ARDELYX, INC.ARDX

ARDELYX, INC. Fair Value Disclosure

10-KFiled Feb 19, 20262 min read
FAIR VALUE MEASUREMENTS
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:
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.
The following table sets forth the fair value of our financial assets that are measured or disclosed on a recurring basis by level within the fair value hierarchy:
December 31, 2025December 31, 2024
(in thousands)
Total
Fair Value
Level 1Level 2Level 3Total
Fair Value		Level 1Level 2Level 3
Assets
Money market funds$49,430 $49,430 $— $— $48,650 $48,650 $— $— 
U.S. treasury securities95,157 — 95,157 — 79,773 — 79,773 — 
Commercial paper46,450 — 46,450 — 37,065 — 37,065 — 
U.S. government-sponsored agency bonds27,366 — 27,366 — 45,962 — 45,962 — 
Corporate bonds22,582 — 22,582 — 17,413 — 17,413 — 
Yankee bonds5,135 — 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 $— 
Fair Value of Debt
The principal outstanding under our 2022 Loan Agreement is subject to a variable interest rate and therefore, we believe the carrying amount of the term loan approximates fair value as of December 31, 2025 and 2024. See Note 9. Borrowing for a description of the Level 2 inputs used to estimate the fair value of the liability.
The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of December 31, 2025 and 2024 and is based on our current estimate of future royalties and commercialization milestones expected to be received by HCR over the life of the HCR Agreement. See Note 8. Deferred Royalty Obligation Related to the Sale of Future Royalties for a description of the Level 3 inputs used to estimate the fair value of the liability.

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.

Other Available Disclosures

Income TaxesRevenueEarnings Per SharePP&ELeasesSegmentsDebtCommitmentsStock CompensationNew Standards