Ardelyx, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. Ardelyx was a clinical-stage biopharmaceutical company with no product sales or revenue. Its portfolio included Phase 3 programs for tenapanor (hyperphosphatemia and IBS-C) and RDX7675 (hyperkalemia); RDX8940 had an IND filed in late 2016.
Financial performance and liquidity
Amounts are in millions of dollars except per-share data. The company reported no revenue in the periods shown.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Research and development expense | $20.6 | $23.8 | $43.0 | $43.1 |
| General and administrative expense | $5.8 | $4.9 | $11.9 | $9.1 |
| Total operating expenses | $26.4 | $28.7 | $54.9 | $52.2 |
| Net loss | $25.7 | $28.6 | $53.7 | $52.1 |
| Net loss per share | $0.54 | $0.83 | $1.13 | $1.53 |
| Cash used in operating activities | Not presented by quarter | $50.8 | $41.1 |
At June 30, cash and cash equivalents were $63.6 million and short-term investments were $85.1 million, totaling $148.7 million, down from $200.8 million at December 31, 2016. Total assets were $164.1 million; total liabilities were $19.1 million, including $18.4 million of current liabilities. The balance sheet reports no debt. No operating margin is meaningful because the company had no revenue.
Changes versus comparable periods
- Q2 net loss narrowed by $2.9 million year over year, as operating expenses fell $2.3 million and other income increased. R&D declined 14%, primarily due to lower external clinical manufacturing and development costs, partly offset by higher internal costs.
- For the six months, net loss increased by $1.6 million and operating expenses rose $2.6 million. G&A increased 30%, primarily from higher personnel, stock-based compensation and professional fees.
- Operating cash use increased $9.7 million year over year for the first half. Investing activities provided $39.3 million, mainly from investment maturities and sales; financing provided $0.6 million. The prior-year financing inflow included $80.8 million in net public-offering proceeds.
Outlook, risks and unusual items
- Management said existing capital resources were expected to fund projected operating requirements for at least 12 months from June 30, 2017, but stated that significant additional capital would be needed for development and commercialization plans. There was no credit facility or committed source of capital; additional financing or partnerships might not be available on acceptable terms.
- Key uncertainties include clinical-trial outcomes and timing, regulatory approval, manufacturing and supply, commercialization partnerships, market acceptance, reimbursement and competition. The company noted that tenapanor met the primary endpoint in its first Phase 3 trials in both hyperphosphatemia and IBS-C, but results of further trials and approval were uncertain.
- Subsequent to quarter-end, the board approved a restructuring to reduce the workforce by 30 employees, or 28%, to 76. The company estimated approximately $0.8 million of third-quarter 2017 severance and related charges, with most payments expected in that quarter. The Chief Medical Officer also notified the company of his resignation, expected to take effect in early September.
- There was no material litigation pending as of June 30, 2017. Management reported disclosure controls were effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, results and timelines for the remaining tenapanor Phase 3 trials and RDX7675 clinical programs.
- Whether the stated 12-month liquidity outlook remains adequate after the workforce reduction and ongoing clinical spending, and when additional capital or partnerships may be required.
- Actual restructuring costs, completion of workforce reductions and the impact on trial execution and development capacity.
- Potential effects of regulatory requirements, manufacturing scale-up, reimbursement and competition on the programs’ approval and commercial prospects.