ARDELYX INC
For the period ended Dec 31, 2023. Filed Feb 22, 2024.
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FY2023 · Filed Feb 22, 2024
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Report of Independent Registered Public Accounting Firm (PCAOB ID
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ardelyx, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Ardelyx, Inc. (the “Company”) as of December 31, 2023 and 2022, the related statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 22, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| Estimates of Reserves for Variable Consideration Impacted by Estimated Payor Mix | |
| Description of the Matter | As described in Note 2 to the financial statements, the Company recognizes revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration relating to off-invoice discounts, chargebacks or rebates, wholesaler fees, group purchasing organization administrative fees, patient copay assistance programs, and estimated product returns. The variable consideration is based on the amounts earned or to be claimed for related sales which may not be known at the point of sale. Government-mandated rebates under the Medicaid Drug Rebate Program (“Medicaid”) and the Medicare Coverage Gap Program (“Medicare”) are estimated based on estimated payor mix and statutory discount rates. Patient copay assistance program amounts are estimated based on payor mix consideration, the terms of the program and redemption information provided by third-party claims processing organizations. The Company’s total estimate of reserves for variable consideration was $8.6 million as of December 31, 2023. During 2023, the Company recorded $31.3 million in total reductions to gross commercial product sales as a result of reserves for variable consideration.Auditing the Company’s estimates of reserves for variable consideration relating to Medicaid and Medicare claims and patient copay assistance was especially challenging as it involved evaluation of management’s subjective judgments with respect to payor mix that is developed based on various data sources. The Company has a limited history upon which to base its assumptions, and changes in these assumptions could have a material impact on the amount of reserves recorded for variable consideration. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s process to determine the reserves for variable consideration that are impacted by the payor mix. For example, we tested controls over management’s review of the completeness and accuracy of the data used to determine the estimate. To test the Company’s estimates of reserves for variable consideration relating to Medicaid and Medicare claims and patient copay assistance, our audit procedures included, among others, evaluating the methodologies and assumptions used and testing the accuracy and completeness of the underlying data used in the Company’s payor mix analysis. We compared the assumptions used by management to third-party industry data and actual trends. We also evaluated the reasonableness of changes in estimated reserves during the year, and assessed the accuracy of the Company’s estimates against actual results. We also performed sensitivity analyses to determine the effect of changes in management’s assumptions on the amount of reserves recorded for variable consideration impacted by the payor mix, where appropriate. Further, we evaluated the appropriateness of classification and disclosure of the Company’s reserves for variable consideration in the financial statements. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2009.
Boston, MA
February 22, 2024
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