What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-10 · 207 added, 164 removed, 382 unchanged (49% of the section changed)

8 unchanged sentences

Our portfolio includes a late-stage product candidate and a commercial product:

• Vadadustat is an oral hypoxia-inducible factor prolyl hydroxylase inhibitor, or HIF-PHI, in global Phase 3 development for two indications:

• Vadadustat is an oral hypoxia-inducible factor prolyl hydroxylase inhibitor, or HIF-PHI, that recently completed global Phase 3 development for two indications:

(1) anemia due to chronic kidney disease, or CKD, in adult patients on dialysis, or DD-CKD, and (2) anemia due to CKD in adult patients not on dialysis, or NDD-CKD.

We believe vadadustat has the potential to set a new oral standard of care for patients with anemia due to CKD, subject to regulatory approval.

Vadadustat is designed to mimic the physiologic effect of altitude on oxygen availability.

1 unchanged sentence

Vadadustat is not approved by the U.S.

Food and Drug Administration (FDA) or any regulatory authority for use with the exception of Japan’s Ministry of Health, Labour and Welfare (MHLW).

In Japan, vadadustat is approved as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD adult patients, under the trade name VAFSEO.

Food and Drug Administration, or FDA, or any regulatory authority for use with the exception of Japan’s Ministry of Health, Labour and Welfare, or MHLW.

In Japan, vadadustat is approved and marketed under the trade name VAFSEO as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD adult patients.

In May of 2020, we announced that INNO 2 VATE, our Phase 3 program evaluating vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients, met the primary and key secondary efficacy endpoints in each of the two studies in the program and also met the program's primary safety endpoint.

In September of 2020, we announced that PRO 2 TECT, our Phase 3 program evaluating vadadustat for the treatment of anemia due to CKD in adult NDD-CKD patients met the primary and key secondary efficacy endpoints in each of the two studies in the program, but did not meet the program's primary safety endpoint.

In October of 2020, we completed a pre-NDA meeting with the FDA.

We plan to submit to the FDA a New Drug Application, or NDA, for vadadustat as early as possible in 2021 for two indications:

(1) the treatment of anemia due to CKD in adult DD-CKD patients, and (2) the treatment of anemia due to CKD in adult NDD-CKD patients.

A key component of this NDA is the data from INNO 2 VATE.

Based on our pre-NDA meeting, we believe the INNO 2 VATE data support potential approval of vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients.

The pre-NDA meeting also allowed us the opportunity to clarify key questions regarding data from PRO 2 TECT, and we look forward to working with the FDA in their review of these data.

While the PRO 2 TECT data showed that vadadustat achieved both the primary and key secondary efficacy endpoints in each of the two studies in the program, it did not meet the program’s primary safety endpoint for adult NDD-CKD patients, and we remain appropriately cautious in our outlook for potential approval of vadadustat in adult NDD-CKD patients.

Importantly, we believe the PRO 2 TECT data will not adversely impact the potential approvability of vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients.

• Auryxia ® (ferric citrate) is approved and marketed in the United States for two indications:

(1) the control of serum phosphorus levels in adult patients with DD-CKD, or the Hyperphosphatemia Indication, and (2) the treatment of iron deficiency anemia, or IDA, in adult patients with NDD-CKD, or the IDA Indication.

citrate is also approved and marketed in Japan as an oral treatment for the improvement of hyperphosphatemia in patients with CKD, including DD-CKD and NDD-CKD, under the trade name Riona ® (ferric citrate hydrate).

In the second quarter of 2020, we announced positive top-line results from INNO 2 VATE, the first of our two global Phase 3 cardiovascular outcomes programs.

At that time, we also announced that we had significantly advanced PRO 2 TECT, the second of our two global Phase 3 cardiovascular outcomes programs, and achieved the target number of major adverse cardiovascular events, or MACE, for the study.

More recently, in August 2020, we announced database lock for PRO 2 TECT and plans to report top-line data in early September 2020.

Ferric citrate is also approved and marketed in Japan as an oral treatment for the improvement of hyperphosphatemia in patients with CKD, including DD-CKD and NDD-CKD, under the trade name Riona ® (ferric citrate hydrate).

Top-line Results from Global Phase 3 INNO 2 VATE Program

42 unchanged sentences

Serious treatment emergent adverse events were slightly lower for vadadustat treated patients at 55.0% and 58.3% for darbepoetin alfa-treated patients.

INNO 2 VATE results on key secondary safety endpoints showed that vadadustat demonstrated non-inferiority to darbepoetin alfa in analyses of expanded MACE, cardiovascular MACE, cardiovascular mortality, and all-cause mortality.

Top-line Results from Global Phase 3 PRO 2 TECT Program

The two PRO 2 TECT studies ( Correction and Conversion ), which collectively enrolled 3,476 patients, evaluated the efficacy and safety of vadadustat for the treatment of anemia due to CKD in adult patients not on dialysis.

Vadadustat achieved the primary and key secondary efficacy endpoint in each of the two PRO 2 TECT studies, demonstrating non-inferiority to darbepoetin alfa as measured by a mean change in Hb between baseline and the primary evaluation period (weeks 24 to 36) and secondary evaluation period (weeks 40 to 52).

Vadadustat did not meet the primary safety endpoint of the PRO 2 TECT program, defined as non-inferiority of vadadustat versus darbepoetin alfa in time to first occurrence of MACE, which is the composite of all-cause mortality, non-fatal myocardial infarction, and non-fatal stroke across both PRO 2 TECT studies.

Primary and Key Secondary Efficacy Endpoint Results

Vadadustat achieved each of the PRO 2 TECT studies' primary efficacy endpoints of mean change in Hb between baseline and the primary evaluation period (mean Hb from weeks 24 to 36) compared to darbepoetin alfa, in adult patients on dialysis, demonstrating non-inferiority to darbepoetin alfa using an NI margin of -0.75 g/dL prospectively agreed to with FDA and EMA.

In PRO 2 TECT's Correction study (n=1,751):

• Primary Efficacy Endpoint Result :

Vadadustat was non-inferior to darbepoetin alfa.

The least square mean difference in Hb was 0.05 g/dL (95% CI:

-0.04, 0.15), achieving the pre-specified NI criterion of -0.75 g/dL.

The mean (SD) Hb level at week 24 to week 36 was 10.39 (0.99) g/dL for vadadustat-treated patients compared to 10.35 (1.03) g/dL for darbepoetin alfa-treated patients.

• Key Secondary Efficacy Endpoint Result :

Vadadustat sustained the target Hb efficacy response at weeks 40 to 52 achieving non-inferiority compared to darbepoetin alfa.

The least square mean difference in Hb was 0.04 g/dL (95% CI:

-0.06, 0.14).

The mean (SD) Hb level at week 40 to week 52 was 10.48 (1.05) g/dL for vadadustat-treated patients compared to 10.45 (1.01) g/dL for darbepoetin alfa-treated patients.

In PRO 2 TECT's Conversion study (n=1,725):

• Primary Efficacy Endpoint Result :

Vadadustat was non-inferior to darbepoetin alfa.

The least square mean difference in Hb was -0.01 g/dL (95% CI:

-0.09, 0.07), achieving the pre-specified NI criterion of -0.75 g/dL.

The mean (SD) Hb level at week 24 to week 36 was 10.77 (0.98) g/dL for vadadustat-treated patients compared to 10.77 (0.99) g/dL for darbepoetin alfa-treated patients.

• Key Secondary Efficacy Endpoint Result :

Vadadustat sustained efficacy in the Conversion study demonstrating non-inferiority to darbepoetin with a least square mean difference in Hb of 0.00 g/dL (95% CI:

-0.10, 0.09).

The mean (SD) Hb level at week 40 to week 52 was 10.80 (1.04) g/dL in the vadadustat-treated patients compared to 10.79 (1.05) g/dL for darbepoetin alpha-treated patients.

Primary Safety Major Adverse Cardiovascular Events (MACE) Endpoint Result

The PRO 2 TECT program (Correction and Conversion studies) (n=3,471):

• Primary Safety MACE Endpoint Result :

Vadadustat did not meet the PRO 2 TECT program's primary safety endpoint of non-inferiority for MACE.

The upper bound of the 95% confidence interval of the Hazard Ratio (HR) was above the pre-specified NI margin of 1.25 for primary MACE analysis (HR 1.17, 95% CI:

MACE is defined as the composite endpoint of all-cause mortality, non-fatal myocardial infarction, and non-fatal stroke.

The incidence of treatment emergent adverse events during the Correction study in the vadadustat-treated patients was 90.9%, and 91.6% in darbepoetin alfa-treated patients.

During the study, the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa-treated patients were end-stage renal disease (34.7%/ 35.2%), hypertension (17.7%/ 22.1.%), hyperkalemia (12.3.%/ 15.6%), urinary tract infection (12.9%/ 12.0%), diarrhea (13.9%/ 10.0%), peripheral oedema (12.5%/ 10.5%), fall (9.6%/ 10%) and nausea (10%/ 8.2%).

Serious treatment emergent adverse events were 65.3% for vadadustat-treated patients and 64.5% for darbepoetin alfa-treated patients.

The incidence of treatment emergent adverse events during the Conversion study in vadadustat treated patients was 89.1% and 87.7% in darbepoetin alfa-treated patients.

During the study, the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa-treated patients were end-stage renal disease (27.5%/ 28.4%), hypertension (14.4%/ 14.8%), urinary tract infection (12.2%/ 14.5%), diarrhea (13.8.%/ 8.8.%), peripheral oedema (9.9%/ 10.1%) and pneumonia (10.0%/ 9.7%).

Serious treatment emergent adverse events were 58.5% for vadadustat-treated patients and 56.6% for darbepoetin alfa-treated patients.

The PRO 2 TECT analysis plan was prospectively designed to analyze the effect of regional differences, most notably, well-known differences in Hb treatment targets.

Within PRO 2 TECT, U.S.

patients were treated to a target Hb range of 10 to 11 g/dL and non-U.S.

patients were treated to a target Hb range of 10 to 12 g/dL.

In October of 2020, we presented a pre-specified regional analysis using age as a dichotomous variable, that showed vadadustat was not associated with a clinically meaningful increase in cardiovascular risk compared to darbepoetin alfa in U.S.

patients treated to a target Hb range of 10 to 11 g/dL, in an analysis of MACE (HR 1.06, 95% CI:

Regulatory and Commercialization Strategy

We plan to file for regulatory approval in the United States and other regions upon successful completion of the global Phase 3 studies for vadadustat, which includes the PRO 2 TECT studies of vadadustat for the treatment of anemia due to CKD in NDD-CKD patients that we expect to read out in early September 2020, as previously disclosed.

In connection with our plan to file for regulatory approval for vadadustat in the United States, we entered into a letter agreement on February 14, 2020, or the Letter Agreement, with Vifor (International) Ltd., or Vifor Pharma, relating to Vifor Pharma’s agreement with a third party to purchase a Priority Review Voucher, or the PRV, issued by the FDA subject to satisfaction of customary closing conditions, or the PRV Purchase.

A PRV entitles the holder to priority review of a New Drug Application, or NDA, or a Biologics License Application, or BLA, for a new drug, which reduces the target FDA review time to six months after official acceptance of the submission, and could lead to expedited approval.

In October of 2020, we completed a pre-NDA meeting with the FDA.

We plan to submit to the FDA an NDA for vadadustat as early as possible in 2021 for two indications:

(1) the treatment of anemia due to CKD in adult DD-CKD patients, and (2) the treatment of anemia due to CKD in adult NDD-CKD patients.

A key component of this NDA is the data from INNO 2 VATE.

Based on our pre-NDA meeting, we believe the INNO 2 VATE data support potential approval of vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients.

The pre-NDA meeting also allowed us the opportunity to clarify key questions regarding data from PRO 2 TECT, and we look forward to working with the FDA in their review of these data.

Importantly, we believe the PRO 2 TECT data will not adversely impact the potential approvability of vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients.

We and Otsuka Pharmaceutical Co.

Ltd., are working in close collaboration to prepare a Marketing Authorization Application, or MAA, for submission to the European Medicines Agency, or EMA, next year.

In connection with our plan to file an NDA for vadadustat in the United States, we entered into a letter agreement on February 14, 2020, or the Letter Agreement, with Vifor (International) Ltd., or Vifor Pharma, relating to Vifor Pharma’s agreement with a third party to purchase a Priority Review Voucher, or the PRV, issued by the FDA subject to satisfaction of customary closing conditions, or the PRV Purchase.

A PRV entitles the holder to priority review of an NDA, or a Biologics License Application, or BLA, for a new drug, which reduces the target FDA review time to six months after official acceptance of the submission, and could lead to expedited approval.

Pursuant to the Letter Agreement, we paid Vifor Pharma $10.0 million in connection with the closing of the PRV Purchase.

8 unchanged sentences

The license granted to Vifor Pharma would be effective upon FDA approval of vadadustat in the DD-CKD indication, the earlier of a determination by the Centers for Medicare & Medicaid Services, or CMS, that vadadustat will be included in Medicare’s bundled reimbursement model or that vadadustat will be reimbursed using the Transitional Drug Add-On Payment Adjustment, or TDAPA, and a milestone payment by Vifor Pharma.

Japan Approval

Japan Approval and Launch

In June 2020, we announced the first regulatory approval of vadadustat for the treatment of anemia due to CKD in DD-CKD and NDD-CKD patients in Japan.

Vadadustat will be marketed by our collaboration partner, MTPC, in Japan under the trade name VAFSEO.

Our collaboration partner, MTPC, commenced commercial sales of vadadustat in Japan under the trade name, VAFSEO, in August 2020.

The regulatory approval triggered a $15.0 million regulatory milestone payment from MTPC to Akebia.

3 unchanged sentences

Patients will be dosed with vadadustat or a placebo starting within 24 hours of hospital admission and continuing for up to 14 days.

This study is being conducted under an FDA Investigational New Drug application with UTHealth as the study sponsor.

This study is being conducted under an FDA Investigational New Drug application with UTHealth as the study sponsor and is currently enrolling patients.

We market Auryxia in the United States with our well-established, nephrology-focused commercial organization.

1 unchanged sentence

Auryxia is our only product approved for sale in the United States and it generated approximately $34.4 million and $30.0 million in revenue from U.S.

product sales during the three months ended June 30, 2020 and 2019, respectively, and approximately $59.9 million and $52.2 million during the six months ended June 30, 2020 and 2019, respectively.

product sales during the three months ended September 30, 2020 and 2019, respectively, and approximately $94.3 million and $82.2 million during the nine months ended September 30, 2020 and 2019, respectively.

We have funded our operations primarily through equity offerings, strategic collaborations, product revenues and debt.

1 unchanged sentence

We have never been profitable and have incurred net losses in each year since inception.

Our net losses were $175.8 million and $58.2 million for the three months ended June 30, 2020 and 2019, respectively, and $236.5 million and $130.6 million for the six months ended June 30, 2020 and 2019, respectively.

Our net losses were $60.0 million and $54.6 million for the three months ended September 30, 2020 and 2019, respectively, and $296.5 million and $185.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Substantially all of our net losses resulted from costs incurred in connection with our development efforts relating to vadadustat, including preparing for and conducting clinical studies of vadadustat, providing general and administrative support for these operations and protecting our intellectual property.

2 unchanged sentences

We expect to continue to incur significant expenses if and as we:

• conduct our development program of vadadustat for the treatment of anemia due to CKD, including PRO 2 TECT and other ongoing or planned studies with respect to vadadustat, and develop plans for and conduct the preclinical and clinical development of any other potential product candidates;

• conduct our development program of vadadustat and develop any other potential product candidates;

• continue our commercialization activities for Auryxia and plan for the commercialization of vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired;

17 unchanged sentences

Any of these events could significantly harm our business, financial condition and prospects.

From inception through June 30, 2020, we raised approximately $693.7 million of net proceeds from the sale of equity including $519.8 million from various underwritten public offerings, $123.9 million from at-the-market offerings, or ATM offerings, pursuant to sales agreements with Cantor Fitzgerald & Co., and $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma.

From inception through September 30, 2020, we raised approximately $693.7 million of net proceeds from the sale of equity including $519.8 million from various underwritten public offerings, $123.9 million from at-the-market offerings, or ATM offerings, pursuant to sales agreements with Cantor Fitzgerald & Co., and $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma.

During the quarter ended June 30, 2020, we completed an underwritten public offering of our common stock with aggregate net proceeds of $142.4 million.

7 unchanged sentences

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition continues to depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, any resurgence of COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets where the healthcare providers with whom we interact, our partners, our CROs, our contract manufacturing organizations, or CMOs, and our other vendors operate.

During the second quarter of 2020, certain states, countries, and businesses had begun to ease restrictions that were in place earlier.

Recently, however, viral infections have begun to increase again, resulting in the resumption of restrictions.

As a result, there remains uncertainty concerning the impact and duration of the COVID-19 pandemic.

To date, we have not experienced any significant adverse impact from COVID-19 on our financial and operational performance and our fundamentals have remained strong.

We believe our innovative therapies are critical to dialysis and non-dialysis CKD patients, who are among the most at risk during this pandemic.

Continuing to provide and support our therapies is a priority.

However, we are continuing to monitor and assess the potential impact of the COVID-19 pandemic on our business and operations, including our sales, supply chain, manufacturing, and clinical trials.

To date, we do not believe we have experienced any significant adverse impact from COVID-19 on our financial and operational performance.

However, the dialysis and non-dialysis CKD patient populations, many of whom rely on our innovative therapies, have been disproportionately impacted by COVID-19 based on the number of cases and hospitalizations, which may significantly negatively impact our product demand, payer mix, and net product revenue in the future.

Continuing to provide and support our therapies is a priority and we are continuing to monitor and assess the potential impact of the COVID-19 pandemic on our business and operations, including our sales, supply chain, manufacturing, and clinical trials.

We are also mindful of the potential macro-level risks from the impact on the healthcare system to us, our patients, our customers, healthcare providers, our collaboration partners, and our vendors, as well as the potential impact on payer mix.

The majority of our office-based employees have been working from home since March 13, 2020 and are not expected to return to the office before the end of 2020.

In addition, consistent with Centers for Disease Control and Prevention guidance and in accordance with evolving COVID-19 safety restrictions imposed by many of our customers, we suspended in-person interactions by our customer-facing personnel with healthcare providers, including dialysis centers and hospitals.

Although we began permitting in-person interactions in the second quarter of 2020 where appropriate and permissible, healthcare facilities have continued, or begun again, to restrict access for non-patients, including the members of our sales force.

For example, DaVita, Inc., or DaVita, and Fresenius Medical Care, or Fresenius, which account for a vast majority of the dialysis population

in the United States, have restricted access to their clinics.

In addition, healthcare facilities have continued, or begun again, to restrict access for non-patients, including the members of our sales force.

For example, DaVita, Inc., or DaVita, and Fresenius Medical Care, or Fresenius, which account for a vast majority of the dialysis population in the United States, have restricted access to their clinics.

As a result, we continue to primarily engage with healthcare providers and other customers virtually, where possible.

Given this uncertain environment and the lack of clear visibility, we are actively monitoring the demand for our marketed therapy, including the potential for material declines or changes in prescription trends and in customer orders.

Given this uncertain environment and the disproportionate impact of COVID-19 on CKD patients, we are actively monitoring the demand for our marketed therapy, including the potential for material declines or changes in prescription trends and customer orders.

At this time, our third party contract manufacturing partners continue to operate at or near normal levels.

While we currently do not anticipate any interruptions in our manufacturing process due to COVID-19, we believe that we have inventory to help mitigate the impact should they occur.

However, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our contract manufacturing partners' ability to manufacture our marketed product or to have our marketed product reach our markets, which would also impact our inventory reserves.

In terms of our clinical trials, our PRO 2 TECT studies for vadadustat have advanced significantly and as previously disclosed, we expect to announce top-line data in early September.

Our FO 2 RWARD-2 trial for vadadustat is fully enrolled, and we continue to expect top-line data by year end.

COVID-19 precautions are, however, causing a delay in enrolling new clinical trials.

We are using remote monitoring and performing remote patient visits, where possible.

However, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our contract manufacturing partners' ability to manufacture and deliver Auryxia and vadadustat (which is currently marketed under the trade name VAFSEO by MTPC in Japan), which may result in delays in or disruptions to manufacturing and supply of our products.

COVID-19 precautions may cause a delay in enrolling new clinical trials.

We are using remote monitoring and central monitoring, where possible.

This uncertain COVID-19 environment has presented new risks to our business.

While we are working aggressively to mitigate impacts on our business, we are mindful that many of these risks and the impact to the larger healthcare market are outside our control.

While we are working aggressively to mitigate the impacts on our business, we are mindful that many of these risks and the impact to the larger healthcare market are outside of our control.

For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part II, Item 1A.

1 unchanged sentence

Financial Overview

To date, our revenues have been derived from collaboration revenues, which include license and milestone payments and cost-sharing revenue, generated through collaboration and license agreements with partners for the development and commercialization of vadadustat and, following the Merger, commercial sales of Auryxia and royalty revenue from sales of Riona in Japan.

To date, our revenues have been derived from collaboration revenues, which include license and milestone payments, royalty and cost-sharing revenue generated through collaboration and license agreements with partners for the development and commercialization of vadadustat and, following the Merger, commercial sales of Auryxia and royalty revenue from sales of Riona in Japan.

Cost-sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and, potentially, co-promotion activities, under our collaboration agreements.

4 unchanged sentences

As a result of the Merger and the application of purchase accounting, costs of goods sold also includes both amortization expense and, if applicable, impairment charges associated with the fair value of the developed product rights for Auryxia as well as expense associated with the fair value inventory step-up.

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of June 30, 2020 is estimated to be seven years.

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of September 30, 2020 is estimated to be seven years.

The fair value inventory step-up is expected to be incurred over approximately three years from the date of the Merger.

14 unchanged sentences

For example, if the FDA, the EMA, or other regulatory authorities were to require us to conduct clinical studies in addition to or different from those that we currently anticipate, or if we experience delays in any of our clinical studies, we could be required to expend significant additional financial resources and time on the completion of clinical development.

From inception through June 30, 2020, we have incurred $1.2 billion in research and development expenses.

From inception through September 30, 2020, we have incurred $1.3 billion in research and development expenses.

We expect to have significant research and development expenditures for the foreseeable future as we continue the development of vadadustat and any other product candidates.

5 unchanged sentences

We do not track our internal research and development expenses on a program-by-program basis as they are deployed across multiple projects under development.

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

9 unchanged sentences

Results of Operations

Comparison of the Three Months Ended June 30, 2020 and 2019

Comparison of the Three Months Ended September 30, 2020 and 2019

Three Months Ended Increase

June 30, 2020 June 30, 2019 (Decrease)

September 30, 2020 September 30, 2019 (Decrease)

(In Thousands)

5 unchanged sentences

Amortization of intangibles 6,106 9,101 (2,995)

Impairment of intangible asset 115,527 — 115,527

Total cost of goods sold 30,345 38,263 (7,918)

12 unchanged sentences

We distribute our product principally through a limited number of wholesale distributors as well as certain specialty pharmacy providers.

Net product revenue was $30.7 million for the three months ended June 30, 2020, compared to net product revenue of $29.1 million for the three months ended June 30, 2019.

Net product revenue was $34.4 million for the three months ended September 30, 2020, compared to net product revenue of $30.0 million for the three months ended September 30, 2019.

The increase was primarily due to an increase in units sold.

We did not experience any significant impact from COVID-19 on net product revenue for the three months ended June 30, 2020;

however, we have no clear visibility on how product demand and payer mix may be impacted in the upcoming weeks and months and therefore, it is not possible to predict whether our future net product revenue will be impacted as a result of COVID-19 going forward.

We do not believe we experienced any significant impact from COVID-19 on net product revenue for the three months ended September 30, 2020;

however, CKD patients have been disproportionately impacted by COVID-19 based on the number of cases and hospitalizations, which may significantly negatively impact our product demand, payer mix, and net product revenue in the future.

In September 2018, CMS decided that Auryxia would not be covered by Medicare for the IDA Indication.

7 unchanged sentences

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $59.4 million for the three months ended June 30, 2020 compared to $71.7 million for the three months ended June 30, 2019.

We recognized $53.7 million in collaboration revenue for the three months ended June 30, 2020 from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

Agreement, and the Otsuka collaboration agreement for

certain territories outside the United States, or the Otsuka International Agreement, and recognition of a milestone earned under our collaboration agreement with MTPC, or the MTPC Agreement.

We recognized $70.0 million in collaboration revenue for the three months ended June 30, 2019 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement and recognition of a milestone under the MTPC Agreement.

License, collaboration and other revenue was $25.6 million for the three months ended September 30, 2020 compared to $62.0 million for the three months ended September 30, 2019.

We recognized $23.9 million in collaboration revenue for the three months ended September 30, 2020 from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

Agreement, and the Otsuka collaboration agreement for certain territories outside the United States, or the Otsuka International Agreement, and recognition of royalty revenue under our collaboration agreement with MTPC, or the MTPC Agreement.

We recognized $59.9 million in collaboration revenue for the three months ended September 30, 2019 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement.

The decrease in revenue between the two periods was attributable to a decrease of $36.4 million of revenue recognized under both the Otsuka U.S.

Agreement and Otsuka International Agreement.

This decrease was partially offset by an additional $5.0 million of revenue recognized under the MTPC Agreement due to timing of milestone recognition and an additional $4.0 million of revenue recognized for the supply of validation drug product to MTPC during the second quarter of 2020.

We expect our Otsuka collaboration revenue to decrease in the near term because our top-line data from our INNO 2 VATE studies have been reported, and our PRO 2 TECT studies are nearing completion.

Agreement and Otsuka International Agreement, offset by $0.4 million of royalty revenue recognized under the MTPC Agreement.

We expect our Otsuka collaboration revenue to decrease in the near term because our INNO 2 VATE and PRO 2 TECT studies have read out, and we are currently engaged in close-out activities with respect to these studies.

Cost of Goods Sold - Product .

Cost of goods sold of $50.0 million for the three months ended June 30, 2020 consists of costs associated with the manufacturing of Auryxia, $19.9 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, $11.0 million in non-cash charges related to an increase to the liability for excess purchase commitments and $9.9 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

We expect cost of goods sold to decrease as we work to lower costs through quality and process improvements, enhanced manufacturing efficiencies and improvements in the overall quality and mix of our inventory.

Cost of goods sold of $28.6 million for the three months ended June 30, 2019 consisted primarily of costs associated with the manufacturing of Auryxia and $19.0 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting.

Cost of goods sold of $24.2 million for the three months ended September 30, 2020 primarily consists of costs associated with the manufacturing of Auryxia, $8.4 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, and $8.5 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

This write-down was largely related to a previously disclosed manufacturing quality issue related to Auryxia.

These charges were partially offset by a $0.7 million non-cash gain related to a reduction to the liability for excess purchase commitments.

Cost of goods sold of $29.2 million for the three months ended September 30, 2019 consisted primarily of costs associated with the manufacturing of Auryxia and $18.0 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting.

Cost of Goods Sold - Amortization of Intangibles.

Amortization of intangibles relates to the acquired developed product rights for Auryxia.

During the three months ended June 30, 2020, this intangible asset was being amortized over its estimated useful life of approximately nine years using a straight-line method.

Amortization of intangibles for each of the three months ended June 30, 2020 and 2019 was $9.1 million.

We expect the combined effect of the lower carrying value of the Auryxia intangible asset following impairment in the second quarter of 2020, as further described below, and the corresponding adjustment to the estimated useful life of the developed product rights for Auryxia, to result in a decrease in future amortization charges.

Cost of Goods Sold - Impairment of Intangible Asset.

In the second quarter of 2020, in connection with a routine business review, we reduced our short-term and long-term Auryxia revenue forecast.

This reduction was primarily driven by the compounding impact of the CMS Decisions that rescinded Medicare Part D coverage of Auryxia for the IDA Indication, and imposed a prior authorization requirement for Auryxia for the Hyperphosphatemia Indication.

As a result, we recorded an impairment charge of $115.5 million to the Auryxia intangible asset during the three months ended June 30, 2020.

There were no such impairment charges during the three months ended June 30, 2019.

During the three months ended September 30, 2020, this intangible asset was being amortized using a straight-line method over its estimated useful life of approximately seven years.

Amortization of intangibles during the three months ended September 30, 2020 and 2019 was $6.1 million and $9.1 million, respectively.

The combined effect of the lower carrying value of the Auryxia intangible asset following impairment in the second quarter of 2020, as further described below, and the corresponding adjustment to the estimated useful life of the developed product rights for Auryxia, results in a decrease in future amortization charges.

Research and Development Expenses .

Research and development expenses were $52.8 million for the three months ended June 30, 2020, compared to $85.7 million for the three months ended June 30, 2019, a decrease of $32.9 million.

Research and development expenses were $46.9 million for the three months ended September 30, 2020, compared to $74.5 million for the three months ended September 30, 2019, a decrease of $27.7 million.

The decrease was primarily due to the following:

4 unchanged sentences

Total net decrease $ (27.7)

The decrease in the costs related to the development of vadadustat is primarily attributable to a decrease in external costs related to the continued advancement of the PRO 2 TECT Phase 3 program, for which we locked the database in the third quarter of 2020, and the INNO 2 VATE Phase 3 program, for which we reported top-line data in the second quarter of 2020.

The decreases in vadadustat research and development expenses, as well as other research and development expenses, were offset by an increase in headcount and consulting costs to support our research and development programs.

Although we expect our research and development expenses in 2020 to decrease because top-line data from our INNO 2 VATE studies were reported in the second quarter of 2020, and as PRO 2 TECT nears top-line data readout, we will continue to incur significant research and development expenses in future periods in support of our global Phase 3 program and other studies for vadadustat and development of our other product candidates.

The decrease in the costs related to the development of vadadustat is primarily attributable to a decrease in external costs related to our global Phase 3 program (INNO 2 VATE and PRO 2 TECT), for which we reported top-line data in the second and third quarters of 2020, respectively.

Although we expect our research and development expenses in 2020 to decrease because top-line data from our INNO 2 VATE and PRO 2 TECT studies were reported, we will continue to incur significant research and development expenses in future periods in support of our development program of vadadustat and other ongoing or planned studies with respect to Auryxia, vadadustat and development of our other product candidates.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $35.5 million for the three months ended June 30, 2020, compared to $36.1 million for the three months ended June 30, 2019.

The decrease of $0.6 million was primarily due to decreases in sales and marketing, facilities and information technology costs.

Selling, general and administrative expenses were $40.2 million for the three months ended September 30, 2020, compared to $34.2 million for the three months ended September 30, 2019.

The increase of $6.0 million was primarily due to increases in headcount, professional fees and consulting costs.

In 2020, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia and for support of our ongoing research and development and potential commercialization of vadadustat and other product candidates to be relatively consistent with 2019.

License Expenses.

License expense related to royalties due to Auryxia relating to sales of Riona in Japan were $1.0 million and $0.9 million for the three months ended June 30, 2020 and 2019, respectively.

License expense related to royalties due to Auryxia relating to sales of Riona in Japan were $0.7 million and $0.9 million for the three months ended September 30, 2020 and 2019, respectively.

Other Expense, Net .

Other expense, net, was $1.9 million for the three months ended June 30, 2020 compared to other income, net of $0.5 million for the three months ended June 30, 2019.

The change to other expense, net was primarily due to interest expense associated with our Term Loans in the three months ended June 30, 2020.

We did not have similar expenses during the three months ended June 30, 2019.

Other income, net for the three months ended June 30, 2019 was primarily due to interest income on our investments.

Other expense, net, was $1.9 million for the three months ended September 30, 2020 compared to other income, net of $43,000 for the three months ended September 30, 2019.

The change to other expense, net was primarily due to interest expense associated with our Term Loans in the three months ended September 30, 2020.

We did not have similar expenses during the three months ended September 30, 2019.

Other income, net for the three months ended September 30, 2019 was primarily due to interest income on our investments.

Benefit from Income Taxes.

There was no benefit from income taxes for the three months ended June 30, 2020.

Benefit from income taxes was $0.8 million for the three months ended June 30, 2019 due to a decrease in our net deferred tax liabilities, or DTLs.

During the three months ended June 30, 2019, there was an increase in deferred tax assets associated with the state net operating loss generated during the period.

This increase in deferred tax assets reduced our net DTLs which created a benefit from income taxes for the three months ended June 30, 2019.

Comparison of the Six Months Ended June 30, 2020 and 2019

Six Months Ended Increase

June 30, 2020 June 30, 2019 (Decrease)

There was no benefit from income taxes for the three months ended September 30, 2020.

Benefit from income taxes was $1.3 million for the three months ended September 30, 2019 due to a decrease in our net deferred tax liabilities, or DTLs.

During the three months ended September 30, 2019, there was an increase in deferred tax assets associated with the state net operating loss generated during the period.

This increase in deferred tax assets reduced our net DTLs which created a benefit from income taxes for the three months ended September 30, 2019.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended Increase

September 30, 2020 September 30, 2019 (Decrease)

(In Thousands)

20 unchanged sentences

We distribute our product principally through a limited number of wholesale distributors as well as certain specialty pharmacy providers.

Net product revenue was $59.9 million for the six months ended June 30, 2020, compared to net product revenue of $52.2 million for the six months ended June 30, 2019.

Net product revenue was $94.3 million for the nine months ended September 30, 2020, compared to net product revenue of $82.2 million for the nine months ended September 30, 2019.

The increase was primarily due to an increase in units sold.

experience any significant impact from COVID-19 on net product revenue for the six months ended June 30, 2020;

We do not believe we experienced any significant impact from COVID-19 on net product revenue for the nine months ended September 30, 2020;

however, CKD patients have been disproportionately impacted by COVID-19 based on the number of cases and hospitalizations, which may significantly negatively affect our product demand, payer mix, and net product revenue in the future.

In September 2018, CMS decided that Auryxia would not be covered by Medicare for the IDA Indication.

7 unchanged sentences

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $118.7 million for the six months ended June 30, 2020 compared to $121.3 million for the six months ended June 30, 2019.

We recognized $111.7 million in collaboration revenue for the six months ended June 30, 2020 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement and recognition of a milestone earned under the MTPC Agreement.

We recognized $118.2 million in collaboration revenue for the six months ended June 30, 2019 from our cost sharing arrangement under the Otsuka U.S.

License, collaboration and other revenue was $144.3 million for the nine months ended September 30, 2020 compared to $183.2 million for the nine months ended September 30, 2019.

We recognized $135.5 million in collaboration revenue for the nine months ended September 30, 2020 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement and recognition of a milestone and royalty revenue earned under the MTPC Agreement.

We recognized $178.1 million in collaboration revenue for the nine months ended September 30,

2019 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement and recognition of a milestone under the MTPC Agreement.

1 unchanged sentence

Agreement and Otsuka International Agreement.

We expect our Otsuka collaboration revenue to decrease in the near term because our top-line data from our INNO 2 VATE studies have been reported, and our PRO 2 TECT studies are nearing completion.

This decrease was partially offset by an additional $5.4 million of revenue recognized under the MTPC Agreement due to timing of milestone recognition and royalty revenue.

Cost of Goods Sold - Product .

Cost of goods sold of $68.6 million for the six months ended June 30, 2020 consists of costs associated with the manufacturing of Auryxia, $31.1 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, $11.0 million in non-cash charges related to an increase to the liability for excess purchase commitments and $10.1 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Cost of goods sold of $50.7 million for the six months ended June 30, 2019 consisted primarily of costs associated with the manufacturing of Auryxia and $33.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting.

Cost of goods sold of $92.8 million for the nine months ended September 30, 2020 primarily consists of costs associated with the manufacturing of Auryxia, $39.5 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, $18.6 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation, and $10.3 million in non-cash charges related to an increase to the liability for excess purchase commitments as a result of a reduction in short-term and long-term Auryxia revenue sales forecast during the second quarter of 2020.

Cost of goods sold of $79.9 million for the nine months ended September 30, 2019 consisted primarily of costs associated with the manufacturing of Auryxia and $51.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting.

Cost of Goods Sold - Amortization of Intangibles.

Amortization of intangibles relates to the acquired developed product rights for Auryxia.

During the six months ended June 30, 2020, this intangible asset was being amortized over its estimated useful life of approximately nine years using a straight-line method.

Amortization of intangibles for each of the six months ended June 30, 2020 and 2019 was $18.2 million.

During the nine months ended September 30, 2020, this intangible asset was being amortized using a straight-line method over its estimated useful life of approximately seven years during the three months ended September 30, 2020 and approximately nine years during the six months ended June 30, 2020.

Amortization of intangibles during the nine months ended September 30, 2020 and 2019 was $24.3 million and $27.3 million, respectively.

Cost of Goods Sold - Impairment of Intangible Asset.

1 unchanged sentence

As a result, we recorded an impairment charge of $115.5 million to the Auryxia intangible asset during the six months ended June 30, 2020.

There were no such impairment charges during the six months ended June 30, 2019.

As a result, we recorded an impairment charge of $115.5 million to the Auryxia intangible asset during the nine months ended September 30, 2020.

There were no such impairment charges during the nine months ended September 30, 2019.

Research and Development Expenses .

Research and development expenses were $134.1 million for the six months ended June 30, 2020, compared to $168.0 million for the six months ended June 30, 2019, a decrease of $34.0 million.

Research and development expenses were $180.9 million for the nine months ended September 30, 2020, compared to $242.6 million for the nine months ended September 30, 2019, a decrease of $61.7 million.

The decrease was primarily due to the following:

4 unchanged sentences

Total net decrease $ (61.7)

The aggregate decrease in costs was partially offset by an increase in external costs related to other vadadustat clinical and preclinical activities as well as regulatory activities.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $73.5 million for the six months ended June 30, 2020, compared to $70.4 million for the six months ended June 30, 2019.

Selling, general and administrative expenses were $113.6 million for the nine months ended September 30, 2020, compared to $104.5 million for the nine months ended September 30, 2019.

The increase of $9.1 million was primarily due to increases in headcount and consulting costs.

In 2020, we expect our selling, general and

administrative expenses for our ongoing commercialization of Auryxia and for support of our ongoing research and development and potential commercialization of vadadustat and other product candidates to be relatively consistent with 2019.

License Expenses.

License expense related to royalties due to Auryxia relating to sales of Riona in Japan were $1.7 million and $1.6 million for the six months ended June 30, 2020 and 2019, respectively.

License expense related to royalties due to Auryxia relating to sales of Riona in Japan were $2.4 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively.

Other Expense, Net .

Other expense, net, was $3.6 million for the six months ended June 30, 2020 compared to other income, net of $1.3 million for the six months ended June 30, 2019.

The change to other expense, net was primarily due to interest expense associated with our Term Loans in the six months ended June 30, 2020.

We did not have similar expenses during the six months ended June 30, 2019.

Other income, net for the six months ended June 30, 2019 was primarily due to interest income on our investments.

Other expense, net, was $5.4 million for the nine months ended September 30, 2020 compared to other income, net of $1.3 million for the nine months ended September 30, 2019.

The change to other expense, net was primarily due to interest expense associated with our Term Loans in the nine months ended September 30, 2020.

We did not have similar expenses during the nine months ended September 30, 2019.

Other income, net for the nine months ended September 30, 2019 was primarily due to interest income on our investments.

Benefit from Income Taxes.

There was no benefit from income taxes for the six months ended June 30, 2020.

Benefit from income taxes was $3.6 million for the six months ended June 30, 2019 due to a decrease in our DTLs.

During the six months ended June 30, 2019, there was an increase in deferred tax assets associated with the state net operating loss generated during the period.

This increase in deferred tax assets reduced our net DTLs which created a benefit from income taxes for the six months ended June 30, 2019.

There was no benefit from income taxes for the nine months ended September 30, 2020.

Benefit from income taxes was $4.9 million for the nine months ended September 30, 2019 due to a decrease in our DTLs.

During the nine months ended September 30, 2019, there was an increase in deferred tax assets associated with the state net operating loss generated during the period.

This increase in deferred tax assets reduced our net DTLs which created a benefit from income taxes for the nine months ended September 30, 2019.

Liquidity and Capital Resources

We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of June 30, 2020, we had an accumulated deficit of $1.0 billion.

We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of September 30, 2020, we had an accumulated deficit of $1.1 billion.

We anticipate that we will continue to incur losses for the foreseeable future.

5 unchanged sentences

We have funded our operations principally through sales of our common stock, payments received from our collaboration partners, debt, and following the Merger, product sales.

As of June 30, 2020, we had cash and cash equivalents and available for sale securities of approximately $295.3 million.

As of September 30, 2020, we had cash and cash equivalents and available for sale securities of approximately $269.3 million.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

1 unchanged sentence

The following table sets forth the primary sources and uses of cash for each of the periods set forth below:

Six Months Ended

June 30, 2020 June 30, 2019

Nine Months Ended

September 30, 2020 September 30, 2019

(In Thousands)

5 unchanged sentences

Operating Activities .

Net cash used in operating activities of $52.4 million for the six months ended June 30, 2020 was largely driven by timing of payments on our Phase 3 development program for vadadustat, rebate payments and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including the intangible asset impairment charge of $115.5 million, fair value step-up of inventory sold or written off of $31.1 million, amortization of intangibles of $18.2 million, stock-based compensation expense of $11.8 million, an increase to the liability for excess purchase commitments of $11.0 million and write-downs of inventory of $10.1 million primarily associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Net cash used in operating activities of $176.3 million for the six months ended June 30, 2019 was largely driven by timing of payments on our Phase 3 development program for vadadustat, payments for inventory and merger-related liabilities.

Net cash used in operating activities of $79.6 million for the nine months ended September 30, 2020 was largely driven by timing of payments on our Phase 3 development program for vadadustat, rebate payments and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including the intangible asset impairment charge of $115.5 million, fair value step-up of inventory sold or written off of $39.5 million, amortization of intangibles of $24.3 million, write-downs of inventory of $18.6 million primarily associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation, stock-based compensation expense of $18.4 million, and an increase to the liability for excess purchase commitments of $10.3 million.

Net cash used in operating activities of $165.3 million for the nine months ended September 30, 2019 was largely driven by timing of payments on our Phase 3 development program for vadadustat, payments for inventory and merger-related liabilities.

These payments were partially offset by adjustments for non-cash items, including the fair value step-up of inventory sold or written off of $51.6 million, amortization of intangibles of $27.3 million, and stock-based compensation expense of $7.0 million.

Investing Activities .

Net cash used in investing activities for the six months ended June 30, 2020 was $49.8 million and was comprised primarily of purchase of available for sale securities of $50.0 million.

Net cash provided by investing activities for the six months ended June 30, 2019 was $164.5 million and was comprised primarily of proceeds from the maturities of available for sale securities of $103.7 million and proceeds from the sales of available for sale securities of $64.7 million, partially offset by purchases of equipment of $3.9 million.

Net cash used in investing activities for the nine months ended September 30, 2020 was $99.7 million and was comprised primarily of purchase of available for sale securities of $99.9 million.

Net cash provided by investing activities for the nine months ended September 30, 2019 was $188.9 million and was comprised primarily of proceeds from the maturities of available for sale securities of $130.6 million and proceeds from the sales of available for sale securities of $64.7 million, partially offset by purchases of equipment of $6.4 million.

Financing Activities.

Net cash provided by financing activities for the six months ended June 30, 2020 was $200.2 million and consisted primarily of proceeds from the public issuance of common stock of $198.9 million, proceeds from the exercise of stock options and proceeds from the sale of stock under our employee stock purchase plan.

Net cash used in financing activities for the six months ended June 30, 2019 was $5.6 million and consisted primarily of payments on loans payable of $15.0 million, partially offset by proceeds from the public issuance of common stock, proceeds from the exercise of stock options and proceeds from the sale of stock under our employee stock purchase plan.

Net cash provided by financing activities for the nine months ended September 30, 2020 was $201.2 million and consisted primarily of proceeds from the public issuance of common stock of $198.9 million, proceeds from the exercise of stock options and proceeds from the sale of stock under our employee stock purchase plan.

Net cash used in financing activities for the nine months ended September 30, 2019 was $5.4 million and consisted primarily of payments on loans payable of $15.0 million, partially offset by proceeds from the public issuance of common stock, proceeds from the exercise of stock options and proceeds from the sale of stock under our employee stock purchase plan.

Operating Capital Requirements

3 unchanged sentences

We expect to continue to incur additional costs associated with operating as a public company and we anticipate that we will need substantial additional funding in connection with our continuing operations.

As of June 30, 2020, we had cash, cash equivalents and available for sale securities of $295.3 million.

As of September 30, 2020, we had cash, cash equivalents and available for sale securities of $269.3 million.

At the inception of our collaboration agreements with Otsuka and MTPC, our collaborators committed to an aggregate of approximately $573.0 million or more in cost-share funding, of which we received approximately $272.0 million at the onset of the collaborations, and the remainder of which we generally continue to receive on a quarterly prepaid basis, and through license payments.

32 unchanged sentences

BioPharma Credit PLC subsequently transferred its interest in the term loans, solely in its capacity as a lender, to its affiliate, BPCR Limited Partnership.

The Collateral Agent and BPCR Limited Partnership are collectively referred to as Pharmakon.

The first tranche of $80.0 million, or Tranche A, was

drawn on November 25, 2019, or the Tranche A Funding Date.

The Collateral Agent and the lenders are collectively referred to as Pharmakon.

The first tranche of $80.0 million, or Tranche A, was drawn on November 25, 2019, or the Tranche A Funding Date.

The second tranche, available until December 31, 2020, allows us to borrow, at our option, an additional $20.0 million, or Tranche B, subject to the satisfaction of customary conditions.

16 unchanged sentences

Under certain circumstances, a default interest rate will apply on all outstanding obligations during the occurrence and continuance of an event of default.

As of June 30, 2020, we determined that no events of default had occurred.

As of September 30, 2020, we determined that no events of default had occurred.

We assessed the terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion feature.

6 unchanged sentences

As a result of the Merger, our contractual obligations include Keryx’s commercial supply agreements with BioVectra Inc., or BioVectra, and Siegfried Evionnaz SA, or Siegfried, to supply commercial drug substance for Auryxia.

Pursuant to the Manufacture and Supply Agreement with BioVectra and the Product Manufacture and Supply and Facility Construction Agreement with BioVectra, collectively the BioVectra Agreement, we have agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices.

The price per kilogram will decrease with an increase in quantity above the minimum purchase quantity.

In addition, the BioVectra Agreement contained contingent milestone payments for capital developments in connection with construction of an expansion of the site of the BioVectra production facility for the manufacture of drug substance for Auryxia.

These milestone payments were achieved by BioVectra and paid and fully recorded

prior to the Merger.

The term of the BioVectra Agreement expires in late 2026, after which, it automatically renews for specified terms until terminated.

We have the right to terminate the BioVectra Agreement prior to the contract term, which could result in an early termination fee.

As of June 30, 2020, we are required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $127.0 million through the year ended December 31, 2026.

As part of purchase accounting, we identified an executory contract in the supply agreement between Keryx and BioVectra, which includes future firm purchase commitments.

This executory contract was deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast.

As a result, we recorded a liability of $29.5 million in purchase accounting as of the acquisition date for the preliminary fair value of the off-market element.

In the second quarter of 2020, in connection with the reduced short-term and long-term Auryxia revenue forecast, we increased the liability for excess purchase commitments by $11.0 million for a total liability of $41.5 million and recorded a corresponding charge to cost of goods sold.

Additionally, through June 30, 2020, we recorded $1.0 million in accretion expense related to the present value discount associated with this liability.

Pursuant to the Manufacture and Supply Agreement with BioVectra and the Product Manufacture and Supply and Facility Construction Agreement with BioVectra, collectively the BioVectra Agreement, we agreed to purchase minimum quantities of Auryxia drug substance annually at predetermined prices.

On September 4, 2020, we and BioVectra entered into an Amended and Restated Product Manufacture and Supply and Facility Construction Agreement, which provided for reduced minimum quantity commitments and revised the predetermined prices.

The price per kilogram decreases with an increase in quantity above the predetermined purchase quantity tiers.

In addition, the Manufacture and Supply Agreement with BioVectra and the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement with BioVectra, collectively the Amended BioVectra Agreement, requires us to reimburse BioVectra for certain costs in connection with construction of a new facility for the manufacture and supply of Auryxia drug substance.

These construction costs are recorded in other assets and amortized into drug substance as inventory is released to us from BioVectra.

The term of the Manufacture and Supply Agreement with BioVectra expires on December 31, 2022.

The term of the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement expires on December 31, 2026, after which, it automatically renews for successive one-year terms unless either party gives notice of its intention to terminate within a specified time prior to the end of the then-current term.

In addition, we and BioVectra each have the ability to terminate these agreements upon the occurrence of certain conditions.

As of September 30, 2020, we are required to reimburse BioVectra for certain costs in connection with the construction of the new facility and to purchase minimum quantities of Auryxia drug substance annually for a total cost of approximately $96.2 million through the end of the contract term.

Pursuant to the Siegfried Master Manufacturing Services and Supply Agreement, or the Siegfried Agreement, we have agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices.

2 unchanged sentences

The Siegfried Agreement provides us with certain termination rights prior to December 31, 2021.

As of June 30, 2020, we are required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $51.8 million through the year ended December 31, 2021.

As of September 30, 2020, we are required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $51.4 million through the year ending December 31, 2021.

As part of purchase accounting, we identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include firm purchase commitments.

These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast.

The liability related to the amount of purchase commitments that exceed the current forecast was $41.0 million and $30.2 million as of September 30, 2020 and December 31, 2019, respectively.

The $10.8 million increase in liability, which was largely driven by a reduction in the short-term and long-term Auryxia revenue sales forecast during the second quarter of 2020, was primarily recorded to cost of goods sold.

On April 9, 2019, we entered into a Supply Agreement with Esteve Química, S.A., or Esteve, or the Esteve Agreement.

The Esteve Agreement includes the terms and conditions under which Esteve will manufacture vadadustat drug substance, or API, for commercial use.

The Esteve Agreement includes the terms and conditions under which Esteve will manufacture vadadustat drug substance for commercial use.

Pursuant to the Esteve Agreement, we provide rolling forecasts to Esteve on a quarterly basis, or the Esteve Forecast.

The Esteve Forecast reflects our needs for API produced by Esteve over a certain number of months, represented as a quantity of API per calendar quarter.

The Esteve Forecast reflects our needs for vadadustat drug substance produced by Esteve over a certain number of months, represented as a quantity of vadadustat drug substance per calendar quarter.

The parties have agreed to a volume-based pricing structure under the Esteve Agreement.

The Esteve Agreement has an initial term of four years, beginning April 9, 2019 and ending April 9, 2023.

As of June 30, 2020, we had a minimum commitment with Esteve for $13.6 million through the second quarter of 2021.

Subsequent to June 30, 2020, our minimum commitment with Esteve increased to $23.9 million through the third quarter of 2021.

As of September 30, 2020, we have committed to purchase $26.0 million of vadadustat drug substance from Esteve through the second quarter of 2022.

On March 11, 2020, we entered into a Supply Agreement with Patheon Inc., or Patheon, or the Patheon Agreement.

4 unchanged sentences

The Patheon Agreement has an initial term beginning March 11, 2020 and ending June 30, 2023.

As of June 30, 2020, we had a minimum commitment with Patheon for $0.4 million through the fourth quarter of 2020.

Subsequent to June 30, 2020, our minimum commitment with Patheon increased to $1.3 million through the third quarter of 2021.

Pursuant to the Patheon Agreement, we have agreed to purchase a certain percentage of our or ours affiliates' global demand for vadadustat drug product from Patheon.

As of September 30, 2020, we had a minimum commitment with Patheon for $1.3 million through the third quarter of 2021.

On April 2, 2020, we entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec, or WuXi STA, or the WuXi STA Agreement.

The WuXi STA Agreement includes the terms and conditions under which WuXi STA will manufacture vadadustat API for commercial use.

The WuXi STA Agreement includes the terms and conditions under which WuXi STA will manufacture vadadustat drug substance for commercial use.

Pursuant to the WuXi STA Agreement, we provide rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA Forecast.

The WuXi STA Forecast reflects our needs for API produced by WuXi STA over a certain number of months, represented as a quantity of API per calendar quarter.

The WuXi STA Forecast reflects our needs for vadadustat drug substance produced by WuXi STA over a certain number of quarters.

The parties have agreed to a volume-based pricing structure under the WuXi STA Agreement.

The WuXi STA Agreement has an initial term of four years, beginning April 2, 2020 and ending April 2, 2024.

There were no minimum commitments under the WuXi STA Agreement as of June 30, 2020.

Subsequent to June 30, 2020, we have a minimum commitment with WuXi STA for $44.7 million through the fourth quarter of 2021.

As of September 30, 2020, we have committed to purchase $44.7 million of vadadustat drug substance from WuXi STA through the fourth quarter of 2021.

Other Third Party Contracts

Under our agreement with IQVIA to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of June 30, 2020 were approximately $23.2 million, of which Otsuka reimburses a significant portion back to us.

Under our agreement with IQVIA to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of September 30, 2020 were approximately $17.6 million, of which Otsuka reimburses a significant portion back to us.

The estimated period of substantive performance for the committed work with IQVIA is through the end of 2020.

We also contract with various other organizations to conduct research and development activities with remaining contract costs to us of approximately $68.1 million as of June 30, 2020.

We also contract with various other organizations to conduct research and development activities with remaining contract costs to us of approximately $119.8 million as of September 30, 2020.

The scope of the services under these research and development contracts can be modified and the contracts cancelled by us upon written notice, and therefore not included in the table of contractual obligations and commitments.

1 unchanged sentence

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As of September 30, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

3 unchanged sentences

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue, prepaid and accrued research and development expenses and stock-based compensation.

We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

In making estimates and judgments, management employs critical accounting policies.

During the six months ended June 30, 2020, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K.

During the nine months ended September 30, 2020, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis