ARDELYX, INC.ARDX
ARDELYX, INC. Stock Compensation Disclosure
EQUITY INCENTIVE PLANS
2014 Plan
The 2014 Equity Incentive Plan (2014 Plan), effective on June 18, 2014, provided for the stock-based compensation awards, including stock options, stock appreciation rights, restricted stock, service-based RSUs, performance-based RSUs, deferred stock, deferred stock units, dividend equivalents, stock payments and performance awards. The 2014 Plan initially reserved 1.5 million shares, including the 35 thousand shares remaining for future awards under a previous equity incentive plan (2008 Plan), with up to 1.2 million additional shares which could be added from forfeited or lapsed awards from the 2008 Plan. The 2014 Plan allowed for an annual increase in the number of shares available for issuance on the first day of each year through 2024, equal to the lesser of four percent of our outstanding common stock on the last day of the immediately preceding year or a smaller amount determined by the board of directors (2014 Plan evergreen provision).
On June 14, 2024, stockholders approved the Amended and Restated 2014 Equity Incentive Award Plan (2014 A&R Plan). The key provisions pursuant to the 2014 A&R Plan included (i) an addition of 19.0 million shares to the total existing share reserve; (ii) the removal of the 2014 Plan evergreen provision such that any increase to the total number of shares that may be issued must be approved by our stockholders; and (iii) an increase for the limit of shares that may be issued upon exercise of incentive stock options from 10.7 million to 58.5 million shares. In addition to increases resulting from repurchases, forfeitures, expirations and cancellations of awards under the 2008 Plan, shares reserved for issuance under the 2014 A&R Plan will be increased by the number of shares subject to awards granted under the Inducement Plan, as discussed below, that are repurchased, forfeited, expire or are cancelled on or after June 14, 2024. As a result, no new awards would be made under the Inducement Plan following June 14, 2024.
On June 18, 2025, stockholders approved the Equity Plan Amendment to the 2014 A&R Plan to (i) increase the number of shares reserved for issuance under the 2014 A&R Plan by 10.0 million shares; and (ii) increase the limit of shares that may be issued upon exercise of incentive stock options from 58.5 million to 68.5 million shares. As of December 31, 2025, approximately 16.9 million shares of our common stock were available for future issuance under the 2014 A&R Plan, as amended.
2016 Plan
In November 2016, our board of directors approved the 2016 Employment Commencement Incentive Plan (Inducement Plan) under which 1.0 million shares were reserved. In January 2021, January 2022, December 2022 and January 2024, 0.5 million, 2.0 million, 3.0 million and 5.8 million shares, respectively, were added to the Inducement Plan. As of December 31, 2025, 9.0 million shares of our common stock were subject to inducement grants that were issued pursuant to the Inducement Plan. As of December 31, 2025, no additional shares of our common stock were available for future issuance under the 2016 Plan.
Stock Options
A summary of our stock option activity and related information for the year ended December 31, 2025 is as follows:
| Number of Shares (in thousands) | Weighted-Average Exercise Price per Share | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Balance as of December 31, 2024 | 28,085 | $ | 5.63 | ||||||||||||||||||||
| Options granted | 9,011 | $ | 5.08 | ||||||||||||||||||||
| Options exercised | (1,880) | $ | 2.20 | ||||||||||||||||||||
Options forfeited or canceled | (6,239) | $ | 6.29 | ||||||||||||||||||||
| Balance as of December 31, 2025 | 28,977 | $ | 5.54 | 6.4 | $ | 37,405 | |||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 28,977 | $ | 5.54 | 6.4 | $ | 37,405 | |||||||||||||||||
| Exercisable as of December 31, 2025 | 18,133 | $ | 5.43 | 5.1 | $ | 28,181 | |||||||||||||||||
The aggregate intrinsic value represents the difference between the total pre-tax value (i.e., the difference between our stock price and the exercise price) of stock options outstanding as of December 31, 2025, based on our common stock closing price of $5.83 per share, which would have been received by the option holders if all their in-the-money options had been exercised as of that date.
The intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was $9.6 million, $19.6 million and $1.1 million, respectively. The total fair value of options vested during the years ended December 31, 2025, 2024 and 2023 was $68.1 million, $61.0 million and $24.9 million, respectively.
The weighted-average grant-date estimated fair value of options granted during the years ended December 31, 2025, 2024 and 2023 was $3.19, $6.22 and $2.36 per share, respectively. The estimated grant date fair value of employee stock options was calculated using the Black-Scholes option-pricing model, based on the following weighted-average assumptions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected term (in years) | 4.0 | 5.4 | 5.1 | ||||||||||||||
| Expected volatility | 77.6 | % | 100.8 | % | 97.6 | % | |||||||||||
| Risk-free interest rate | 3.1 | % | 4.0 | % | 3.8 | % | |||||||||||
| Dividend yield | — | % | — | % | — | % | |||||||||||
Expected Term—We estimate the expected term of our options based upon historical exercises and post-vesting termination behavior.
Expected Volatility—We use the historic volatility of our own stock over the retrospective period corresponding to the expected remaining term of the options to compute our expected stock price volatility.
Risk-Free Interest Rate—The risk-free interest rate assumption is based on the zero-coupon U.S. treasury instruments on the date of grant with a maturity date consistent with the expected term of our stock option grants.
Dividend Yield—To date, we have not declared or paid any cash dividends and do not have any plans to do so in the future. Therefore, we use an expected dividend yield of zero.
Restricted Stock Units
A summary of our RSUs activity and related information for the year ended December 31, 2025 is as follows:
| Number of RSUs (in thousands) | Weighted-Average Grant Date Fair Value per Share | ||||||||||
| Non-vested restricted stock units as of December 31, 2024 | 8,013 | $ | 6.59 | ||||||||
| Granted | 11,291 | $ | 5.15 | ||||||||
| Vested | (4,070) | $ | 5.75 | ||||||||
| Forfeited | (2,651) | $ | 5.93 | ||||||||
| Non-vested restricted stock units as of December 31, 2025 | 12,583 | $ | 5.71 | ||||||||
| Restricted stock units exercisable (vested and deferred) as of December 31, 2025 | 21 | ||||||||||
The total estimated fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 was $21.7 million, $16.4 million and $3.5 million, respectively.
Issuance of Common Stock for Services
During the years ended December 31, 2025, 2024 and 2023, we issued approximately 0.1 million, 41 thousand and 0.1 million shares, respectively, of our common stock to members of the board of directors who elected to receive stock in lieu of their cash fees under our Non-Employee Director Compensation Program, as amended. In 2025, our board of directors adopted the Fifth Amended and Restated Non-Employee Director Compensation Program, under which the board may provide each director with the opportunity to defer the settlement of restricted stock units to be granted to a future date. The shares issued during the years ended December 31, 2025, 2024 and 2023 were valued at $0.3 million, $0.3 million and $0.3 million, respectively, based on the fair value of the common stock on the date of grant.
Employee Stock Purchase Plan
The 2014 ESPP, effective on June 18, 2014, initially reserved approximately 0.2 million shares of our common stock for our eligible employees to purchase shares of our common stock at a discount. If approved by the administrator of the ESPP, on the first day of each calendar year through 2024, the number of shares in the reserve increased by an amount equal to the lesser of (i) one percent of the shares of our common stock outstanding on the last day of the immediately preceding fiscal year; and (ii) such number of shares of our common stock as determined by the board of directors (2014 ESPP evergreen provision); provided, however, no more than 2.2 million shares of our common stock could be issued under the ESPP.
On June 14, 2024, stockholders approved the Amended and Restated 2014 ESPP (A&R ESPP). The key provisions pursuant to the A&R ESPP included (i) an addition of 3.0 million shares to the total existing share reserve; and (ii) the removal of the 2014 ESPP evergreen provision such that no evergreen increases would be made after June 14, 2024.
During the years ended December 31, 2025, 2024 and 2023, we issued approximately 0.4 million, 0.5 million and 0.4 million shares, respectively, at an average share price of $4.46, $4.64 and $1.85, respectively, pursuant to the ESPP. As of December 31, 2025, approximately 3.3 million shares of our common stock were available for future issuance under the A&R ESPP.
The following table illustrates the weighted-average assumptions for the Black-Scholes option-pricing model used in determining the fair value of ESPP purchase rights granted to our employees:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected term (in years) | 0.5 | 0.5 | 0.5 | ||||||||||||||
| Expected volatility | 72.6 | % | 82.8 | % | 86.0 | % | |||||||||||
| Risk-free interest rate | 4.2 | % | 5.0 | % | 5.3 | % | |||||||||||
| Dividend yield | — | % | — | % | — | % | |||||||||||
Stock-Based Compensation Expense
Stock-based compensation expense for stock options, RSUs and our ESPP included in our statements of operations and comprehensive loss was as follows:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Selling, general and administrative | $ | 38,650 | $ | 27,791 | $ | 9,952 | |||||||||||
| Research and development | 10,312 | 9,590 | 3,578 | ||||||||||||||
| Total | $ | 48,962 | $ | 37,381 | $ | 13,530 | |||||||||||
A summary of our total unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 31, 2025 is as follows:
Unrecognized Compensation Expense (in thousands) | Average Remaining Vesting Period (in years) | ||||||||||
| Stock option grants | $ | 46,330 | 2.53 | ||||||||
| RSU grants | $ | 67,104 | 2.88 | ||||||||
| ESPP | $ | 107 | 0.17 | ||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.