What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-10 compared with 2020-11-05 · 295 added, 603 removed, 816 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

2021 December 31,

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Long-term debt, net 96,607 96,378

Liability related to sale of future royalties, net 46,925 —

Other non-current liabilities 53,617 60,611

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0 shares issued and

outstanding at September 30, 2020 and December 31, 2019

outstanding at March 31, 2021 and December 31, 2020

Common stock $ 0.00001 par value;

350,000,000 and 175,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively;

143,328,652 and 121,674,568 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

350,000,000 shares authorized at March 31, 2021 and December 31, 2020;

158,520,089 and 148,074,085 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,460,971 1,425,115

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Product revenue, net $ 30,408 $ 29,209

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Amortization of intangibles 9,011 9,100

Impairment of intangible asset — — 115,527 —

Total cost of goods sold 34,606 27,713

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Other income (expense):

Interest income (expense) ( 2,274 ) 228 ( 6,554 ) 1,582

Other income (expense) 410 ( 185 ) 1,136 ( 240 )

Net loss before income taxes ( 59,959 ) ( 55,862 ) ( 296,457 ) ( 190,055 )

Benefit from income taxes — ( 1,277 ) — ( 4,879 )

Interest expense ( 4,805 ) ( 1,972 )

Other income 161 350

Net loss $ ( 69,580 ) $ ( 60,747 )

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Net loss $ ( 69,580 ) $ ( 60,747 )

Other comprehensive gain (loss) - unrealized gain (loss) on debt securities 15 ( 17 ) 6 267

Other comprehensive loss - unrealized loss on debt securities ( 4 ) —

Total comprehensive loss $ ( 69,584 ) $ ( 60,747 )

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Balance at December 31, 2019 121,674,568 $ 1 $ 1,188,810 $ — $ ( 794,054 ) $ 394,757

Proceeds from sale of stock under

employee stock purchase plan 39,977 — 188 — — 188

Exercise of options 62,204 — 365 — — 365

Share-based compensation expense — — 2,094 — — 2,094

Restricted stock unit vesting 132,563 — — — — —

Unrealized gain — — — 225 — 225

Net loss — — — — ( 72,421 ) ( 72,421 )

Balance at March 31, 2019 117,122,262 $ 1 $ 1,153,230 $ ( 36 ) $ ( 586,816 ) $ 566,379

Issuance of common stock, net of

issuance costs 7,973,967 — 56,575 — — 56,575

Exercise of options 300,592 — 195 — — 195

Retired shares ( 55,324 ) — ( 426 ) — — ( 426 )

Share-based compensation expense — — 2,284 — — 2,284

Restricted stock unit vesting 35,251 — — — — —

Unrealized gain — — — 59 — 59

Net loss — — — — ( 58,170 ) ( 58,170 )

Balance at June 30, 2019 118,787,301 $ 1 $ 1,164,318 $ 23 $ ( 644,986 ) $ 519,356

Proceeds from sale of stock under

1 unchanged sentence

Share-based compensation expense — — 4,916 — — 4,916

Restricted stock unit vesting 28,881 — — — — —

Unrealized loss — — — ( 17 ) — ( 17 )

Net loss — — — — ( 54,585 ) ( 54,585 )

Balance at September 30, 2019 118,863,735 $ 1 $ 1,167,126 $ 6 $ ( 699,571 ) $ 467,562

Balance at December 31, 2019 121,674,568 $ 1 $ 1,188,810 — $ ( 794,054 ) $ 394,757

Issuance of common stock, net of

issuance costs 7,973,967 — 56,575 — — 56,575

Proceeds from sale of stock under

employee stock purchase plan 115,024 — 451 — — 451

Share-based compensation expense — — 4,916 — — 4,916

Exercise of options 64,126 — 412 — — 412

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Balance at March 31, 2020 130,251,440 $ 1 $ 1,251,164 $ — $ ( 854,801 ) $ 396,364

Balance at December 31, 2020 148,074,085 $ 1 $ 1,425,115 $ 13 $ ( 1,177,511 ) $ 247,618

Issuance of common stock, net of

issuance costs 9,228,017 1 29,497 — — 29,498

Share-based compensation expense — $ — $ 6,864 $ — $ — $ 6,864

Exercise of options 48,103 $ — $ 409 $ — $ — $ 409

Restricted stock unit vesting 179,866 $ — $ — $ — $ — $ —

Unrealized loss — $ — $ — $ ( 9 ) $ — $ ( 9 )

Net loss — $ — $ — $ — $ ( 175,751 ) $ ( 175,751 )

Balance at June 30, 2020 143,129,409 $ 1 $ 1,400,820 $ ( 9 ) $ ( 1,030,552 ) $ 370,260

Proceeds from sale of stock under

1 unchanged sentence

Share-based compensation expense — — 5,992 — — 5,992

Exercise of options 54,404 — 405 — — 405

Restricted stock unit vesting 1,063,711 — — — — —

Unrealized gain — — — 15 — 15

Unrealized loss — — — ( 4 ) — ( 4 )

Net loss — — — — ( 69,580 ) ( 69,580 )

Balance at September 30, 2020 143,328,652 $ 1 $ 1,408,466 $ 6 $ ( 1,090,511 ) $ 317,962

Balance at March 31, 2021 158,520,089 $ 2 $ 1,460,971 $ 9 $ ( 1,247,091 ) $ 213,891

See accompanying notes to unaudited condensed consolidated financial statements

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(in thousands)

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Operating activities:

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Amortization of intangibles 9,011 9,100

Intangible asset impairment charge 115,527 —

Amortization of premium/discount on investments ( 11 ) —

Non-cash interest expense related to sale of future royalties 2,162 —

Non-cash royalty revenue related to sale of future royalties ( 20 ) —

Non-cash interest expense 229 437

4 unchanged sentences

Stock-based compensation 5,992 4,916

Deferred income taxes — ( 4,879 )

Change in fair value of derivative liability 80 90

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Purchase of equipment ( 59 ) —

Purchase of available for sale securities ( 99,932 ) —

Proceeds from the maturities of available for sale securities 20,000 245

Proceeds from sales of available for sale securities — 64,721

Net cash provided by (used in) investing activities ( 99,687 ) 188,896

Net cash provided by investing activities 19,941 245

Financing activities:

Proceeds from sale of future royalties, net 44,783 —

Proceeds from the issuance of common stock, net of issuance costs 29,327 56,485

1 unchanged sentence

Proceeds from the exercise of stock options — 412

Retirement of treasury stock — ( 426 )

Payments on debt — ( 15,000 )

Net cash provided by (used in) financing activities 74,477 57,348

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Akebia is a biopharmaceutical company with the purpose of bettering the lives of people living with kidney disease.

Akebia’s lead investigational product candidate, vadadustat, is an oral therapy in Phase 3 development for the treatment of anemia due to chronic kidney disease, or CKD.

Akebia’s lead investigational product candidate, vadadustat, is an oral therapy in development for the treatment of anemia due to chronic kidney disease, or CKD.

Vadadustat is an oral hypoxia-inducible factor prolyl hydroxylase inhibitor, or HIF-PHI, designed to mimic the physiologic effect of altitude on oxygen availability.

At higher altitudes, the body responds to lower oxygen availability with stabilization of hypoxia-inducible factor, or HIF, which can lead to red blood cell, or RBC, production and improved oxygen delivery to tissues.Vadadustat is approved and marketed in Japan as a treatment for anemia due to CKD in both dialysis-dependent and non-dialysis dependent adult patients under the trade name VAFSEO.

In addition, the Company has a commercial product, Auryxia ® (ferric citrate), which is currently approved by the U.S.

Food and Drug Administration, or FDA, and marketed for two indications in the United States:

the control of serum phosphorus levels in adult patients with CKD on dialysis, or DD-CKD, and the treatment of iron deficiency anemia, or IDA, in adult patients with CKD not on dialysis, or NDD-CKD.

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

The Company submitted a New Drug Application, or NDA, to the U.S.

Food and Drug Administration, or FDA, for vadadustat in March of 2021 for the treatment of anemia due to CKD in adult patients with CKD on dialysis, or DD-CKD, and adult patients with CKD not on dialysis, or NDD-CKD.

The Company's NDA submission did not include a Priority Review Voucher.

Based on standard FDA review timelines, the FDA has a 60-day period to determine whether the NDA is complete and acceptable for review.

In addition, the Company has a commercial product, Auryxia ® (ferric citrate), which is currently approved by the FDA and marketed for two indications in the United States:

the control of serum phosphorus levels in DD-CKD adult patients and the treatment of iron deficiency anemia, or IDA, in NDD-CKD adult patients.

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

Since inception, the Company has devoted most of its resources to research and development, including its preclinical and clinical development activities, and providing general and administrative support for these operations.

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and its subsidiary Torii Pharmaceutical Co., Ltd., collectively JT and Torii, on December 12, 2018 following the consummation of a merger with Keryx Biopharmaceuticals, Inc., or Keryx, or the Merger.

Additionally, following regulatory approval of vadadustat in Japan, the Company began recognizing royalty revenues from Mitsubishi Tanabe Pharma Corporation, or MTPC, from the sale of VAFSEO since August 2020.

In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information).

The Company has not generated a profit to date and may never generate profits from product sales.

The Company’s product candidates are subject to long development cycles, and the Company may be unsuccessful in its efforts to develop, obtain marketing approval for or market its product candidates.

If the Company does not successfully commercialize any of its products or product candidates, it may be unable to achieve profitability.

Vadadustat and the Company’s other potential product candidates are subject to long development cycles, and the Company may be unsuccessful in its efforts to develop, obtain marketing approval for or market vadadustat and its other potential product candidates.

If the Company does not successfully commercialize Auryxia, vadadustat or any other potential product candidate, it may be unable to achieve profitability.

The Company’s management completed its going concern assessment in accordance with ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , or ASC 205-40.

The Company believes that its cash resources will be sufficient to allow the Company to fund its current operating plan beyond the next twelve months from the filing of this Quarterly Report on Form 10-Q, as required by ASC 205-40.

The Company believes that its cash resources will be sufficient to allow the Company to fund its current operating plan through at least the next twelve months from the filing of this Quarterly Report on Form 10-Q, as required by ASC 205-40.

There can be no assurance, however, that the current operating plan will be achieved in the time frame anticipated by the Company, or that its cash resources will fund the Company’s operating plan for the period anticipated by the Company or that additional funding will be available on terms acceptable to the Company, or at all.

The Company will require additional capital to pursue development and commercial activities related to expanded indications for current products and any additional products and product candidates.

The Company expects to finance future cash needs through product revenue, public or private equity or debt transactions, payments from its collaborators, royalty transactions, strategic transactions, or a combination of these approaches.

The Company will require additional capital to pursue development and commercial activities related to Auryxia and vadadustat or any additional products and product candidates, including those that may be in-licensed or acquired.

The Company expects to finance future cash needs through product revenue, public or private equity or debt transactions, payments from its collaborators, strategic transactions, or a combination of these approaches.

However, adequate additional financing may not be available to the Company on acceptable terms, or at all.

If the Company is unable to raise capital in sufficient amounts when needed or on attractive terms, it may not be able to pursue development and commercial activities related to expanded indications for current products and any additional products and product candidates.

If the Company is unable to raise capital in sufficient amounts when needed or on attractive terms, it may not be able to pursue development and commercial activities related to Auryxia and vadadustat or any additional products and product candidates, including those that may be in-licensed or acquired.

Summary of Significant Accounting Policies

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In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included.

Interim results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020 or any other future period.

Interim results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021 or any other future period.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

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The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the U.S.

Securities and Exchange Commission on March 12, 2020, or the 2019 Annual Report on Form 10-K.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2020 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2019 Annual Report on Form 10-K and are updated below as necessary.

Securities and Exchange Commission on February 25, 2021, or the 2020 Annual Report on Form 10-K.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three months ended March 31, 2021 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K and are updated below as necessary.

New Accounting Pronouncements – Recently Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected.

Previously, U.S.

GAAP delayed recognition of the full amount of credit losses until the loss was probable of occurring.

Under this ASU, the income statement will reflect an entity’s current estimate of all expected credit losses.

The Company adopted this new standard on January 1, 2020 using the modified retrospective approach, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption with prior periods not restated.

The cumulative-effect adjustment recorded on January 1, 2020, is not material.

Please see the description of the Company’s “Credit Losses” accounting policy in the “Significant Accounting Policies” section below.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements for fair value measurements.

The Company adopted this new standard on January 1, 2020 using the prospective approach for amendments applicable to the Company.

The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract .

This standard clarifies the accounting for implementation costs in cloud computing arrangements.

This standard became effective for us on January 1, 2020, and was adopted on a prospective basis.

The adoption of this standard did not have a material impact to the Company’s unaudited condensed consolidated financial statements and disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 .

This standard makes targeted improvements for collaborative arrangements as follows:

• Clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers , when the collaborative arrangement participant is a customer in the context of a unit of account.

In those situations, all the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements;

• Adds unit-of-account guidance to ASC 808, Collaborative Arrangements , to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606;

• Precludes a company from presenting transactions with collaborative arrangement participants that are not directly related to sales to third parties with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer.

This standard became effective for the Company on January 1, 2020, and did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

New Accounting Pronouncements – Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods therein, and is applicable to the Company in fiscal year 2021.

Early adoption is permitted.

This standard became effective for the Company on January 1, 2021.

ASU 2019-12 requires certain amendments to be applied using a modified retrospective approach, which requires a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, while other amendments should be applied on a prospective basis.

The Company does not expect that the adoption of this standard will have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

Derivative Financial Instruments

The Company accounts for warrants and other derivative financial instruments as either equity or liabilities in accordance with ASC Topic 815, Derivatives and Hedging, or ASC 815, based upon the characteristics and provisions of each instrument.

Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s unaudited condensed consolidated balance sheets and no further adjustments to their valuation are made.

Warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the Company’s unaudited condensed consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense.

The warrant issued by the Company in connection with the Janssen Pharmaceutica NV Research and License Agreement, the Janssen Agreement, is classified as equity in the Company’s unaudited condensed consolidated balance sheet.

(See Note 12).

The derivative liability recorded in connection with the Company’s Loan Agreement with Pharmakon is classified as a liability in the Company’s unaudited condensed consolidated balance sheet.

(See Note 11).

The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

Use of Estimates

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Estimates are used in the following areas, among others:

prepaid and accrued research and development expense, operating lease assets and liabilities, derivative liabilities, other non-current liabilities, stock-based compensation expense, product and collaboration revenues including various rebates and reserves related to product sales, inventories, income taxes, intangible assets and goodwill.

prepaid and accrued research and development expense, operating lease assets and liabilities, derivative liabilities, other non-current liabilities, including the excess purchase commitment liability, stock-based compensation expense, product and collaboration revenues including various rebates and reserves related to product sales, non-cash interest expense on the liability related to sale of future royalties, inventories, income taxes, intangible assets and goodwill.

The Company has made estimates of the impact of COVID-19 within the unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods including changes to sales, payer mix, reserves and allowances, intangible assets and goodwill.

While the COVID-19 pandemic has not had a material adverse impact on the Company’s financial condition, the future impacts of the pandemic and any resulting economic impact is largely unknown and rapidly evolving.

Credit Losses

Available for sale debt securities.

Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.

The Company classifies all securities as available for sale and includes them in current assets as they are intended to fund current operations.

The Company's investment portfolio at any point in time contains investments in money market mutual funds, U.S.

government debt securities, certificates of deposit and corporate debt securities.

The Company segments its portfolio based on the underlying risk profiles of the securities and have a zero loss expectation for money market mutual funds, U.S.

government debt securities and certificates of deposit.

The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.

Factors considered also include whether a decline in fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors, the financial condition and near-term prospects of the issuer, and our intent and ability to hold the investment to allow for an anticipated recovery in fair value.

Any unrealized loss that is not credit related is recognized in other comprehensive (loss) income in the unaudited condensed consolidated statements of operations.

A credit-related unrealized loss is recognized as an allowance on the unaudited condensed consolidated balance sheets with a corresponding adjustment to earnings in the unaudited condensed consolidated statements of operations.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents consist of all cash on hand, deposits and funds invested in available for sale securities with original maturities of three months or less at the time of purchase.

Cash equivalents are reported at fair value.

At September 30, 2020, the Company’s cash is primarily in money market funds.

The Company may maintain balances with its banks in excess of federally insured limits.

Restricted cash represents amounts required for security deposits under the Company’s office and lab space lease agreements.

Restricted cash is included in “prepaid expenses and other current assets” and “other assets” in the unaudited condensed consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the unaudited condensed consolidated balance sheet that sum to the total of the amounts reported in the unaudited condensed consolidated statement of cash flows (in thousands):

September 30, 2020 September 30, 2019

Cash and cash equivalents $ 169,286 $ 122,886

Prepaid expenses and other current assets 395 263

Other assets 2,039 2,092

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 171,720 $ 125,241

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation.

Assets under capital lease are included in property and equipment.

Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, generally three years to seven years .

Such costs are periodically reviewed for recoverability when impairment indicators are present.

Such indicators include, among other factors, operating losses, unused capacity, market value declines and technological obsolescence.

Recorded values of asset groups of equipment that are not expected to be recovered through undiscounted future net cash flows are written down to current fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale).

The following is the summary of property and equipment and related accumulated depreciation as of September 30, 2020 and December 31, 2019.

Useful Life September 30, 2020 December 31, 2019

(in thousands)

Computer equipment and software 3 $ 1,010 $ 1,010

Furniture and fixtures 5 - 7 2,086 2,086

Equipment 7 2,451 2,451

Leasehold improvements Shorter of the useful life or remaining lease term ( 10 years)

14,044 14,044

Less accumulated depreciation ( 5,223 ) ( 3,664 )

Net property and equipment $ 8,821 $ 10,380

Depreciation expense was approximately $ 0.5 million and $ 0.6 million for the three months ended September 30, 2020 and 2019, respectively, and approximately $ 1.6 million and $ 1.7 million for each of the nine months ended September 30, 2020 and 2019, respectively.

The Company values its inventories at the lower-of-cost or net realizable value.

The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis.

Company classifies its inventory costs as long-term, in other assets in its unaudited condensed consolidated balance sheets, when it expects to utilize the inventory beyond their normal operating cycle.

Prior to the regulatory approval of its product candidates, the Company incurs expenses for the manufacture of material that could potentially be available to support the commercial launch of its products.

Until the first reporting period when regulatory approval has been received or is otherwise considered probable and the future economic benefit is expected to be realized, the Company records all such costs as research and development expense.

Inventory used in clinical trials is also expensed as research and development expense, when selected for such use.

Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in a clinical manufacturing campaign.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified.

Such impairment charges, should they occur, are recorded as a component of cost of product sales in the unaudited condensed consolidated statements of operations and comprehensive loss.

The determination of whether inventory costs will be realizable requires the use of estimates by management.

If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required.

Additionally, the Company’s product is subject to strict quality control and monitoring that it performs throughout the manufacturing process.

The Company will record a charge, in the event that certain batches or units of product do not meet quality specifications, to cost of product sales to write-down any unmarketable inventory to its estimated net realizable value.

In all cases, product inventory is carried at the lower of cost or its estimated net realizable value.

The Company performs an assessment of all embedded features of a debt instrument to determine if (1) such features should be bifurcated and separately accounted for, and (2) if bifurcation requirements are met, whether such features should be classified and accounted for as equity or liability instruments.

If the embedded feature meets the requirements to be bifurcated and accounted for as a liability, the fair value of the embedded feature is measured initially, included as a liability on the unaudited condensed consolidated balance sheet, and re-measured to fair value at each reporting period.

Any changes in fair value are recorded in the unaudited condensed consolidated statement of operations.

The Company monitors, on an ongoing basis, whether events or circumstances could give rise to a change in the classification of embedded features.

Revenue Recognition

The Company generates revenues primarily from sales of Auryxia, see Note 3, and from its collaborations with MTPC and Otsuka, see Note 4.

The Company recognizes revenue in accordance with ASC 606, which applies to all contracts with customers, except for contracts that are within the scope of other standards.

Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

(v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company does not include a financing component to its estimated transaction price at contract inception unless it estimates that certain performance obligations will not be satisfied within one year.

Additionally, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.

Product Revenue, Net

The Company sells Auryxia in the United States, or U.S., primarily to wholesale distributors as well as certain specialty pharmacy providers, collectively, Customers.

These Customers resell the Company’s product to health care providers and patients.

In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s product.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer.

The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less.

Reserves for Variable Consideration

Revenue from product sales is recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, co-pay assistance and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products.

These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount will be credited to the Customer) or as a current liability (if the amount is payable to a Customer or a party other than a Customer).

When appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.

Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances:

The Company generally provides Customers with discounts that include incentive fees that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.

In addition, the Company compensates (through trade discounts and allowances) its Customers for sales order management, data, and distribution services.

However, the Company has determined such services received to date are not distinct from the Company’s sale of products to the Customer and, therefore, these payments have been recorded as a reduction of revenue within the unaudited condensed consolidated statement of operations and comprehensive loss through September 30, 2020.

The Company records a corresponding reduction of accounts receivable (if the trade discount and/or allowance will be credited to the Customer) or an increase in accrued expense (if the trade discount and/or allowance is payable to a Customer) on the unaudited condensed consolidated balance sheets.

Product Returns:

Consistent with industry practice, the Company generally offers Customers a limited right of return which allows for the product to be returned when the product expiry is within an allowable window, when the quantity delivered is different than quantity ordered, the product is damaged in transit prior to receipt by the customer, or is subject to a recall.

This right of return generally lapses once the product is provided to a patient.

The Company estimates the amount of its product sales that may be returned for credit by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

The Company currently estimates product return reserve using available industry data and its own historical sales information, including its visibility into the inventory remaining in the distribution channel.

Provider Chargebacks and Discounts :

Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company.

Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers.

These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by Customers, and the Company generally issues credits for such amounts within a few weeks of the Customer’s resale of the product.

Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution

channel at each reporting period end that the Company expects will be sold to qualified healthcare providers, and chargebacks that Customers have claimed but for which the Company has not yet issued a credit.

Commercial and Medicare Part D Rebates:

The Company contracts with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products.

The Company estimates the rebates for commercial and Medicare Part D payors based upon (i) its contracts with the payors and (ii) information obtained from its Customers and other third parties regarding the payor mix for Auryxia.

The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Other Government Rebates:

The Company is subject to discount obligations under state Medicaid programs and other government programs.

The Company estimates its Medicaid and other government programs rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix.

These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets.

For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program.

The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period.

Other Incentives:

Other incentives that the Company offers include voluntary patient assistance programs such as the Company’s co-pay assistance program, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors.

The calculation of the accrual for co-pay assistance is based on actual claims processed during a given period, as well as historical utilization data to estimate the amount the Company expects to receive associated with product that has been recognized as revenue, but remains in in the distribution channel at the end of each reporting period.

Collaboration Revenues

The Company enters into out-license and collaboration agreements which are within the scope of ASC 606, under which it licenses certain rights to its product candidates to third parties.

The terms of these arrangements typically include payment to the Company of one or more of the following:

non-refundable, up-front license fees;

development, regulatory, and commercial milestone payments;

payments for manufacturing supply services the Company provides through its contract manufacturers;

and royalties on net sales of licensed products.

Each of these payments may result in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company implements the five-step model noted above.

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine whether the individual promises should be accounted for as separate performance obligations or as a combined performance obligation, and to determine the stand-alone selling price for each performance obligation identified in the contract.

A deliverable represents a separate performance obligation if both of the following criteria are met:

(i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success.

With regard to the MTPC and Otsuka collaboration agreements, the Company recognizes revenue related to amounts allocated to the identified performance obligation on a proportional performance basis as the underlying services are performed.

Licenses of Intellectual Property

If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an out-license and collaboration arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

The Company evaluates the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone Payments

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method.

The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to assess the milestone as probable of being achieved.

There is considerable judgment involved in determining whether a milestone is probable of being reached at each specific reporting period.

Milestone payments that are not within the control of the Company or the customer, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenues as, or when, the performance obligations under the contract are satisfied.

At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment.

Manufacturing Supply Services

Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options.

The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.

If the Company is entitled to additional payments when the licensee exercises these options, any additional payments are recorded in license, collaboration and other revenues when the licensee obtains control of the goods, which is upon delivery.

The Company will recognize sales-based royalties, including milestone payments based on the level of sales, at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

The Company receives royalty payments from JT and Torii, based on net sales of Riona in Japan, and MTPC, based on net sales of VAFSEO in Japan.

Collaborative Arrangements

The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808).

Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements.

The Company considers the guidance in ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions , in determining the appropriate treatment for the transactions between the Company and its collaborative partner and the transactions between the Company and third parties.

Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.

Therefore, the Company recognizes its allocation of the shared costs incurred with respect to the jointly conducted medical affairs and commercialization and non-promotional activities under the Otsuka U.S.

Agreement, as defined below in Note 4, as a component of the related expense in the period incurred.

During the three months ended September 30, 2020 and 2019, the Company incurred approximately $ 1.2 million and $ 0.5 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S.

Agreement, of which approximately $ 0.5 million and $ 0.2 million are reimbursable by Otsuka and recorded as a reduction to research and development expense during the three months ended September 30, 2020 and 2019, respectively.

During the three months ended September 30, 2020 and 2019, Otsuka incurred approximately $ 0.5 million and $ 0.3 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S.

Agreement, of which approximately $ 0.3 million and $ 0.2 million are reimbursable by the Company and recorded as an increase to research and development expense during the three months ended September 30, 2020 and 2019, respectively.

To the extent product revenue is generated from the collaboration, the Company recognizes its share of the net sales on a gross basis if it is deemed to be the principal in the transactions with customers, or on a net basis if it is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 606.

Intangible Assets

The Company maintains a definite-lived intangible asset related to developed product rights for Auryxia, which was acquired on December 12, 2018 as part of the Merger.

Intangible assets are initially recorded at fair value and stated net of accumulated amortization and impairments.

The Company amortizes its intangible assets that have finite lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized.

Amortization for the Company’s intangible asset is recorded over its estimated useful life, which as of September 30, 2020 is estimated to be seven years .

The Company reviews intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life.

If an impairment indicator exists, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of the intangible asset group to its carrying value on the unaudited condensed consolidated balance sheet.

If the carrying value of the intangible asset group exceeds the undiscounted cash flows used in the recoverability test, the Company will write the carrying value of the intangible asset group down to the fair value in the period identified.

The Company calculates the fair value of the intangible asset group as the present value of estimated future cash flows expected to be generated from the intangible asset group using a risk-adjusted discount rate.

In determining estimated future cash flows associated with its intangible asset group, the Company uses market participant assumptions pursuant to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820).

The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired in a business combination to goodwill.

Goodwill is evaluated for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.

The Company compares the fair value of its reporting unit to its carrying value.

If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of its reporting unit, the Company would record an impairment loss equal to the difference.

As described above, the Company operates in one operating segment which the Company considers to be the only reporting unit.

Fair Value of Financial Instruments

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values.

ASC 820 establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.

The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments, and is not a measure of the investment credit quality.

The three levels of the fair value hierarchy are described below:

• Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

• Level 2 – Valuations based on quoted prices for similar assets or liabilities in markets that are not active, or for which all significant inputs are observable, either directly or indirectly.

• Level 3 – Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Items measured at fair value on a recurring basis include available for sale securities and derivative liabilities (see Note 7).

The carrying amounts of prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term maturities.

Items measured at fair value on a nonrecurring basis include property and equipment, intangible assets and goodwill.

The Company remeasures the fair value of these assets upon the occurrence of certain events.

There were no such remeasurements

to property and equipment during either of the three and nine months ended September 30, 2020 and 2019.

During the three months ended June 30, 2020, the Company identified indicators of impairment related to the developed product rights for Auryxia, an intangible asset measured using Level 3 inputs, and recorded an impairment charge of $ 115.5 million (see Note 9 for additional information).

There were no impairments to assets measured using Level 3 inputs during the three months ended September 30, 2020, and no other impairments to assets measured using Level 3 inputs during the nine months ended September 30, 2020, other than as described in the previous sentence.

There were no impairments to assets measured using Level 3 inputs during either of the three and nine months ended September 30, 2019.

The Company’s other financial instruments mainly consists of debt (see Note 11).

Net Loss per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents.

Diluted net loss per share is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method.

For purposes of the diluted net loss per share calculation, preferred stock, stock options, warrants, restricted stock and RSUs are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented.

Therefore, basic and diluted net loss per share were the same for all periods presented.

Diluted net income per share is calculated by dividing the net income by the weighted-average common shares outstanding for the period, including any dilutive effect from outstanding options, warrants, restricted stock and RSUs using the treasury stock method.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates.

Changes in estimates are recorded in the period they become known.

The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Liability Related to Sale of Future Royalties

The Company treats the liability related to sale of future royalties, see Note 5, as a debt financing, amortized under the effective interest rate method over the estimated life of the related expected royalty stream.

The liability related to sale of future royalties

and the debt amortization are based on the Company’s current estimates of future royalties expected to be paid over the life of the arrangement.

The Company will periodically assess the expected royalty payments.

To the extent the Company’s estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis.

Non-cash royalty revenue is reflected as royalty revenue within license, collaboration and other revenue, and non-cash amortization of debt is reflected as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

Product Revenue and Reserves for Variable Consideration

To date, the Company’s only source of product revenue has been product revenue from the U.S.

sales of Auryxia, which it began recording on December 12, 2018 following the consummation of the Merger.

Total net product revenue was $ 34.4 million and $ 30.0 million for the three months ended September 30, 2020 and 2019, respectively, and $ 94.3 million and $ 82.2 million for the nine months ended September 30, 2020 and 2019, respectively.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2020 and 2019 (in thousands):

To date, the Company’s only source of product revenue has been from the U.S.

sales of Auryxia.

Total net product revenue was $ 30.4 million and $ 29.2 million for the three months ended March 31, 2021 and 2020, respectively.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2021 and 2020 (in thousands):

and Discounts Rebates, Fees

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Credits/payments made ( 2,646 ) ( 29,098 ) ( 1,917 ) ( 33,661 )

Balance at September 30, 2020 $ 785 $ 41,869 $ 774 $ 43,428

Balance at March 31, 2021 $ 1,329 $ 43,216 $ 884 $ 45,429

Balance at December 31, 2019 $ 738 $ 30,552 $ 253 $ 31,543

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Credits/payments made ( 2,353 ) ( 29,024 ) ( 1,051 ) ( 32,428 )

Balance at September 30, 2019 $ 665 $ 29,902 $ 288 $ 30,855

Balance at March 31, 2020 $ 717 $ 32,079 $ 255 $ 33,051

Chargebacks, discounts and returns are recorded as a direct reduction of revenue on the unaudited condensed consolidated statement of operations with a corresponding reduction to accounts receivable on the unaudited condensed consolidated balance sheets.

Rebates, distribution-related fees, and other sales-related deductions are recorded as a reduction in revenue on the unaudited condensed consolidated statement of operations with a corresponding increase to accrued liabilities or accounts payable on the unaudited condensed consolidated balance sheets.

Accounts receivable, net related to product sales was approximately $ 21.7 million and $ 23.0 million as of September 30, 2020 and December 31, 2019, respectively.

Accounts receivable, net related to product sales was approximately $ 28.3 million and $ 21.9 million as of March 31, 2021 and December 31, 2020, respectively.

License, Collaboration and Other Significant Agreements

During the three and nine months ended September 30, 2020 and 2019, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of September 30, 2020:

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

2020 2019 2020 2019

During the three months ended March 31, 2021 and 2020, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of March 31, 2021:

Three Months Ended March 31,

License, Collaboration and Other Revenue:

(in thousands) (in thousands)

(in thousands)

MTPC Agreement $ 18 $ —

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Total License, Collaboration and Other Revenue $ 21,896 $ 59,269

September 30, 2020

March 31, 2021

Short-Term Long-Term Total

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(in thousands)

MTPC Agreement $ 5,897 $ — $ 5,897

Agreement $ 7,187 $ 11,167 $ 18,354

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Total $ 18,253 $ 19,299 $ 37,552

The following table presents changes in the Company’s contract assets and liabilities during the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended September 30, 2020 Balance at

The following table presents changes in the Company’s contract assets and liabilities during the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31, 2021 Balance at

Period Additions Deductions Balance at End

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Accrued expenses and other current liabilities $ 10,000 $ — $ — $ 10,000

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Contract assets:

Other current assets $ — $ 10,000 $ ( 10,000 ) $ —

Accounts receivable(1) $ 15,822 $ 71,639 $ ( 2,895 ) $ 84,566

Prepaid expenses and other current assets $ — $ 546 $ — $ 546

Contract liabilities:

Deferred revenue $ 72,950 $ 65,209 $ ( 60,474 ) $ 77,685

Accounts payable $ 13,492 $ — $ ( 13,492 ) $ —

(1) Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement as of September 30, 2020 and 2019 and December 31, 2019 and 2018.

Also excludes accounts receivable related to amounts due to the Company from product sales which are included in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2020 and December 31, 2019.

During the three and nine months ended September 30, 2020 and 2019, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands):

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

Accrued expenses and other current liabilities $ — $ 615 $ — $ 615

(1) Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement as of March 31, 2021 and 2020 and December 31, 2020 and 2019.

During the three months ended March 31, 2021 and 2020, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands):

Three Months Ended March 31,

Revenue Recognized in the Period from:

2020 2019 2020 2019

Amounts included in deferred revenue at the beginning of the period $ 5,382 $ 10,130

Performance obligations satisfied in previous periods $ 20,648 $ — $ 21,346 $ 1,254

Mitsubishi Tanabe Pharma Corporation Collaboration Agreement

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The Company and MTPC agreed that, instead of including Japanese patients in the Company’s global Phase 3 program for vadadustat, MTPC would be the sponsor of a Phase 3 program for vadadustat in Japan.

MTPC is responsible for the costs of the Phase 3 program in Japan and other studies required in Japan, and made no funding payments for the global Phase 3 program.

MTPC is responsible for the costs of the Phase 3 program in Japan and other studies required in Japan, and made no funding payments for the global Phase 3 program for vadadustat.

In June 2020, vadadustat was approved in Japan for the treatment of anemia due to CKD, which triggered a $ 15.0 million regulatory milestone payment to the Company that was received in the third quarter of 2020.

In August 2020, MTPC launched vadadustat commercially in Japan under the trade name VAFSEO as a treatment of anemia due to CKD for adult patients on dialysis and not on dialysis.

In August 2020, MTPC launched vadadustat commercially in Japan under the trade name Vafseo TM as a treatment of anemia due to CKD for adult patients on dialysis and not on dialysis.

In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information).

The Company and MTPC have established a joint steering committee pursuant to the MTPC Agreement to oversee development and commercialization of vadadustat in the MTPC Territory, including approval of any development or commercialization plans.

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In consideration for the exclusive license and other rights contained in the MTPC Agreement, MTPC also made a $ 20.0 million upfront payment as well as a payment of $ 20.5 million for Phase 2 studies in Japanese patients completed by the Company and reimbursed by MTPC.

The Company is also entitled to receive tiered royalty payments ranging from the low teens to 20 % on annual net sales of vadadustat in the MTPC Territory.

The Company is also entitled to receive tiered royalty payments ranging from 13 % to 20 % on annual net sales of vadadustat in the MTPC Territory.

Royalty payments are subject to certain reductions, including upon the introduction of competitive products in certain instances.

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(i) the expiration of the last to expire valid claim within the intellectual property covering the licensed product, (ii) the expiration of marketing or regulatory exclusivity in such country, or (iii) the tenth anniversary of the first commercial sale of such licensed product in such country.

Due to the uncertainty of drug development and commercialization and the high historical failure rates associated therewith, although the Company has received $ 10.0 million in development milestones, $ 25.0 million in regulatory milestones, no additional milestone may ever be received from MTPC.

Due to the uncertainty of drug development and commercialization and the high historical failure rates associated therewith, although the Company has received $ 10.0 million in development milestones and $ 25.0 million in regulatory milestones, no additional milestone may ever be received from MTPC.

The Company recognizes any revenue from MTPC royalties in the period in which the sales occur.

As noted above, in February 2021, the Company entered into the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information).

Revenue Recognition

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The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company determined that the remaining consideration that may be payable to the Company subsequent to MTPC's commercial launch of VAFSEO in the third quarter of 2020 is quarterly royalties on net sales, sales milestones, and certain regulatory milestones.

As of September 30, 2020, the transaction price is comprised of:

(i) the up-front payment of $ 20.0 million, (ii) the cost for the Phase 2 studies of $ 20.5 million, (iii) the cost of all clinical supply provided to MTPC for the Phase 3 studies, (iv) $ 10.0 million in development milestones received, (v) $ 25.0 million in regulatory milestones received, comprised of $ 10.0 million relating to the JNDA filing and the $ 15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $ 0.4 million in royalties from net sales of VAFSEO.

As of September 30, 2020, all development milestones and $ 25.0 million in regulatory milestones have been achieved.

The Company determined that the remaining consideration that may be payable to the Company subsequent to MTPC's commercial launch of Vafseo TM in the third quarter of 2020 is quarterly royalties on net sales, sales milestones, and certain regulatory milestones.

As of March 31, 2021, the transaction price is comprised of:

(i) the up-front payment of $ 20.0 million, (ii) the cost for the Phase 2 studies of $ 20.5 million, (iii) the cost of all clinical supply provided to MTPC for the Phase 3 studies, (iv) $ 10.0 million in development milestones received, (v) $ 25.0 million in regulatory milestones received, comprised of $ 10.0 million relating to the JNDA filing and $ 15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $ 0.4 million in royalties from net sales of Vafseo.

As of March 31, 2021, all development milestones and $ 25.0 million in regulatory milestones have been achieved.

No other regulatory milestones have been assessed as probable of being achieved and as a result have been fully constrained.

Revenue for the License, Research and Clinical Supply Performance Obligation for the MTPC Agreement is being recognized using a proportional performance method, for which all deliverables have been completed.

Accordingly, the Company recognized the $ 15.0 million regulatory milestone relating to regulatory approval of vadadustat in Japan as revenue during the nine months ended September 30, 2020 and the $ 10.0 million regulatory milestone for the filing of the JNDA as revenue during the nine months ended September 30, 2019, as the regulatory milestones were both deemed probable of being achieved and the required performance obligations had been satisfied as of September 30, 2020 and September 30, 2019, respectively.

The Company recognized $ 0.4 million and $ 0 in revenues for the three months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there is $ 0.4 million in accounts receivable, no deferred revenue, and no contract assets.

There were no asset or liability balances classified as long-term in the unaudited condensed consolidated balance sheet as of September 30, 2020.

The Company recognized immaterial revenue from MTPC royalties for the three months ended March 31, 2021 and no revenue from the MTPC Agreement for the three months ended and March 31, 2020.

As noted above, in February 2021, the Company entered into the Royalty Agreement, whereby the Company sold its right to receive these royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information).

The revenue is classified as collaboration revenue in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2021, there is an immaterial amount in accounts receivable, no deferred revenue, and no contract assets.

There were no asset or liability balances classified as long-term in the unaudited condensed consolidated balance sheet as of March 31, 2021.

Supply of Drug Product to MTPC

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The Company does not recognize revenue under this arrangement until risk of loss passes to MTPC and delivery has occurred.

During the three and nine months ended September 30, 2020, the Company recognized $ 0.5 million and $ 4.5 million, respectively, in revenue for drug product that was delivered during the three and nine months ended September 30, 2020, respectively.

As of September 30, 2020, the Company recorded no accounts receivable, no deferred revenue, and $ 5.9 million in other current liabilities for drug product that is subject to return by MTPC.

Subsequent to September 30, 2020, risk of loss passed to MTPC and delivery occurred with respect to an additional $ 1.7 million of vadadustat drug product, which reduced the liability to $ 4.2 million.

No revenues were recognized for either of the three months ended March 31, 2021 and 2020 for drug product that was delivered under the MTPC Agreement.

As of March 31, 2021, the Company recorded no accounts receivable, no deferred revenue, and $ 2.2 million in other current liabilities and $ 1.4 million in other non-current liabilities for drug product that was subject to return by MTPC.

On July 15, 2020, the Company and its collaboration partner MTPC entered into a supply agreement, or the MTPC Supply Agreement.

The MTPC Supply Agreement includes the terms and conditions under which the Company will supply vadadustat drug product to MTPC for commercial use in Japan and certain other Asian countries, as contemplated by the MTPC Agreement.

Pursuant to the MTPC Supply Agreement, MTPC will provide a rolling forecast, or the MTPC Forecast, to the Company on a quarterly basis.

The MTPC Forecast will reflect MTPC’s needs for vadadustat drug product over a certain number of months, represented as a quantity of vadadustat drug product per calendar quarter.

MTPC will make an up-front payment for a certain percentage of each batch of vadadustat drug product ordered.

Pursuant to the MTPC Supply Agreement, MTPC provides a rolling forecast, or the MTPC Forecast, to the Company on a quarterly basis.

The MTPC Forecast reflects MTPC’s needs for vadadustat drug product over a certain number of months, represented as a quantity of vadadustat drug product per calendar quarter.

MTPC makes an up-front payment for a certain percentage of each batch of vadadustat drug product ordered.

The term of the MTPC Supply Agreement will exist throughout the term of the MTPC Agreement, and the termination provisions of the MTPC Agreement govern termination of the MTPC Supply Agreement.

The Company did no t recognize any revenue under the MTPC Supply Agreement during the three and nine months ended September 30, 2020, respectively.

Subsequent to September 30, 2020, the Company invoiced MTPC for $ 18.9 million in up-front payments for vadadustat drug product ordered by MTPC.

The Company did no t recognize any revenue under the MTPC Supply Agreement during the three months ended March 31, 2021.

During the three months ended March 31, 2021, the Company invoiced MTPC for $ 4.4 million in payments for vadadustat drug product ordered by MTPC.

As of March 31, 2021, the Company recorded $ 3.4 million in accounts receivable, $ 5.9 million in deferred revenue, $ 12.2 million in other current liabilities and $ 5.4 million in other non-current liabilities.

Subsequent to March 31, 2021, the Company invoiced MTPC for an additional $ 2.6 million in up-front payments for vadadustat drug product ordered by MTPC.

Collaboration and License Agreement with Otsuka Pharmaceutical Co.

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The co-exclusive license relates to activities that will be jointly conducted by the Company and Otsuka pursuant to the terms of the Otsuka U.S.

Additionally, the parties agreed not to promote, market or sell any competing product in the territory covered by the agreement.

Additionally, the parties agreed not to promote, market or sell any competing product in the territory covered by the Otsuka U.S.

The Company is responsible for performing all activities related to the development of vadadustat as outlined in the current global development plan, while Otsuka may agree to perform certain activities under the global development plan from time to time as agreed by the parties.

The current global development plan encompasses all activities with respect to the ongoing PRO 2 TECT and INNO 2 VATE clinical programs through the filing for marketing approval, as well as certain other studies.

The current global development plan encompasses all activities with respect to the PRO 2 TECT and INNO 2 VATE clinical programs, which were completed in 2020, through the filing for marketing approval, as well as certain other studies.

The Company’s obligations related to the conduct of the current global development plan include the associated manufacturing and supply services for vadadustat.

Under the Otsuka U.S.

Agreement, the parties jointly conduct, and have equal responsibility for, all medical affairs, commercialization and non-promotional activities pursuant to underlying plans as agreed to by the parties.

Agreement, the parties jointly conduct all medical affairs, commercialization and non-promotional activities pursuant to underlying plans as agreed to by the parties.

If approved by the FDA, Otsuka is obligated to purchase all of its supply requirements of vadadustat for commercial use from the Company pursuant to a separate supply agreement to be negotiated.

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The Additional Funding is fully creditable against future payments due to the Company under the arrangement, provided that future payments due to the Company may not be reduced by more than 50 % in any calendar year and any remaining creditable amount above 50 % in any calendar year will be applied to subsequent future payments until fully credited.

As of September 30, 2020, the Additional Funding was $ 80.9 million.

As of March 31, 2021, the Additional Funding was $ 95.0 million.

In addition, Otsuka is required to make certain milestone payments to the Company upon the achievement of specified development, regulatory and commercial events.

More specifically, as of September 30, 2020, the Company is eligible to receive up to $ 65.0 million in regulatory milestone payments for the first product to achieve the associated event and up to $ 575.0 million in commercial milestone payments associated with aggregate sales of licensed products.

More specifically, as of March 31, 2021, the Company is eligible to receive up to $ 65.0 million in regulatory milestone payments for the first product to achieve the associated event and up to $ 575.0 million in commercial milestone payments associated with aggregate sales of licensed products.

These future milestones are subject to reduction as a result of the Company’s exercise of the Otsuka Funding Option, as described above.

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Effectively, the Company has treated the arrangement as if the License Performance Obligation and the Committee Performance Obligation are a single performance obligation.

As of September 30, 2020, the transaction price totaling $ 471.2 million is comprised of:

(i) the up-front payment of $ 125.0 million, (ii) the cost share payment with respect to amounts incurred by the Company through December 31, 2016 of $ 33.8 million, and (iii) the estimate of the net cost share consideration to be received of approximately $ 312.4 million with respect to amounts incurred by the Company subsequent to December 31, 2016 and the Additional Funding.

As of September 30, 2020, no development or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

During the three months ended September 30, 2020 and 2019, the Company recognized revenue totaling approximately $ 16.3 million and $ 39.7 million, respectively, and approximately $ 80.7 million and $ 103.5 million during the nine months ended September 30, 2020 and 2019, respectively, with respect to the Otsuka U.S.

As of March 31, 2021, the transaction price totaling $ 478.9 million is comprised of:

(i) the up-front payment of $ 125.0 million, (ii) the cost share payment with respect to amounts incurred by the Company through December 31, 2016 of $ 33.8 million, and (iii) the estimate of the net cost share consideration to be received of approximately $ 320.1 million with respect to amounts incurred by the Company subsequent to December 31, 2016.

As of March 31, 2021, no development or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

During the three months ended March 31, 2021 and 2020, the Company recognized revenue totaling approximately $ 13.7 million and $ 38.6 million, respectively, with respect to the Otsuka U.S.

The revenue is classified as collaboration revenue in the accompanying unaudited condensed consolidated statements of operations.

As of September 30, 2020, there is approximately $ 31.4 million of deferred revenue related to the Otsuka U.S.

As of March 31, 2021, there is approximately $ 18.4 million of deferred revenue related to the Otsuka U.S.

Agreement of which $ 7.2 million is classified as current and $ 11.2 million is classified as long-term in the accompanying unaudited condensed consolidated balance sheet based on the performance period of the underlying obligations.

Additionally, as of September 30, 2020, there are approximately $ 3.1 million in contract liabilities (included in accounts payable) and $ 0.9 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of December 31, 2019, there was $ 8.9 million in accounts receivable in the consolidated balance sheet.

Additionally, as of March 31, 2021, there is approximately $ 0.8 million in accounts receivable and $ 1.3 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of December 31, 2020, there was approximately $ 5.0 million in contract liabilities (included in accounts payable) and $ 1.2 million in prepaid expenses and other current assets in the consolidated balance sheet.

The Company determined that the medical affairs, commercialization and non-promotional activities elements of the Otsuka U.S.

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As a result, the activities conducted pursuant to the medical affairs, commercialization and non-promotional activities plans will be accounted for as a component of the related expense in the period incurred.

During the three months ended September 30, 2020 and 2019, the Company incurred

approximately $ 1.2 million and $ 0.5 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S.

Agreement of which approximately $ 0.5 million and $ 0.2 million are reimbursable by Otsuka and recorded as a reduction to research and development expense during the three months ended September 30, 2020 and 2019, respectively.

During the three months ended September 30, 2020 and 2019, Otsuka incurred approximately $ 0.5 million and $ 0.3 million of costs related to the cost-sharing provisions of the Otsuka U.S.

During the three months ended March 31, 2021 and 2020, the Company incurred approximately $ 1.0 million and $ 0.5 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S.

Agreement, of

which approximately $ 0.5 million and $ 0.3 million are reimbursable by Otsuka and recorded as a reduction to research and development expense during the three months ended March 31, 2021 and 2020, respectively.

During the three months ended March 31, 2021 and 2020, Otsuka incurred approximately $ 0.3 million and $ 0.4 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S.

Agreement, of which approximately $ 0.2 million is reimbursable by the Company and recorded as an increase to research and development expense during each of the three months ended March 31, 2021 and 2020.

International Collaboration and License Agreement with Otsuka Pharmaceutical Co.

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The Company also received a payment of approximately $ 0.2 million which represents reimbursement for Otsuka’s share of costs previously incurred by the Company in implementing the current global development plan in excess of a specified threshold during the quarter ended March 31, 2017.

Commencing in the second quarter of 2017, Otsuka began to contribute, as required by the Otsuka International Agreement, a percentage of the remaining costs incurred under the current

global development plan.

The Company estimates that Otsuka’s funding of the current global development plan costs subsequent to March 31, 2017 will total roughly $ 224.7 million or more, depending on the actual current global development plan costs incurred.

Commencing in the second quarter of 2017, Otsuka began to contribute, as required by the Otsuka International Agreement, a percentage of the remaining costs incurred under the current global development plan.

The Company estimates that Otsuka’s funding of the current global development plan costs

subsequent to March 31, 2017 will total roughly $ 224.5 million or more, depending on the actual current global development plan costs incurred.

The costs associated with the performance of any mutually agreed upon development activities in addition to those outlined in the current global development plan will be subject to a cost sharing or reimbursement mechanism as set forth in the Otsuka International Agreement or to be determined by the parties.

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In addition, Otsuka would be required to make certain milestone payments to the Company upon the achievement of specified development, regulatory and commercial events.

More specifically, as of September 30, 2020, the Company is eligible to receive up to $ 52.0 million in regulatory milestone payments for the first licensed product to achieve the associated event.

More specifically, as of March 31, 2021, the Company is eligible to receive up to $ 52.0 million in regulatory milestone payments for the first licensed product to achieve the associated event.

Moreover, the Company is eligible for up to $ 525.0 million in commercial milestone payments associated with aggregate sales of all licensed products.

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Effectively, the Company has treated the arrangement as if the License Performance Obligation and the Committee Performance Obligation are a single performance obligation.

As of September 30, 2020, the transaction price totaling $ 297.9 million is comprised of:

As of March 31, 2021, the transaction price totaling $ 297.7 million is comprised of:

(i) the up-front payment of $ 73.0 million, (ii) the cost share payment with respect to amounts incurred by the Company during the quarter ended March 31, 2017 of $ 0.2 million, and (iii) an estimate of the net cost share consideration to be received with respect to amounts incurred by the Company subsequent to March 31, 2017 of $ 224.5 million.

As of September 30, 2020, no development or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

During the three months ended September 30, 2020 and 2019, the Company recognized revenue totaling approximately $ 7.2 million and $ 20.2 million, respectively, and approximately $ 39.4 million and $ 64.6 million during the nine months ended September 30, 2020 and 2019, respectively, with respect to the Otsuka International Agreement.

As of March 31, 2021, no development or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

During the three months ended March 31, 2021 and 2020, the Company recognized revenue totaling approximately $ 7.0 million and $ 19.4 million, respectively, with respect to the Otsuka International Agreement.

The revenue is classified as collaboration revenue in the accompanying unaudited condensed consolidated statements of operations.

As of September 30, 2020, there is approximately $ 15.6 million of deferred revenue related to the Otsuka International Agreement of which $ 7.4 million is classified as current and $ 8.2 million is classified as long-term in the accompanying unaudited condensed consolidated balance sheet based on the performance period of the underlying obligations.

Additionally, as of September 30, 2020, there are approximately $ 1.4 million in contract liabilities (included in accounts payable) and $ 0.4 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of December 31, 2019, there was $ 4.0 million in accounts receivable in the consolidated balance sheet.

As of March 31, 2021, there is approximately $ 8.6 million of deferred revenue related to the Otsuka International Agreement of which $ 5.2 million is classified as current and $ 3.5 million is classified as long-term in the accompanying unaudited condensed consolidated balance sheet based on the performance period of the underlying obligations.

Additionally, as of March 31, 2021, there is approximately $ 0.4 million in accounts receivable and $ 0.6 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of December 31, 2020, there was approximately $ 2.3 million in contract liabilities (included in accounts payable) and $ 0.5 million in prepaid expenses and other current assets in the consolidated balance sheet.

Janssen Pharmaceutica NV Research and License Agreement

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Pursuant to the Vifor Amended Agreement, the Company granted Vifor Pharma an exclusive license to sell vadadustat to FKC and to certain third party dialysis organizations approved by the Company, or Third Party Dialysis Organizations, in the United States.

The license granted under the Vifor Amended Agreement will become effective upon (i) the approval of vadadustat for DD-CKD patients by the FDA, (ii) the earlier of a determination by the Centers for Medicare & Medicaid Services, or CMS, that vadadustat will be reimbursed using Medicare’s bundled reimbursement model or that vadadustat will be reimbursed using the Transitional Drug Add-On Payment Adjustment, and (iii) payment by Vifor Pharma of a $ 25.0 million milestone upon the occurrence of (i) and (ii).

The license granted under the Vifor Amended Agreement will become effective upon (i) the approval of vadadustat for DD-CKD adult patients by the FDA, (ii) the earlier of a determination by the Centers for Medicare & Medicaid Services, or CMS, that vadadustat will be reimbursed using Medicare’s bundled reimbursement model or that vadadustat will be reimbursed using the Transitional Drug Add-On Payment Adjustment, and (iii) payment by Vifor Pharma of a $ 25.0 million milestone upon the occurrence of (i) and (ii).

The Vifor Amended Agreement is structured as a profit share arrangement between the Company and Vifor Pharma in which the Company will receive a majority of the profit, after deduction of certain amounts relating to Vifor Pharma’s costs, from Vifor Pharma’s sales of vadadustat to FKC and the Third Party Dialysis Organizations in the United States.

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Unless earlier terminated, the Vifor Amended Agreement will expire upon the later of the expiration of all patents that claim or cover vadadustat or expiration of marketing or regulatory exclusivity for vadadustat in the United States.

Vifor Pharma may terminate the Vifor Amended Agreement in its entirety upon 12 months’ prior written notice after the release of the first top-line data in the vadadustat global Phase 3 program for DD-CKD patients, which release occurred in the second quarter of 2020 with the announcement of top-line data from the INNO 2 VATE program.

Vifor Pharma may terminate the Vifor Amended Agreement in its entirety upon 12 months’ prior written notice after the release of the first top-line data in the vadadustat global Phase 3 program for DD-CKD adult patients, which release occurred in the second quarter of 2020 with the announcement of top-line data from the INNO 2 VATE program.

In addition, either party may, subject to a cure period, terminate the Vifor Amended Agreement in the event of the other party’s uncured material breach or bankruptcy.

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As the parties’ rights under the Vifor

Agreement are conditioned upon (a) the approval of vadadustat for DD-CKD patients by the FDA;

Agreement are conditioned upon (a) the approval of vadadustat for DD-CKD adult patients by the FDA;

(b) the earlier of a determination by CMS that vadadustat will be reimbursed using Medicare’s bundled reimbursement model or that vadadustat will be reimbursed using the Transitional Drug Add-On Payment Adjustment;

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

Vifor Pharma is obligated to retain all rights to, and maintain the validity of, the PRV until Akebia and Vifor Pharma (a) enter into a definitive agreement setting forth the financial and other terms by which Vifor Pharma will assign the PRV to Akebia for use with Akebia’s planned NDA for vadadustat for the treatment of anemia due to CKD in both dialysis-dependent and non-dialysis dependent patients, or (b) make a mutual decision to sell the PRV and share the proceeds based on certain terms.

Vifor Pharma is obligated to retain all rights to, and maintain the validity of, the PRV until Akebia and Vifor Pharma (a) enter into a definitive agreement setting forth the financial and other terms by which Vifor Pharma will assign the PRV to Akebia for use with Akebia’s NDA for vadadustat for the treatment of anemia due to CKD in both dialysis-dependent and non-dialysis dependent patients, or (b) make a mutual decision to sell the PRV and share the proceeds based on certain terms.

In March of 2021, the Company submitted an NDA for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients.

The Company's NDA submission did not include a Priority Review Voucher.

During the quarter ended March 31, 2020, the $ 10.0 million payment to Vifor Pharma was recorded to research and development expense in the unaudited condensed consolidated statement of operations and as an operating cash outflow in the unaudited condensed consolidated statement of cash flows.

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In addition, the Company may terminate the Panion Amended License Agreement (i) in its entirety or (ii) with respect to one or more countries in the Company’s licensed territory, in either case upon 90 days’ notice.

The Company and Panion also each have the right to terminate the Panion Amended License Agreement upon the occurrence of a material breach of the Panion Amended License Agreement by the other party, subject to certain cure provisions, or certain

insolvency events.

Company and Panion also each have the right to terminate the Panion Amended License Agreement upon the occurrence of a material breach of the Panion Amended License Agreement by the other party, subject to certain cure provisions, or certain insolvency events.

The Panion Amended License Agreement also provides that, on a country-by-country basis, until the second anniversary of the expiration of the obligation of the Company or Panion, as applicable, to pay royalties in a country in which such party has ferric citrate for sale on the date of such expiration, neither the other party nor its affiliates will, directly or indirectly, sell, distribute or otherwise commercialize or supply or cause to supply ferric citrate to a third party for sale or distribution in such country.

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In addition, the Panion Amended License Agreement provides that each of the Company and Panion has the right, but not the obligation, to conduct litigation against any infringer of certain patent rights under the Panion Amended License Agreement in certain territories.

The Company recognized royalty payments due to Panion of approximately $ 2.9 million and $ 2.7 million during the three months ended September 30, 2020 and 2019, respectively, and approximately $ 8.2 million and $ 7.5 million during the nine months ended September 30, 2020 and 2019, respectively, relating to the Company’s sales of Auryxia in the United States and JT and Torii’s net sales of Riona in Japan, as the Company is required to pay a mid-single digit percentage of net sales of ferric citrate in the Company’s licensed territories to Panion under the terms of the Panion Amended License Agreement.

The Company recognized royalty payments due to Panion of approximately $ 2.5 million during each of the three months ended March 31, 2021 and 2020, relating to the Company’s sales of Auryxia in the United States and JT and Torii’s net sales of Riona in Japan, as the Company is required to pay a mid-single digit percentage of net sales of ferric citrate in the Company’s licensed territories to Panion under the terms of the Panion Amended License Agreement.

Sublicense Agreement with Japan Tobacco, Inc.

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JT and Torii are responsible for the future development and commercialization costs in Japan.

Ferric citrate hydrate is currently approved by the Japanese Ministry of Health, Labour and Welfare for manufacturing and marketing in Japan for the treatment of hyperphosphatemia in patients with CKD.

Ferric citrate hydrate is being marketed in Japan by Torii, under the brand name Riona.

During the three months ended June 30, 2020, JT and Torii announced the filing of a supplemental NDA with the Pharmaceuticals and Medical Devices Agency seeking an additional indication for Riona to treat adult patients with IDA in Japan.

The Company is eligible to receive royalty payments based on a tiered double-digit percentage of net sales of Riona in Japan escalating up to the mid-teens, subject to certain reductions upon expiration or termination of the Amended and Restated License Agreement between Keryx and Panion, by which Keryx in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, for the development and commercialization of ferric citrate.

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The Company developed a best estimate of the standalone selling price for the Rights to Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement and determined it immaterial.

As such, the Company did not develop a best estimate of standalone selling price for the License and Supply Performance Obligation and allocated the entire

transaction price to this performance obligation.

Additionally, as of the consummation of the Merger, the services associated with the License and Supply Performance Obligation were completed and JT and Torii had secured their own source to manufacture ferric citrate hydrate.

As such, the Company did not develop a best estimate of standalone selling price for the License and Supply Performance Obligation and allocated the entire transaction price to this performance obligation.

Additionally, as of the consummation of the Merger, the services associated

with the License and Supply Performance Obligation were completed and JT and Torii had secured their own source to manufacture ferric citrate hydrate.

As such, any initial license fees as well as any development-based milestones and manufacturing fee revenue were received and recognized prior to the Merger.

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In accordance with ASC 606, the Company recognizes sales-based royalties, including milestone payments based on the level of sales, when the related sales occur as these amounts have been determined to relate predominantly to the license granted to JT and Torii and therefore are recognized at the later of when the performance obligation is satisfied, or the related sales occur.

The Company recognized license revenue of $ 1.2 million and $ 1.5 million during the three months ended September 30, 2020 and 2019, respectively, and $ 4.0 million and $ 4.3 million during the nine months ended September 30, 2020 and 2019, respectively, related to royalties earned on net sales of Riona in Japan.

The Company recognized license revenue of $ 1.2 million and $ 1.1 million during the three months ended March 31, 2021 and 2020, respectively, related to royalties earned on net sales of Riona in Japan.

The Company records the associated mid-single digit percentage of net sales royalty expense due to Panion, the licensor of Riona, in the same period as the royalty revenue from JT and Torii is recorded.

Business Combination

On December 12, 2018, the Company completed the Merger with Keryx.

Keryx’s proprietary product, Auryxia, is approved by the FDA 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 in adult patients with NDD-CKD, or the IDA Indication.

Pursuant to the terms and conditions of the Merger Agreement, each outstanding Keryx Share, excluding the Baupost Additional Shares, as defined below, and each outstanding Keryx equity award were converted into Akebia Shares and substantially similar Akebia equity awards, respectively, at an exchange ratio of 0.37433 for a total fair value consideration of $ 527.8 million consisting of the following (in thousands):

Fair value of 57,773,090 Akebia Shares

Fair value of 602,752 Akebia RSUs

Fair value of 3,967,290 Akebia stock options

Total consideration $ 527,754

Immediately prior to the Merger, Baupost Group Securities, L.L.C., or Baupost, agreed to convert its $ 164.7 million of Keryx’s Convertible Notes into 35,582,335 Keryx Shares, in accordance with the terms of the governing indenture agreement, in exchange for an additional 4,000,000 Keryx Shares, or the Baupost Additional Shares.

The aggregate 39.6 million Keryx Shares were then converted into Akebia Shares at the 0.37433 exchange ratio.

The fair value of the Baupost Additional Shares, on an as-converted basis, of $ 13.4 million has been excluded from the purchase price and recorded within selling, general and administrative expenses in the Company’s consolidated financial statements, as the issuance of those shares by Keryx is considered to be a separate transaction under ASC 805, Business Combinations , since it was entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer or the combined entity.

The Company allocated the $ 527.8 million purchase price to the identifiable assets acquired and liabilities assumed in the business combination at their fair values as of December 12, 2018 as follows (in thousands):

Cash and cash equivalents $ 5,257

Inventory 235,597

Trade accounts receivable, net 15,834

Prepaid expenses and other current assets 8,399

Goodwill 55,053

Intangible assets:

Developed product rights for Auryxia 329,130

Other intangible assets 545

Property and equipment, net 3,646

Other assets 14,441

Accounts payable ( 17,570 )

Accrued expenses ( 42,972 )

Deferred tax liability ( 35,096 )

Debt ( 15,000 )

Fair value of unfavorable executory contract ( 29,510 )

Total purchase price $ 527,754

In performing the purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Keryx’s business.

As part of the purchase price allocation, the Company identified developed product rights for Auryxia as the primary intangible asset.

The fair value of the developed product rights for Auryxia was determined using the multi-period excess earnings method which is a variation of the income approach, and is a valuation technique that provides an estimate of the fair value of an asset based on the principle that the value of an intangible asset is equal to the present value of the incremental after-tax cash flows attributable to the asset, after taking charges for the use of other assets employed by the business.

Key estimates and assumptions used in this model were projected revenues and expenses related to the asset, estimated contributory asset charges, and a risk-adjusted discount rate of 20.0 % used to calculate the present value of the future expected cash inflows from the asset.

The intangible asset is being amortized on a straight-line basis over its estimated useful life, which at the time of the Merger was estimated to be nine years .

During the second quarter of 2020, the Company identified indicators of impairment related to the developed product rights for Auryxia and recorded an impairment charge of $ 115.5 million and made a corresponding adjustment to the estimated useful life of the developed product rights for Auryxia from nine years to seven years (see Note 9 for additional information).

The Company also identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include future 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 and as such, the Company recorded a liability in purchase accounting.

As of the acquisition date, the fair value of the off-market element was $ 29.5 million.

During the second quarter of 2020, the Company recorded an $ 11.0 million increase to the liability for excess purchase commitments, for a total liability of $ 41.5 million, and a corresponding charge to cost of goods sold largely driven by a reduction in the short-term and long-term Auryxia revenue sales forecast.

As of September 30, 2020, the Company's liability for excess purchase commitments was $ 41.0 million (see Note 14 for additional information).

The goodwill represents the excess of the purchase price over the estimated fair value of net assets acquired.

The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits that were expected to be realized from the Merger.

These benefits included the expectation that the combined company would establish itself as a leading renal company with enhanced position and large market opportunity, synergistic utilization of Keryx’s commercial organization, and strengthening the combined company’s financial profile.

Such goodwill is no t deductible for tax purposes.

In connection with the Merger, the Company identified a deferred tax liability of $ 35.1 million as a result of the difference in the book basis and tax basis related to the identifiable inventory, other intangible assets, net and other liability.

In determining the deferred tax liability to be recorded the Company elected to first consider the recoverability of the deferred tax assets acquired in the acquisition before considering the recoverability of the acquirer’s existing deferred tax assets.

Liability Related to Sale of Future Royalties

On February 25, 2021, the Company entered into the Royalty Agreement with HealthCare Royalty Partners IV, L.P., or HCR, pursuant to which the Company sold to HCR its right to receive royalties and sales milestones for vadadustat in Japan and certain other Asian countries, such countries collectively, the MTPC Territory, and such payments collectively the Royalty Interest Payments, in each case, payable to the Company under the MTPC Agreement, subject to an annual maximum “cap” of $ 13.0 million, or the Annual Cap, and an aggregate maximum “cap” of $ 150.0 million, or the Aggregate Cap.

After HCR receives Royalty Interest Payments equal to the Annual Cap in a given calendar year, the Company will receive 85 % of the Royalty Interest Payments for the remainder of that year.

After HCR receives Royalty Interest Payments equal to the Aggregate Cap, or the Company pays the Aggregate Cap to HCR (net of the Royalty Interest Payments already received by HCR), the Royalty Interest Payments will revert back to the Company, and HCR would have no further right to any Royalty Interest Payments.

The Company received $ 44.8 million from HCR (net of certain transaction expenses) under the Royalty Agreement, and the Company is eligible to receive an additional $ 5.0 million in each year from 2021 through 2023 under the Royalty Agreement if specified annual sales milestones are achieved for vadadustat in the MTPC Territory, subject to the satisfaction of certain customary conditions.

The Company retains the right to receive all potential future regulatory milestones for vadadustat under the MTPC Agreement.

The Royalty Agreement will terminate on the earlier of the date on which HCR has received (i) the last Royalty Interest Payment or (ii) payment by the Company of an amount equal to the Aggregate Cap minus the aggregate amount of all Royalty Interest Payments actually received by HCR.

Although the Company sold its right to receive royalties and sales milestones for vadadustat in the MTPC Territory as described above, as a result of its ongoing involvement in the cash flows related to these royalties, the Company will continue to account for these royalties as revenue.

The Company recognized the proceeds received from HCR as a liability that is being amortized using the effective interest method over the life of the arrangement.

The Company recorded the net proceeds of $ 44.8 million as a liability.

In order to determine the amortization of the liability, the Company is required to estimate the total amount of future net royalty payments to be made to HCR over the term of the Royalty Agreement.

The total threshold of net royalties to be paid, less the net proceeds received, will be recorded as interest expense over the life of the liability.

The Company imputes interest on the unamortized portion of the liability using the effective interest method.

The annual effective interest rate as of March 31, 2021 was 19.3 % which is reflected as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

Over the course of the Royalty Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in forecasted royalty revenue.

There are a number of factors that could materially affect the amount and timing of royalty payments from MTPC, none of which are within the Company's control.

On a quarterly basis, the Company reassesses the effective interest rate and adjusts the rate prospectively as needed.

The following table shows the activity within the liability account for the three months ended March 31, 2021:

March 31, 2021

(in thousands)

Liability related to sale of future royalties, net — beginning balance $ —

Proceeds from sale of future royalties, net 44,783

MTPC royalties payable ( 20 )

Non-cash interest expense recognized 2,162

Liability related to sale of future royalties, net — ending balance $ 46,925

The Royalty Agreement requires the Company to take certain actions, including actions with respect to the Royalty Interest Payments, the MTPC Agreement, the MTPC Supply Agreement, and the Company's intellectual property.

The Royalty Agreement also contains certain representations and warranties, covenants, indemnification obligations, events of default and other provisions that are customary for a royalty monetization transaction of this nature.

In addition, the Company granted HCR a precautionary security interest in connection with the Royalty Interest Payments.

Available For Sale Securities

Cash, cash equivalents, and available for sale securities at September 30, 2020 and December 31, 2019 consisted of the following:

Cash, cash equivalents, and available for sale securities at March 31, 2021 and December 31, 2020 consisted of the following:

Amortized Cost Gross

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(in thousands)

September 30, 2020

March 31, 2021

Cash and cash equivalents $ 252,765 $ — $ — $ 252,765

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Available for sale securities:

Certificates of deposit $ 245 $ — $ — $ 245

government debt securities $ 39,979 $ 13 $ — $ 39,992

Total available for sale securities $ 39,979 $ 13 $ — $ 39,992

Total cash, cash equivalents, and available for sale securities $ 268,677 $ 13 $ — $ 268,690

The estimated fair value of the Company’s available for sale securities balance at September 30, 2020, by contractual maturity, was as follows (in thousands):

The estimated fair value of the Company’s available for sale securities balance at March 31, 2021, by contractual maturity, was as follows (in thousands):

Due in one year or less $ 19,999

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Total available for sale securities $ 19,999

There were no realized gains or losses on available for sale securities for the three and nine months ended September 30, 2020 and 2019.

Additionally, the Company did no t have any available for sale securities that were in an unrealized loss position as of September 30, 2020 and December 31, 2019.

As such, the Company did no t recognize any credit losses during the three and nine months ended September 30, 2020.

There were no realized gains or losses on available for sale securities for the three months ended March 31, 2021 and 2020 and the Company did no t recognize any credit losses during the three months ended March 31, 2021 and 2020.

Additionally, the Company did no t have any available for sale securities that were in an unrealized loss position as of March 31, 2021 and December 31, 2020.

Fair Value of Financial Instruments

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This is because the Company values its cash equivalents and available for sale securities using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

Assets measured or disclosed at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 are summarized below:

Assets measured or disclosed at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 are summarized below:

Fair Value Measurements Using

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(in thousands)

September 30, 2020

March 31, 2021

Cash and cash equivalents $ 252,765 $ — $ — $ 252,765

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Cash and cash equivalents $ 228,698 $ — $ — $ 228,698

Certificates of deposit — 245 — 245

government debt securities — 39,992 — 39,992

$ 228,698 $ 39,992 $ — $ 268,690

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In accordance with ASC 815, the Company concluded that these features are not clearly and closely related to the host instrument, and represent a single compound derivative that is required to be re-measured at fair value on a quarterly basis.

The events of default include maintaining, on an annual basis, a minimum liquidity threshold starting in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia starting in the fourth quarter of 2020.

The Company recorded a derivative liability related to the Company’s Loan Agreement with Pharmakon of $ 2.0 million and $ 1.7 million as of September 30, 2020 and December 31, 2019, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of September 30, 2020 and December 31, 2019.

The estimated fair value of the derivative liability on both September 30, 2020 and December 31, 2019 was determined using a scenario-based approach and discounted cash flow model that includes principal and interest payments under various scenarios involving clinical development success for vadadustat and various cash flow assumptions.

The events of default include maintaining, on an annual basis, a minimum liquidity threshold which started in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia which started in the fourth quarter of 2020.

The Company recorded a derivative liability related to the Company’s Loan Agreement with Pharmakon of $ 2.5 million and $ 2.4 million as of March 31, 2021 and December 31, 2020, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020.

The estimated fair value of the derivative liability on both March 31, 2021 and December 31, 2020 was determined using a scenario-based approach and discounted cash flow model that includes principal and interest payments under various scenarios involving clinical development success for vadadustat and various cash flow assumptions.

Probabilities surrounding clinical development success were derived using industry benchmarks.

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Balance at March 31, 2021 $ 2,500

Change in fair value of derivative liability, recorded as other expense 150

Balance at June 30, 2020 $ 1,890

Change in fair value of derivative liability, recorded as other expense $ 100

Balance at September 30, 2020 $ 1,990

The Company had no other assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2020 and December 31, 2019.

The Company had no other assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at March 31, 2021 and December 31, 2020.

Investment securities are exposed to various risks such as interest rate, market and credit risks.

When the Company holds investment securities, due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, the Company considers if changes in risks in the near term would result in material changes in the fair value of investments.

The components of inventory, inclusive of step-up as a result of bringing Keryx’s inventory onto Akebia’s books at fair value in connection with the Merger, are summarized as follows:

September 30, 2020 December 31, 2019

The components of inventory are summarized as follows:

March 31, 2021 December 31, 2020

(in thousands)

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Long-term inventory, which primarily consists of raw materials and work in process, is included in other assets in the Company’s unaudited condensed consolidated balance sheets.

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in thousands)

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Total inventory $ 73,144 $ 86,309

Inventory amounts written down as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold totaled $ 8.5 million and $ 18.6 million during the three and nine months ended September 30, 2020, respectively, in addition to related step-up charges of $ 1.4 million and $ 7.4 million during the three and nine months ended September 30, 2020, respectively.

Inventory write downs charged to cost of goods sold totaled $ 2.9 million and $ 6.0 million during the three and nine months ended September 30, 2019, respectively, in addition to related step-up charges of $ 8.1 million and $ 10.9 million during the three and nine months ended September 30, 2019, respectively.

The increase for the three and nine months ended September 30, 2020 was 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.

Inventory amounts written down as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold totaled $ 5.1 million during the three months ended March 31, 2021, in addition to related step-up charges of $ 8.7 million during the three months ended March 31, 2021.

Inventory write-downs charged to cost of goods sold totaled $ 0.1 million during the three months ended March 31, 2020.

The increase for the three months ended March 31, 2021 was primarily related to inventory reserves related to a previously disclosed manufacturing quality issue related to Auryxia.

If future sales of Auryxia are lower than expected, the Company may be required to write-down the value of such inventories.

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Intangible Assets

The following table presents the Company’s intangible assets at September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

The following table presents the Company’s intangible assets at March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

Gross Carrying

Value Accumulated Amortization ASC 842

Adjustment Total Estimated

Value Accumulated Amortization Total Estimated

Acquired intangible assets:

Developed product rights for Auryxia $ 213,603 $ ( 78,444 ) $ 135,159 6 years

Favorable lease 545 ( 5 ) ( 540 ) — N/A

Total $ 214,148 $ ( 62,230 ) $ ( 540 ) $ 151,378

December 31, 2020

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The Company amortizes its definite-lived intangible assets acquired as part of the Merger using the straight-line method, which is considered the best estimate of economic benefit, over its estimated useful life.

As a result of the adoption of ASC 842 on January 1, 2019, the Company reclassed the remaining balance of the favorable lease intangible asset into the operating lease asset.

The Company recorded $ 6.1 million and $ 9.1 million in amortization expense related to the developed product rights for Auryxia during the three months ended September 30, 2020 and 2019, respectively, and $ 24.3 million and $ 27.3 million during the nine months ended September 30, 2020 and 2019, respectively.

Estimated future amortization expense for the intangible asset as of September 30, 2020 is as follows (in thousands):

Thereafter 28,834

Auryxia Intangible Asset Impairment

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

This reduction was primarily driven by the compounding impact of the September 2018 CMS decision that rescinded Medicare Part D coverage of Auryxia for the IDA Indication and the related imposition by CMS of a prior authorization requirement for Auryxia for the Hyperphosphatemia Indication.

As a result, the Company determined indicators of impairment existed for the developed product rights for Auryxia and performed an undiscounted cash flow analysis pursuant to ASC 360-10, Impairment or Disposal of Long-lived Assets, to determine if the cash flows expected to be generated by the Auryxia asset group over the estimated remaining useful life of the primary assets were sufficient to recover

the carrying value of the Auryxia asset group.

Based on this analysis, the undiscounted cash flows were not sufficient to recover the carrying value of the Auryxia asset group.

As a result, the Company was required to perform Step 3 of the impairment test to determine the fair value of the Auryxia asset group.

To estimate the fair value, the Company performed a business enterprise valuation for the Auryxia asset group using the income approach, which is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate.

Key estimates and assumptions used in the valuations included projected revenues and expenses related to the asset, estimated contributory asset charges, and a risk-adjusted discount rate of 9.5 % to calculate the present value of the future expected cash inflows.

The Company believes its assumptions are consistent with the plans and estimates that a market participant would use to manage the business.

The discount rates used are intended to reflect the risks inherent in future cash flow projections and were based on an estimate of the weighted average cost of capital, or WACC, of market participants relative to the Auryxia asset group.

As a result of this analysis, the fair value of the Auryxia asset group was below its carrying value, and the Company recorded an impairment charge of $ 115.5 million during the three months ended June 30, 2020 and made a corresponding adjustment to the estimated useful life of the developed product rights for Auryxia from nine years to seven years .

The impairment charge has been entirely allocated to the Company’s only intangible asset, the developed product rights for Auryxia, as all other long-lived assets had fair values that were either equal to or greater than their carrying value.

Per ASC 360-10, the carrying amount of a long-lived asset of the group would not be reduced below its fair value.

The Company believes its assumptions used to determine the fair value of the Auryxia asset group are reasonable.

In the event the estimates and assumptions used in the valuation of the Auryxia asset group, including the forecasted projections, change in the future, additional impairment charges could be recorded in the future.

Goodwill was $ 55.1 million as of September 30, 2020 and December 31, 2019, derived as follows (in thousands):

Total Merger consideration $ 527,754

Fair value of identified acquired assets and liabilities, net ( 472,701 )

Goodwill $ 55,053

The Company recorded $ 9.0 million and $ 9.1 million in amortization expense related to the developed product rights for Auryxia during the three months ended March 31, 2021 and 2020, respectively.

Goodwill was $ 55.1 million as of March 31, 2021 and December 31, 2020.

The Company operates in one operating segment which the Company considers to be the only reporting unit.

Goodwill is evaluated at the reporting unit level for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that an impairment may exist.

There were no impairments of goodwill during either of the three and nine months ended September 30, 2020 or 2019, respectively.

Goodwill is evaluated for impairment at the reporting unit level on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that an impairment may exist.

There were no impairments of goodwill during the three months ended March 31, 2021 or 2020.

Accrued Expenses

Accrued expenses as of September 30, 2020 and December 31, 2019 are as follows:

September 30, 2020 December 31, 2019

Accrued expenses as of March 31, 2021 and December 31, 2020 are as follows:

March 31, 2021 December 31, 2020

(in thousands)

Accrued clinical $ 43,976 $ 61,815

Product revenue allowances $ 38,786 $ 38,049

Accrued clinical 32,085 28,986

MTPC - Supply of commercial drug product 12,216 13,887

Otsuka PRV contribution 10,000 10,000

Accrued payroll 6,185 14,402

MTPC - Supply of Validation Drug Product 5,904 —

Lease liability 5,429 5,286

MTPC - Supply of validation drug product 2,247 4,090

Royalties 2,510 2,998

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Total accrued expenses $ 123,889 $ 130,624

Future principal payments on the Term Loans (as defined below) as of September 30, 2020 are as follows (in thousands):

(in thousands)

Total before unamortized discount and issuance costs 80,000

unamortized discount and issuance costs ( 3,392 )

Total term loans $ 76,608

On November 11, 2019, the Company, with Keryx as guarantor, entered into a loan agreement, or the Loan Agreement, with BioPharma Credit PLC as collateral agent and a lender, or the Collateral Agent, and BioPharma Credit Investments V (Master) LP as a lender, pursuant to which term loans in an aggregate principal amount of $ 100.0 million were made available to the Company in two tranches, subject to certain terms and conditions, or the Term Loans.

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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 the Company to borrow, at its option, an additional $ 20.0 million, or Tranche B, subject to the satisfaction of customary conditions.

The date on which Tranche B is drawn, the Tranche B Funding Date, and each of the Tranche A Funding Date and the Tranche B Funding Date, a Funding Date.

The first tranche of $ 80.0 million, or Tranche A, was drawn on November 25, 2019, or the Tranche A Funding Date, and the second tranche of $ 20.0 million, or Tranche B, was drawn on December 10, 2020, or the Tranche B Funding Date.

Each of the Tranche A Funding Date and the Tranche B Funding Date, a Funding Date.

Proceeds from the Term Loans may be used for general corporate purposes.

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The Tranche A draw was $ 77.3 million, net of facility fee, Lender Expenses and issuance costs.

The Tranche B draw was $ 20.0 million, net of immaterial Lender Expenses and issuance costs.

The Loan Agreement permits voluntary prepayment at any time in whole or in part, subject to a prepayment premium.

The prepayment premium would be 2.00 % of the principal amount being prepaid prior to the third anniversary of the applicable Funding Date, 1.00 % on or after the third anniversary, but prior to the fourth anniversary, of the applicable Funding Date, and 0.50 % on or after the fourth anniversary of the applicable Funding Date but prior to the Maturity Date, and a make-whole premium on or prior to the second anniversary of the applicable Funding Date in an amount equal to foregone interest through

the second anniversary of the applicable Funding Date.

A change of control triggers a mandatory prepayment of the Term Loans.

The Loan Agreement contains customary representations, warranties, events of default and covenants of the Company and its subsidiaries, including maintaining, on an annual basis, a minimum liquidity threshold starting in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia starting in the fourth quarter of 2020.

The Loan Agreement contains customary representations, warranties, events of default and covenants of the Company and its subsidiaries, including maintaining, on an annual basis, a minimum liquidity threshold which started in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia which started in the fourth quarter of 2020.

If an event of default occurs and is continuing under the Loan Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

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 September 30, 2020 and December 31, 2019, the Company determined that no events of default had occurred.

As of March 31, 2021 and December 31, 2020, the Company determined that no events of default had occurred.

The Company 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.

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The fair value of the derivative liability related to the Company’s Loan Agreement with Pharmakon was $ 2.0 million and $ 1.7 million as of September 30, 2020 and December 31, 2019, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of September 30, 2020.

During the three and nine months ended September 30, 2020, the Company recognized approximately $ 2.2 million and $ 6.6 million, respectively, of interest expense related to the Loan Agreement.

The fair value of the derivative liability related to the Company’s Loan Agreement with Pharmakon was $ 2.5 million and $ 2.4 million as of March 31, 2021 and December 31, 2020, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of March 31, 2021.

During the three months ended March 31, 2021 and 2020, the Company recognized approximately $ 2.7 million and $ 2.2 million, respectively, of interest expense related to the Loan Agreement.

In connection with the Janssen Agreement, in February 2017, the Company issued a warrant to purchase 509,611 shares of the Company’s common stock at an exercise price of $ 9.81 per share.

The warrant was fully vested upon issuance and is exercisable in whole or in part, at any time prior to February 9, 2022.

The warrant was fully vested upon issuance and exercisable in whole or in part, at any time prior to February 9, 2022.

The warrant satisfied the equity classification criteria of ASC 815, and is therefore classified as an equity instrument.

The fair value at issuance of $ 3.4 million was calculated using the Black Scholes option pricing model and was charged to research and development expense as it represented consideration for a license for which the underlying intellectual property was deemed to have no alternative future use.

As of September 30, 2020, the warrant remains outstanding and expires on February 9, 2022.

As of March 31, 2021, the warrant remains outstanding and expires on February 9, 2022.

Stockholders’ Equity

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On June 5, 2020, the Company filed a Certificate of Amendment to its Ninth Amended and Restated Certificate of Incorporation, or its Charter, to increase the number of authorized shares of common stock from 175,000,000 to 350,000,000 .

As of September 30, 2020, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $ 0.00001 per share, of which 143,328,652 and 121,674,568 shares were issued and outstanding at September 30, 2020 and December 31, 2019, respectively;

and 25,000,000 shares of undesignated preferred stock, par value $ 0.00001 per share, of which no shares were issued and outstanding at September 30, 2020 and December 31, 2019.

As of March 31, 2021, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $ 0.00001 per share, of which 158,520,089 and 148,074,085 shares were issued and outstanding at March 31, 2021 and December 31, 2020, respectively;

and 25,000,000 shares of undesignated preferred stock, par value $ 0.00001 per share, of which no shares were issued and outstanding at March 31, 2021 and December 31, 2020.

At-the-Market Facility

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for the offer and sale of common stock at the then current market prices in amounts to be determined from time to time.

Also, on November 12, 2019, the Company filed a prospectus supplement pursuant to which it was able to offer and sell up to $ 75.0 million its common stock at the then current market prices from time to time.

In December 2019, the Company commenced sales under this program.

Also, on November 12, 2019, the Company filed a prospectus supplement pursuant to which it was able to offer and sell under the sales agreement up to $ 75.0 million of its common stock at the then current market prices from time to time.

Through December 31, 2019, the Company sold 2,684,392 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 16.8 million.

During the three months ended March 31, 2020, the Company sold 7,973,967 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 56.7 million.

March 12, 2020, the Company filed an additional prospectus supplement, pursuant to which it is able to offer and sell up to $ 65.0 million in its common stock at current market prices from time to time.

During the three and nine months ended September 30, 2020 and through the date of this Quarterly Report on Form 10-Q, the Company did no t sell any shares of common stock pursuant to the March 12, 2020 prospectus supplement.

On March 12, 2020, the Company filed a prospectus supplement relating to the sales agreement, pursuant to which it was able to offer and sell under the sales agreement up to $ 65.0 million of its common stock at current market prices from time to time.

Through December 31, 2020, the Company sold 3,509,381 shares of common stock under this prospectus supplement with net proceeds (after deducting commissions and other offering expenses) of $ 10.6 million.

During the three months ended March 31, 2021, the Company sold 5,224,278 shares of common stock under this prospectus supplement with net proceeds (after deducting commissions and other offering expenses) of $ 15.9 million.

On February 25, 2021, the Company filed a prospectus relating to the sales agreement with its new shelf registration statement (which replaced the Company's prior shelf registration statement and sales agreement prospectus supplement), pursuant to which it is able to offer and sell under the sales agreement up to $ 100.0 million of its common stock at current market prices from time to time.

During the three months ended March 31, 2021 and through the date of this Quarterly Report on Form 10-Q, the Company sold 5,019,539 shares of common stock under this prospectus with net proceeds (after deducting commissions and other offering expenses) of $ 17.1 million.

Equity Offering

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In May 2016, the Company’s Board of Directors approved an inducement award program that was separate from the Company’s equity plans and which, consistent with Nasdaq Listing Rule 5635(c)(4), did not require shareholder approval, or the Inducement Award Program.

During the nine months ended September 30, 2020, the Company granted 948,250 options to purchase shares of the Company’s common stock to new hires under the Inducement Award Program, of which 907,250 options to purchase Akebia Shares remained outstanding at September 30, 2020.

During the three months ended March 31, 2021, the Company granted 336,000 options to purchase shares of the Company’s common stock to new hires as inducements material to such employees' entering into employment with the Company, of which 336,000 options to purchase Akebia Shares remained outstanding at March 31, 2021.

The 2014 Plan allows for the granting of stock options, stock appreciation rights, or SARs, restricted stock, unrestricted stock, RSUs, performance awards and other awards convertible into or otherwise based on shares of the Company’s common stock.

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In addition, the number of Keryx Shares available for issuance under the Keryx 2018 Plan, as adjusted by the Exchange Multiplier pursuant to the terms of the Merger Agreement, may be used for awards granted by the Company under its 2014 Plan, or the Assumed Shares, provided that the Company uses the Assumed Shares for individuals who were not employees or directors of the Company prior to the consummation of the Merger.

During the nine months ended September 30, 2020, the Company granted 1,714,800 options to purchase Akebia Shares to employees under the 2014 Plan, 948,250 options to purchase Akebia Shares to employees under the Inducement Award Program, 2,400,650 Akebia RSUs to employees under the 2014 Plan, 515,500 Akebia PSUs to employees under the 2014 plan, 220,900 options to purchase Akebia Shares to directors under the 2014 Plan, and 95,900 Akebia RSUs to directors under the 2014 Plan.

During the three months ended March 31, 2021, the Company granted 1,797,200 options to purchase Akebia Shares to employees under the 2014 Plan, 336,000 options to purchase Akebia Shares to employees under the Inducement Award Program, 3,199,200 Akebia RSUs to employees under the 2014 Plan, no Akebia PSUs to employees under the 2014 plan, 80,200 options to purchase Akebia Shares to directors under the 2014 Plan, and no Akebia RSUs to directors under the 2014 Plan.

The ESPP provides for the issuance of options to purchase shares of the Company’s common stock to participating employees at a discount to their fair market value.

As noted above, the Company’s stockholders approved the ESPP, which amended and restated the Company’s 2014 ESPP, on June 6, 2019.

The maximum aggregate number of shares at September 30, 2020 of the Company’s common stock available for future issuance under the ESPP is 5,480,334 .

The maximum aggregate number of shares at March 31, 2021 of the Company’s common stock available for future issuance under the ESPP is 5,326,058 .

Under the ESPP, each offering period is six months , at the end of which employees may purchase shares of the Company’s common stock through payroll deductions made over the term of the offering.

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The Company has reserved for future issuance the following number of shares of common stock:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Common stock options and RSUs outstanding (1) 17,892,786 14,108,828

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(2) On January 1, 2021, January 1, 2020 and January 1, 2019, the shares reserved for future grants under the 2014 Plan increased by 4,880,775 , 4,031,376 and 3,801,198 shares, respectively, pursuant to the 2014 Plan Evergreen Provision.

On December 12, 2018, the shares reserved for future grants under the 2014 Plan increased by 2,323,213 shares as a result of the Company’s addition of the Assumed Shares to the 2014 Plan.

On January 30, 2019, the Company’s Board of Directors approved 3,150,000 shares for issuance as option awards in fiscal year 2019 under the Inducement Award Program.

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Options generally expire ten years after the date of grant.

The Company recorded approximately $ 2.3 million and $ 1.3 million of stock-based compensation expense related to stock options during the three months ended September 30, 2020 and 2019, respectively, and approximately $ 6.3 million and $ 3.5 million during the nine months ended September 30, 2020 and 2019, respectively.

Performance-Based Stock Options

On December 12, 2018, pursuant to the Merger Agreement, each outstanding and unexercised performance-based option to acquire Keryx Shares granted under a Keryx equity plan converted into a service-based option or performance-based option to acquire Akebia Shares, with the number of shares and exercise price adjusted by the Exchange Multiplier.

As a result, the Company issued 233,954 performance-based options related to the Merger.

The Company did not have any performance-based options outstanding in fiscal year 2018 prior to the Merger.

The Company did no t issue any performance-based options during the nine months ended September 30, 2020 and 2019.

As of September 30, 2020, the Company had no performance-based options outstanding compared to 46,790 performance-based options outstanding at December 31, 2019.

The Company recorded approximately $ 2.2 million and $ 1.6 million of stock-based compensation expense related to stock options during the three months ended March 31, 2021 and 2020, respectively.

Restricted Stock Units

Service-Based Restricted Stock Units

On February 28, 2020, as part of the Company’s annual grant of equity, the Company issued 2,268,000 restricted stock units, or RSUs, to employees.

In addition, the Company occasionally issues RSUs not in connection with the annual grant process to employees.

On February 26, 2021, the Company issued 3,180,400 restricted stock units, or RSUs, to employees as part of the Company’s annual equity grant process.

The Company occasionally issues RSUs not in connection with the annual grant process to employees when approved by the Compensation Committee.

Generally, RSUs granted by the Company vest in one of the following ways:

(i) 100 % of each RSU grant vests on either the first or the third anniversary of the grant date, (ii) one third of each RSU grant vests on the first, second and third anniversaries of the grant date, subject, in each case, to the individual’s continued service through the applicable vesting date, or (iii) 50 % of each RSU grant vests on the first anniversary and 25 % of each RSU grant vests in 6 months increment after the one year anniversary of the grant date.

(i) 100 % of each RSU grant vests on either the first or the third anniversary of the grant date, (ii) one third of each RSU grant vests on the first, second and third anniversaries of the grant date, subject, in each case, to the individual’s continued service through the applicable vesting date, or (iii) 50 % of each RSU grant vests on the first anniversary and 25 % of each RSU grant vests every six months after the one year anniversary of the grant date.

The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized on a straight-line basis over the vesting period.

The Company recorded approximately $ 3.9 million and $ 1.2 million of stock-based compensation expense related to employee RSUs during the three months ended September 30, 2020 and 2019, respectively, and approximately $ 11.1 million and $ 3.3 million during the nine months ended September 30, 2020 and 2019, respectively.

The Company recorded approximately $ 3.5 million and $ 3.1 million of stock-based compensation expense related to employee RSUs during the three months ended March 31, 2021 and 2020, respectively.

Performance-Based Restricted Stock Units

On February 28, 2020, as part of the Company’s annual grant of equity, the Company issued 479,000 performance-based restricted stock units, or PSUs, to the Company’s executives.

The PSUs granted by the Company vest in connection with the achievement of specified commercial and regulatory milestones.

The PSUs also feature a time-based vesting component.

The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized over time based on the probability of meeting such commercial and regulatory milestones.

The Company recorded approximately $ 0.1 million and $ 0 of stock-based compensation expense related to employee PSUs during the three months ended September 30, 2020 and 2019, respectively, and approximately $ 0.4 million and $ 0 during the nine months ended September 30, 2020 and 2019, respectively.

The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized over time based on the

probability of meeting such commercial and regulatory milestones.

The Company recorded approximately $ 0.1 million of stock-based compensation expense related to employee PSUs during each of the three months ended March 31, 2021 and 2020.

Employee Stock Purchase Plan

The first offering period under the ESPP opened on January 2, 2015.

The Company issued 235,658 shares during the nine months ended September 30, 2020.

The Company recorded approximately $ 0.3 million and $ 0.1 million of stock-based compensation expense related to the ESPP during the three months ended September 30, 2020 and 2019, respectively, and approximately $ 0.6 million and $ 0.2 million during the nine months ended September 30, 2020 and 2019, respectively.

The Company issued 154,276 shares during the three months ended March 31, 2021.

The Company recorded approximately $ 0.2 million of stock-based compensation expense related to the ESPP during each of the three months ended March 31, 2021 and 2020.

Compensation Expense Summary

The Company has classified its stock-based compensation expense related to share-based awards as follows:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

(in thousands) (in thousands)

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

Research and development $ 1,437 $ 1,542

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Compensation expense by type of award:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

(in thousands) (in thousands)

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

Stock options $ 2,227 $ 1,617

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Commitments and Contingencies

The Company leases approximately 65,167 square feet of office and lab space in Cambridge, Massachusetts under a lease which was most recently amended in April 2018, collectively the Cambridge Lease.

The Company leases approximately 65,167 square feet of office and lab space in Cambridge, Massachusetts under a lease which was most recently amended in November 2020, collectively the Cambridge Lease.

Under the Third Amendment to the Cambridge Lease, or the Third Amendment, executed in July 2016, total monthly lease payments under the initial base rent were approximately $ 242,000 and are subject to annual rent escalations.

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The new space leased by the Company was delivered in September 2018 and additional monthly lease payments of approximately $ 135,000 commenced in February 2019 and are subject to annual rent escalations, which commenced in September 2019.

Additionally, as a result of the Merger, the Company now has a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease, which expires in February 2023.

In November 2020, the Company entered into a Sixth Amendment to the Cambridge Lease, or the Sixth Amendment, to extend the term of the Cambridge Lease with respect to the lab space from November 30, 2021 to January 31, 2025.

The Sixth Amendment includes two months of free rent starting in December 2020 and additional monthly lease payments of approximately $ 48,000 commencing in December 2021, and is subject to annual rent escalations, which commence in December 2022.

Additionally, as a result of the Merger, the Company has a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease, which expires in February 2023.

The total monthly lease payments under the base rent are approximately $ 136,000 and are subject to annual rent escalations.

The term of the Cambridge Lease with respect to the office space expires on September 11, 2026, with one five-year extension option available.

The term of the Cambridge Lease with respect to the lab space expires on November 30, 2021, with an extension option for one additional period of two years .

The term of the Boston Lease office space expires on February 28, 2023, with an extension option for one additional five-year extension option available.

The renewal options in the Company’s real estate leases were not included in the calculation of the operating lease assets and operating lease liabilities as the renewal is not reasonably certain.

The term of the Boston Lease office space expires on February 28, 2023, with an extension option for one

additional five-year extension option available.

The renewal options in these real estate leases were not included in the calculation of the operating lease assets and operating lease liabilities as the renewal is not reasonably certain.

The term of the Cambridge Lease with respect to the lab space expires on January 31, 2025, with an extension option for one additional period through September 11, 2026.

The renewal options in this real estate lease was included in the calculation of the operating lease assets and operating lease liabilities as the renewal is reasonably certain.

The lease agreements do not contain residual value guarantees.

Operating lease costs were $ 1.7 million for each of the three months ended September 30, 2020 and 2019 and $ 5.0 million for each of the nine months ended September 30, 2020 and 2019.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.8 million and $ 1.7 million for the three months ended September 30, 2020 and 2019, respectively, and $ 5.3 million and $ 5.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Operating lease costs were $ 1.7 million for each of the three months ended March 31, 2021 and 2020.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.8 million and $ 1.7 million for the three months ended March 31, 2021 and 2020, respectively.

In September 2019, Keryx entered into an agreement to sublease the Boston office space to Foundation Medicine, Inc., or Foundation.

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Keryx continues to be obligated for all payment terms pursuant to the Boston Lease, and the Company will guaranty Keryx’s obligations under the sublease.

Keryx recorded $ 0.4 million and $ 1.3 million in sublease rental income from Foundation during the three and nine months ended September 30, 2020, respectively.

The Company has not entered into any material short-term leases or financing leases as of September 30, 2020.

The total security deposit in connection with the Cambridge Lease is $ 1.6 million as of September 30, 2020.

Keryx recorded $ 0.4 million in sublease rental income from Foundation during each of the three months ended March 31, 2021 and 2020.

The Company has not entered into any material short-term leases or financing leases as of March 31, 2021.

The total security deposit in connection with the Cambridge Lease is $ 1.6 million as of March 31, 2021.

Additionally, the Company recorded $ 0.4 million for the security deposit under the Boston Lease.

Both the Cambridge Lease and the Boston Lease have their security deposits in the form of a letter of credit, all of which are included in prepaid expenses and other current assets in the Company’s unaudited condensed consolidated balance sheets as of September 30, 2020.

As of September 30, 2020, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter are as follows:

Both the Cambridge Lease and the Boston Lease have their security deposits in the form of a letter of credit, all of which are included as restricted cash in other assets in the Company’s unaudited condensed consolidated balance sheets as of March 31, 2021.

As of March 31, 2021, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter are as follows:

Leases Lease Payments

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Total $ 33,825 $ 3,480 $ 30,345

In arriving at the operating lease liabilities, the Company applied incremental borrowing rates ranging from 5.91 % to 6.94 %, which were based on the remaining lease term at the date of adoption of ASC 842, which was January 1, 2019.

As of September 30, 2020, the remaining lease terms ranged from 1.17 years to 5.95 years.

As of September 30, 2020, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities:

In arriving at the operating lease liabilities, the Company applied incremental borrowing rates ranging from 6.22 % to 6.94 %, which were based on the remaining lease term at either the date of adoption of ASC 842 or the effective date of any subsequent lease term extensions.

As of March 31, 2021, the remaining lease terms ranged from 1.92 years to 5.45 years.

As of March 31, 2021, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities:

(in thousands)

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Manufacturing Agreements

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

As a result of the Merger, the Company's 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, the Company agreed to purchase minimum quantities of Auryxia drug substance annually at predetermined prices.

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

As of September 30, 2020, the Company is 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, the Company has 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.

The term of the Siegfried Agreement expires on December 31, 2021, after which, it automatically renews for one year terms until terminated.

The Siegfried Agreement provides for certain termination rights prior to December 31, 2021 for the Company.

As of September 30, 2020, the Company is 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, the Company identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include firm purchase commitments.

As of March 31, 2021, the Company is 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 $ 91.2 million through the end of the contract term.

Pursuant to the Siegfried Master Manufacturing Services and Supply Agreement, as amended (the most recent amendment having been executed on February 11, 2021), or the Siegfried Agreement, the Company has agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices.

The term of the Siegfried Agreement expires on December 31, 2022, subject to our option to extend the term through December 31, 2023 by providing 12 months’ prior written notice to Siegfried.

The Siegfried Agreement provides the Company and Siegfried with certain early termination rights.

As of March 31, 2021, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $ 35.2 million through the year ending December 31, 2022.

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.

The liability related to the amount of purchase commitments that exceed the current forecast was $ 46.8 million and $ 55.8 million as of March 31, 2021 and December 31, 2020, respectively.

The $ 9.0 million reduction in the liability was largely driven by a reduction in purchase commitments due to the most recent amendment to the Siegfried Agreement and was recorded as a non-cash gain to cost of goods sold.

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

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

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

Pursuant to the Esteve Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug substance from Esteve.

As of March 31, 2021, the Company has committed to purchase $ 44.7 million of vadadustat drug substance from Esteve through the fourth quarter of 2022.

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

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

Pursuant to the Patheon Agreement, the Company has agreed to purchase a certain percentage of its or its affiliates' global demand for vadadustat drug product from Patheon.

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

On April 2, 2020, the Company 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 drug substance for commercial use.

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

The WuXi STA Forecast reflects the Company’s 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.

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

Pursuant to the Patheon Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug product from Patheon.

As of March 31, 2021, the Company had a minimum commitment with Patheon for $ 1.0 million through the third quarter of 2021.

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

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

Pursuant to the WuXi STA DS Agreement, the Company provides rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA DS Forecast.

The WuXi STA DS Forecast reflects the Company’s 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 DS Agreement.

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

Pursuant to the WuXi STA DS Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA.

As of March 31, 2021, the Company has committed to purchase $ 44.7 million of vadadustat drug substance from WuXi STA through the first quarter of 2022.

On February 10, 2021, the Company entered into a Supply Agreement with WuXi STA, or the WuXi STA DP Agreement.

The WuXi STA DP Agreement includes the terms and conditions under which WuXi STA will manufacture and supply vadadustat drug product for commercial purposes.

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

Each WuXi STA DP Forecast will reflect the quantities of vadadustat drug product that the Company expects to order from WuXi STA over a certain number of months, represented as a quantity of vadadustat drug product per calendar quarter.

Pursuant to the WuXi STA DP Agreement, the Company has agreed to purchase a certain percentage of global demand for vadadustat drug product from WuXi STA.

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

The vadadustat drug product price will remain fixed for the first 12 months and thereafter shall be annually reviewed by the Company and WuXi STA.

The Company will also reimburse WuXi STA for certain reasonable expenses.

The WuXi STA DP Agreement has an initial term of four years , beginning February 10, 2021 and ending February 10, 2025.

The WuXi STA DP Agreement may be renewed or extended by mutual agreement of the Company and WuXi STA with at least 18 months’ prior written notice.

The WuXi STA DP Agreement allows the Company to terminate the agreement on 180 calendar days’ prior written notice to WuXi STA for any reason.

In addition, each party has the ability to terminate the WuXi STA DP Agreement upon the occurrence of certain conditions.

Other Third Party Contracts

Under the Company’s 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 the Company.

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

The Company also contracts with various other organizations to conduct research and development activities with remaining contract costs to the Company of approximately $ 119.8 million at September 30, 2020.

Under the Company’s 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 March 31, 2021 were approximately $ 8.3 million, of which Otsuka reimburses a significant portion back to the Company.

Substantive performance for the committed work with IQVIA was completed in 2020 and close out activities will be performed throughout 2021.

The Company also contracts with various other organizations to conduct research and development activities with remaining contract costs to the Company of approximately $ 192.3 million at March 31, 2021.

The scope of the services under these research and development contracts can be modified and the contracts cancelled by the Company upon written notice.

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Changes in Company estimates could have a material impact on the Company’s results and financial position.

As of September 30, 2020, the Company does not have any significant legal disputes that require a loss liability to be recorded.

As of March 31, 2021, the Company does not have any significant legal disputes that require a loss liability to be recorded.

The Company continually monitors the need for a loss liability for litigation and related matters.

Net Loss per Share

The shares in the table below were excluded from the calculation of diluted net loss per share, prior to the use of the treasury stock method, due to their anti-dilutive effect:

As of September 30,

For purposes of the diluted net loss per share calculation, preferred stock, stock options, warrants, restricted stock and RSUs are considered to be common stock equivalents and have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for periods presented.

Therefore, basic and diluted net loss per share were the same for all periods presented in the unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss.

The shares in the table

below were excluded from the calculation of diluted net loss per share, prior to the use of the treasury stock method, due to their anti-dilutive effect:

As of March 31,

Warrant 509,611 509,611

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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 1. Financial Statements