ARDELYX INC

For fiscal year 2024, our executive compensation program consisted of the following elements, each established as part of our program in order to achieve the compensation objective specified below:

Base Salaries

The base salaries of our NEOs are an important part of their total compensation package, and are intended to reflect their respective positions, duties and responsibilities. Base salary is a visible and stable fixed component of our compensation program. Base salaries for our NEOs were initially established through arms-length negotiation at the time an executive was hired. Generally, the Committee will review our NEO base salaries on an annual basis, and more frequently in such cases as a promotion or change in role.

During fiscal year 2024, the Committee increased the annual base salary for Messrs. Raab and Renz, Ms. Grammer and Dr. Williams by 10%, 10%, 10% and 8%, respectively, following the Committee’s evaluation of each NEO’s individual performance and its review of Market Data. Mr. Kelliher’s annual base salary was established in connection with his commencement of employment with us. In establishing Mr. Kelliher’s annual base salary as part of arm’s length negotiations with him, the Committee considered the annual base salaries of other NEOs, Mr. Kelliher’s experience and Market Data.

The following table sets forth the base salaries of our NEOs for fiscal year 2024:

Cash-Based Incentive Compensation

We consider annual cash incentive bonuses to be an important component of our total compensation program and provides incentives necessary to retain and motivate NEOs. For 2024, our NEOs were eligible to receive performance-based cash incentives pursuant to the achievement of certain corporate performance objectives, as well as reflecting on their individual performance (excluding our CEO, who has a bonus opportunity based entirely on corporate performance).

The performance goals for these annual performance cash bonuses were evaluated by our compensation committee and approved by our board of directors. The determination of the bonus amounts paid to our NEOs generally reflects a number of considerations, including the NEO’s target bonus opportunity and the performance of the Company against corporate goals, as well as their individual performance.

Each NEO’s target bonus opportunity for 2024 performance is expressed as a percentage of base salary and is detailed below.

Our board of directors or our Committee has historically reviewed these target percentages annually to ensure they are appropriate and competitive, but does not follow a formula in determining them, though internal parity among NEOs and Market Data have the most impact on each NEO’s target percentage. Accordingly, following its review of Market Data, the Committee increased Mr. Raab’s target percentage by 10% over the target percentage for fiscal year 2023 and Mr. Renz’s, Ms. Grammer’s and Dr. Williams’ target percentage by 5% over their target percentage for fiscal 2023. Mr. Kelliher’s target percentage was established in connection with his commencement of employment in March 2024.

For determining performance bonus amounts for our NEOs for 2024, the Committee established the following percentage allocations for corporate performance and individual performance for each NEO. These allocations are unchanged from the previous year. The Committee believes that the CEO’s bonus should be based entirely on corporate performance given the scope and nature of the role as principal executive officer and his responsibility for the Company as a whole. The Committee determined that other NEOs should have a majority of their annual performance cash bonus determined by corporate performance, however some portion should reflect their performance as an individual and functional leader of the Company. The following table provides the breakout of corporate and individual performance, where applicable.

At the beginning of 2024, our Committee and board of directors set our corporate performance goals which covered a broad array of categories that were important to achieving our mission and creating stockholder value.

Each category has an assigned weight, which underscores the relative importance of the goal. Additionally, each category has a number of goals which serve as an evaluation tool for the Committee at year end when assessing Company performance. The Committee has the authority to provide no credit, partial credit, full credit, or more for each category and in total. The scoring of each category reflects the Committee’s evaluation, which sums to a total corporate score based on the category weightings.

Discussion of Corporate Objective Goal Scoring

The Committee reviewed each category of corporate objectives, as well as management’s proposed scoring and underlying rationale, in approving the corporate funding total for 2024.

Corporate Goals

expenses were approximately $311 million for fiscal year 2024 as compared to the annual operating budget of $326 million. The Committee also assessed the Company’s year-end cash balance of approximately $251 million, using its discretion to score performance, and awarded the Company enhanced credit on this category.

Discussion of Individual Goal Scoring

In addition to the corporate goal scoring, the Committee also evaluated each NEO for their individual performance in consultation with the CEO. Given the collective success of the team during 2024, the CEO recommended, and the Committee approved, that all NEOs would receive an individual score equal to the corporate score.

2024 Cash Incentive Payouts

In addition to our formal cash incentive program, the Committee may approve discretionary bonuses to be paid to our NEOs from time to time, when it determines it to be appropriate to attract and retain talent, reward performance, or incentivize future results. There were no such bonuses awarded for fiscal year 2024.

Equity-Based Compensation

The Committee views equity-based compensation as a critical component of our total compensation program. Equity-based compensation creates an ownership culture among our NEOs that provides an incentive to contribute to our mission and align interest of NEOs with those of our stockholders. We do not currently have any formal policy for determining the number of equity-based awards to grant to NEOs, though our Committee does reference the Market Data from our independent consultant when approving annual equity awards, as well as reflects on our philosophy, program objectives, and key factors as described above.

For 2024, the Committee reviewed Market Data that captured both the grant date fair value of long-term incentives provided, as well as the size of long-term incentive grants expressed as a percentage of a company’s common shares outstanding at that time. The Committee determined both reference points were important given the volatility of our share price leading up to the grant date, as well as the Committee’s desire to balance delivering competitive value and awards that were not excessively dilutive to stockholders or punitive to our NEOs on that basis.

The Committee determined to allocate 50% of each NEO’s equity award to time-vesting stock options and 50% to time-vesting Restricted Stock Units (RSUs) applying a 1.28 to 1 ratio for options to RSUs. The Committee reviewed Market Data and considered its desire to balance risk and reward, the volatility of our stock, and the motivational and retention aspects of the awards in arriving at the decision to grant an equal mix of stock options and RSUs (after applying the 1.28 to 1 ratio of options to RSUs described above). In sizing each equity award, the Committee referenced the 50 th percentile of the Market Data, as well as internal equity among NEOs.

As such, on January 16, 2024, in connection with our annual compensation review and approvals, the Committee approved the following grants to each of our NEOs other than Mr. Kelliher, who was not yet employed at our Company. Mr. Kelliher received a new hire grant upon commencing employment with us in March 2024, which was structured in the same fashion as the annual grants, while reflecting arm’s length negotiations.

Each annual stock option grant disclosed above vests and becomes exercisable in substantially equal monthly installments over four years from the grant date, subject to each holder continuing to provide services to us through such dates. The New Hire stock option grant awarded to Mr. Kelliher also vests and becomes exercisable over four years from the grant date, subject to Mr. Kelliher continuing to provide services to us through such dates but contains a one-year cliff vest of 25% of the award, with vesting thereafter on a monthly ratable basis. The Annual RSU grants vest in substantially equal quarterly installments over four years on each of the Company’s designated quarterly RSU vest dates following the grant date, subject to each holder continuing to provide services to us through such dates. Our New Hire RSUs contain a one-year cliff vest of 25% of the award, with vesting thereafter on a quarterly ratable basis.

Retirement Savings and Health and Welfare Benefits

Retirement Programs

We maintain a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. Our NEOs are eligible to participate in the 401(k) plan on the same terms as other full-time employees. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies. In 2023, the compensation committee and board of directors approved matching employer contributions under our 401(k) plan for all employees participating in the 401(k) plan, with all contributions to vest immediately, and the Company match to be 0.5% of the first 3% of the employee’s contribution.

All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans. These health and welfare plans include medical, dental and vision benefits; short-term and long-term disability insurance; and supplemental life and AD&D insurance.

Perquisites and Other Personal Benefits

We did not provide any perquisites or personal benefits to our NEOs not otherwise made available to other employees in 2024.

Employment and Severance Arrangements

We have entered into an employment agreement with our CEO and an offer letter and a change in control severance agreement with each of our other NEOs. Our CEO’s employment agreement and our NEOs’ offer letters set forth the terms and conditions of employment of our NEOs, including base salary and standard employee benefit plan participation and, in the case of offer letters, initial equity awards. Our CEO’s employment agreement and other NEOs’ change in control severance agreements provide for severance benefits and payments upon certain terminations without cause or resignations for good reason. The Committee believes that these types of arrangements are necessary to attract and retain executive talent and are a customary component of executive compensation. In particular, such arrangements can serve to mitigate a potential disincentive for them when they are evaluating a potential acquisition of the Company and can encourage retention through the conclusion of the transaction. The payments and benefits provided under our CEO’s employment agreement and our other NEOs’ change in control severance agreements are described in more detail and quantified below under “—Potential Payments Upon Termination or Change in Control.”

Other Aspects of our Compensation Program

Recovery of Erroneously Awarded Compensation Policy

Our Policy for Recovery of Erroneously Awarded Compensation (the “Clawback Policy”) is intended to comply with SEC and Nasdaq listing standards and maintain a culture of focused, diligent, and responsible management that discourages conduct detrimental to our growth. Accordingly, as set forth in the Clawback Policy, we are required to recover certain erroneously paid incentive-based compensation of our current and former executive officers in the event we are required to prepare a qualifying accounting restatement. The Clawback Policy provides that such erroneously paid incentive-based compensation may also be recovered from other compensation payable by us.

Equity Granting Practices

From time to time, we grant equity awards, including stock options and RSUs, to our employees, including our NEOs. Our typical practice is to grant employee equity awards upon an individual’s commencement of employment. We typically grant annual refresh employee equity grants in the first quarter of each fiscal year, which refresh grants are typically approved at a regularly scheduled meeting of the Committee occurring in such quarter. In addition, non-employee directors receive grants of initial and annual equity awards, at the time of a director’s initial appointment or election to the board and at the time of each annual meeting of our stockholders, respectively, pursuant to our non-employee director compensation program. We do not otherwise maintain any written policies on the timing of awards of stock options, stock appreciation rights, or similar instruments with option-like features. The Committee considers whether there is any material nonpublic information (“MNPI”) about our Company when determining the timing of stock option grants and it does not seek to time the award of stock options in relation to the Company’s public disclosure of MNPI. We have not timed the release of MNPI for the purpose of affecting the value of executive compensation.

During fiscal year 2024, we did not grant stock options or similar option-like instruments to our NEOs during the four business days prior to or the one business day following the filing of our periodic reports or the filing or furnishing of a Form 8-K that discloses MNPI.

Insider Trading

All employees, officers, members of our board of directors and certain consultants of the Company are subject to our Insider Trading Compliance Policy. The policy prohibits the covered individuals from purchasing or selling any of our securities while in possession of material nonpublic information. Our Insider Trading Compliance Policy also prohibits covered individuals, including our NEOs, from (i) making short sales of our securities, (ii) engaging in transactions in puts, calls or other options or derivative instruments related to our securities, (iii) engaging in any hedging or similar transaction designed to decrease the risks associated with holding our securities and (iv) purchasing our securities on margin or pledging our securities as collateral.

Accounting and Tax Considerations

As a general matter, our Committee reviews and considers the various tax and accounting implications of compensation programs we utilize. We account for equity compensation paid to our employees under the rules of Financial Accounting Standards Board Accounting Standard Codification Topic 718, Compensation—Stock Compensation (“ASC Topic 718”). Accounting standards also require us to record cash compensation as an expense at the time the obligation is accrued.

Compensation Risk Assessment

The Committee carefully considered whether our compensation policies and practices were reasonably likely to have a material adverse effect on the Company. The Committee believes that the mix and design of our compensation plans and policies do not encourage management to assume excessive risks and are not reasonably likely to have a material adverse effect on the Company. The Committee considered several factors in assessing the overall risk of our compensation program: