ARDELYX, INC. Fair Value Disclosure
| Level 1 – | Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. | ||||
| Level 2 – | Valuations based on inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||||
| Level 3 – | Valuations based on unobservable inputs for which there is little or no market data, which require us to develop our own assumptions. | ||||
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Total Fair Value | Level 1 | Level 2 | Level 3 | Total Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | 49,430 | $ | 49,430 | $ | — | $ | — | $ | 48,650 | $ | 48,650 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| U.S. treasury securities | 95,157 | — | 95,157 | — | 79,773 | — | 79,773 | — | |||||||||||||||||||||||||||||||||||||||
| Commercial paper | 46,450 | — | 46,450 | — | 37,065 | — | 37,065 | — | |||||||||||||||||||||||||||||||||||||||
| U.S. government-sponsored agency bonds | 27,366 | — | 27,366 | — | 45,962 | — | 45,962 | — | |||||||||||||||||||||||||||||||||||||||
| Corporate bonds | 22,582 | — | 22,582 | — | 17,413 | — | 17,413 | — | |||||||||||||||||||||||||||||||||||||||
| Yankee bonds | 5,135 | — | 5,135 | — | 1,970 | — | 1,970 | — | |||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | — | — | — | — | 2,985 | — | 2,985 | — | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 246,120 | $ | 49,430 | $ | 196,690 | $ | — | $ | 233,818 | $ | 48,650 | $ | 185,168 | $ | — | |||||||||||||||||||||||||||||||
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.