ARDELYX, INC.

ARDELYX, INC. Annual Report: A Clearer Picture for Investors

This summary provides a straightforward look at ARDELYX, INC.'s performance over the past year. We aim to offer a clear and detailed understanding for both current shareholders and potential investors, focusing on essential facts without unnecessary jargon.

Business Overview ARDELYX, INC. is a biopharmaceutical company that discovers, develops, and sells innovative, first-of-their-kind medicines for significant unmet medical needs. The company primarily targets gastrointestinal and cardiorenal diseases. ARDELYX uses its unique technology platform to create new small molecule drugs.

Its main product, IBSRELA (tenapanor), treats Irritable Bowel Syndrome with Constipation (IBS-C). In October 2023, the FDA approved XPHOZAH (tenapanor) for controlling serum phosphorus in adult dialysis patients, and ARDELYX recently launched this product.

Beyond selling its products, ARDELYX earns revenue through strategic partnerships and licensing deals. The company also uses AI-driven drug discovery to find and develop new potential treatments, which could expand its future product pipeline.

Financial Performance In the fiscal year ending December 31, 2023, ARDELYX reported total revenue of approximately $125 million. This marks a significant 75% increase from the prior year, mainly due to strong product sales.

Despite this revenue growth, the company posted a net loss of $180 million. This loss reflects substantial ongoing investments in research and development (R&D) and commercialization efforts for its main products.

Key revenue drivers included:

• IBSRELA sales: $95 million, showing strong market acceptance and growth.
• XPHOZAH sales: $15 million in its first few months after launch.
• Strategic partnerships and licensing agreements: $15 million.

A significant event was the termination agreement with AstraZeneca, which led to a one-time charge of approximately $20 million for asset impairment and contract termination costs. ARDELYX also made substantial investments: $70 million in R&D and $100 million in selling, general, and administrative (SG&A) expenses to support product launches and advance its pipeline.

Risk Factors Investors should understand the key risks ARDELYX faces:

• Commercialization challenges: Successfully selling XPHOZAH in a competitive market.
• Regulatory hurdles: Potential delays or issues for new drugs in development.
• Future funding: The need for additional financing once current cash runs out, projected for Q3 2025.
• Intellectual property protection: Safeguarding its patents and proprietary information.

Typical risks for a biopharmaceutical company also include relying on outside manufacturers, potential product liability lawsuits, and changes in healthcare laws. ARDELYX's long-term profitability depends on its commercial products performing well and successfully developing new drugs.

Management Discussion (MD&A highlights) Management's strategic decisions for the year centered on the termination agreement with AstraZeneca. This agreement returned full global rights for tenapanor (including XPHOZAH) to ARDELYX. While this resulted in a one-time charge, it gives ARDELYX greater control over developing and selling its key product, allowing the company to capture more of its future value.

Management's strategy focuses on:

• Maximizing the commercial potential of IBSRELA and XPHOZAH.
• Advancing its pipeline of new drug candidates.
• Achieving profitability through higher sales and careful spending.

The significant investments in R&D and SG&A demonstrate ARDELYX's commitment to supporting product launches and pipeline growth. The company expects these investments to drive future revenue and ultimately lead to profitability.

Financial Health ARDELYX ended the year with $150 million in cash and cash equivalents, which it expects to fund operations until the third quarter of 2025.

To support its growth and operations, ARDELYX uses a combination of debt and equity financing:

• Debt: The company holds approximately $100 million in various term loans, including the 2022 series, which mature by 2027.
• Equity: ARDELYX raised $75 million by selling common stock on the open market, showing its ability to access capital.
• Strategic Partnership: A deal with HealthCare Royalty Partners IV LP provides funding without issuing new stock. This "non-dilutive" financing comes from selling future royalty payments from IBSRELA, giving the company more financial flexibility.

Future Outlook ARDELYX's future hinges on achieving lasting profitability. The company plans to do this by ensuring IBSRELA and XPHOZAH continue to perform strongly and gain wider market acceptance. ARDELYX aims to maximize the sales potential of these key products by boosting sales and marketing efforts and securing good market access.

Management also focuses on advancing its pipeline of new drug candidates, intending to bring more innovative treatments to market. With its current cash expected to last until Q3 2025, ARDELYX will need either more funding or significant revenue growth to continue operations beyond that time. The company's long-term strategy includes careful spending and using strategic partnerships to strengthen its financial position and expand globally.

Competitive Position ARDELYX operates in highly competitive pharmaceutical markets.

IBSRELA (IBS-C Market): The market for Irritable Bowel Syndrome with Constipation (IBS-C) includes both long-standing treatments and newer drugs. ARDELYX differentiates IBSRELA by its unique way of working: it's a minimally-absorbed NHE3 inhibitor. This means it blocks a specific protein (NHE3) in the gut to help with constipation, offering a distinct treatment option for patients.

XPHOZAH (Hyperphosphatemia Market): In the market for high phosphate levels (hyperphosphatemia) in adult dialysis patients, XPHOZAH competes with many existing phosphate binders. These binders include calcium-, aluminum-, and iron-based options, plus other non-calcium, non-iron treatments.

ARDELYX positions XPHOZAH as a first-of-its-kind, non-binder treatment. It works by blocking NHE3 in the digestive tract to reduce how much phosphate the body absorbs. This offers a new way to manage phosphate levels. The company believes XPHOZAH's unique mechanism and clinical results give it a significant edge, especially for patients who don't respond well to or can't tolerate current phosphate binders.

Long-term commercial success will depend on ARDELYX's ability to clearly explain these differences to doctors and patients, gain good market access, and show its lasting value in a crowded treatment area.