar to the prior-year quarter, improving by $0.3 million, while loss per share narrowed to $0.11 from $0.13. The weighted-average share count increased to 233.1 million from 207.0 million.
Operating cash use decreased by $9.1 million. Financing provided $53.0 million, mainly from the Term C loan; the prior-year period included $50.7 million of net ATM offering proceeds.

Outlook, risks and unusual items

Management expects operating losses to continue as it commercializes IBSRELA and XPHOZAH, funds manufacturing and development, and pursues potential candidates. It believes quarter-end liquid funds can support planned operations for at least one year from issuance of the statements, while cautioning that assumptions may prove incorrect and additional capital may be needed.
No specific revenue, earnings or cash-flow guidance is provided. Revenue and funding needs depend on product uptake, coverage and reimbursement, manufacturing costs, collaboration milestones and royalties, and commercialization performance.
A major XPHOZAH risk is potential inclusion of oral-only ESRD-related drugs in the Medicare ESRD Prospective Payment System beginning January 1, 2025, absent further legislative or regulatory delay. Medicare Part D coverage would then cease; TDAPA eligibility, payment levels and any later base-rate adjustment are uncertain and could materially affect sales.
The company depends on third-party manufacturers, including single-source suppliers, and identifies supply, quality, regulatory-compliance and capacity risks. Competition, adverse events, reimbursement and pricing pressures, and the ability to sustain market acceptance are also significant risks.
The SLR loan is secured by substantially all assets other than intellectual property and includes operating and financial covenants. An event of default could accelerate repayment and permit remedies against collateral. The company also has a covenant requiring a minimum liquidity level under specified revenue conditions.
Future royalties and commercial milestones from Kyowa Kirin’s Japan sales were sold to HCR; royalties recognized in Q1 2024 are remitted to HCR. The deferred royalty obligation was $21.9 million, and no royalty payments had yet reduced its balance. Related Q1 non-cash interest expense was $1.7 million.
Q1 net loss includes $7.6 million of stock-based compensation. Cost of goods sold was lower than it otherwise would have been by an estimated $1.2 million because certain production costs had been expensed in earlier periods.
A securities class action was dismissed in March 2024, but plaintiffs filed a further amended complaint in April; defendants’ next motion to dismiss was due June 3, 2024. Related derivative actions remain stayed. No litigation accrual was recorded; the company says it does not expect pending litigation to materially adversely affect results or financial condition.

Important facts for investors to verify

Whether IBSRELA and XPHOZAH sales growth, market acceptance and reimbursement support continued revenue growth and improve operating cash use.
CMS and legislative or regulatory developments affecting XPHOZAH’s potential ESRD PPS transition, TDAPA treatment and post-TDAPA reimbursement.
Cash burn, capital needs and management’s one-year liquidity assessment, including the impact of commercialization spending and the remaining ATM capacity.
Loan covenant compliance, variable-rate interest expense, repayment terms and any further borrowing or financing.
Product supply capacity and single-source manufacturer continuity, as well as safety, competition and coverage developments.
Progress and financial effect of the securities and derivative lawsuits, and the timing and amount of any Kyowa Kirin royalties or HCR-related payments.