Ardelyx, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Financial statements are unaudited. Ardelyx is a biopharmaceutical company focused on kidney and cardiorenal diseases; it reported no revenue from product sales.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1.2m | $2.7m | $9.1m | $5.8m |
| Operating expenses | $43.4m | $19.9m | $128.1m | $68.9m |
| Loss from operations | $(42.2)m | $(17.2)m | $(119.1)m | $(63.1)m |
| Net loss | $(43.6)m | $(18.1)m | $(121.9)m | $(65.4)m |
| Net loss per share | $(0.42) | $(0.20) | $(1.21) | $(0.73) |
| Cash used in operating activities | — | — | $(113.1)m | $(63.8)m |
- Q3 revenue fell 56.8%, principally because product-supply revenue from Kyowa Kirin (KKC) was lower. Nine-month revenue rose 57.4%, mainly due to a $5.0m KKC development milestone recognized in Q1 after KKC began Phase 3 studies in Japan.
- Q3 operating expenses more than doubled. Nine-month R&D increased 49.5% to $70.2m and G&A increased 161.2% to $57.0m. Ardelyx attributed much of the increases to tenapanor manufacturing and clinical costs, and building commercial infrastructure ahead of a planned U.S. launch.
- There was no cost of revenue in Q3; nine-month cost of revenue was $1.0m, primarily payable to AstraZeneca in connection with the KKC milestone. The filing does not provide a meaningful product gross margin, as the company had no product sales.
Financial position and liquidity
- At September 30, cash and cash equivalents were $75.3m and short-term investments were $66.4m, totaling $141.7m, down from $188.6m at December 31, 2020.
- Total assets were $170.8m; current liabilities were $68.8m, total liabilities $89.4m, and stockholders’ equity $81.4m.
- Term-loan carrying value was $51.5m, including $44.4m classified as current at quarter-end. The $50.0m facility is secured by substantially all assets other than intellectual property and matures November 1, 2022. Ardelyx paid a $16.7m principal installment in November 2021.
- Nine-month investing activities provided $28.9m, primarily reflecting investment maturities exceeding purchases; financing activities provided $68.5m, largely from at-the-market (ATM) share sales. Cash declined by $15.7m over the period.
- Management said available cash, cash equivalents and marketable securities were expected to fund planned expenditures and obligations for at least 12 months following filing. It cautioned that assumptions could prove wrong, identified no committed additional financing, and warned that a shortfall could force further cuts or raise substantial doubt about continuing as a going concern in future periods.
Material developments, outlook and risks
- FDA decision: On July 28, 2021, the FDA issued a Complete Response Letter for tenapanor for control of serum phosphorus in adults with CKD on dialysis. The FDA acknowledged evidence of efficacy but considered the treatment effect small and of unclear clinical significance, and requested another adequate, well-controlled trial. The October End-of-Review meeting did not provide a reasonable path to resubmission. Ardelyx expected to submit a Formal Dispute Resolution Request by the end of Q4 2021; success or a feasible path forward was uncertain.
- Restructuring: The August plan reduced the workforce by 83 employees (about 33%) and resulted in $3.6m of Q3 charges. A further October plan targeted about 100 employees (about 60% of the remaining workforce), eliminated the research organization and research activities, and was expected to cost approximately $4m, primarily in Q4. Management estimated the workforce actions would reduce annual cash compensation costs by about $35m. The filing also describes plans to continue development of RDX013 and potentially conduct further tenapanor studies, creating execution and resourcing considerations after research staff reductions.
- Other programs: IBSRELA (tenapanor) was FDA-approved for adult IBS-C in 2019, but Ardelyx had not commercialized it itself in the U.S. KKC had begun Phase 3 studies in Japan for hyperphosphatemia; Knight had launched IBSRELA in Canada. Ardelyx also reported an ongoing Phase 2 RDX013 program for hyperkalemia.
- Capital and dilution: During the first nine months, Ardelyx sold 12.3m shares under its 2020 ATM for $68.7m gross proceeds. After quarter-end, it sold 6.0m additional shares for $7.4m gross proceeds at a weighted-average $1.23 per share. A separate $150m ATM agreement had no sales as of September 30.
- Contingency: A putative securities class action filed July 30, 2021 names Ardelyx and two officers and alleges misleading statements related to tenapanor. The company disputes the claims and recorded no accrual.
- Other disclosed risks include continued losses, dependence on tenapanor and external manufacturers, uncertain reimbursement and commercialization prospects, debt obligations, and possible COVID-19-related operational or clinical delays. Management reported disclosure controls were effective at a reasonable assurance level as of September 30.
Key facts for investors to verify
- Whether the FDA dispute process changes the regulatory outlook for tenapanor, and what trial design, timing and cost might be required.
- Cash runway assumptions after the November $16.7m loan repayment, restructuring costs, and subsequent ATM proceeds; also review remaining debt payment terms.
- Whether planned cost savings materialize and whether Ardelyx can execute commercial or development plans after eliminating research and much of its commercial workforce.
- Potential future share issuance and dilution under the ATM programs, and developments in the securities lawsuit.