What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-10 · 152 added, 184 removed, 238 unchanged (59% of the section changed)

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Since our initial public offering in 2014, we have built a business focused on developing and commercializing innovative renal therapeutics that we believe serves as a foundation for future growth.

As a leader in the kidney community, we remain committed to helping patients and others where we believe our current and future products have the ability to deliver value.

As a leader in the kidney community, we remain

committed to helping patients and others where we believe our current and future products have the ability to deliver value.

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

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In September of 2020, we announced top-line results from our Phase 3 PRO 2 TECT program that showed vadadustat was non-inferior to darbepoetin alfa with respect to hematological efficacy in treating anemia due to CKD in NDD-CKD adult patients.

While the PRO 2 TECT data showed that vadadustat achieved both the

primary and key secondary hematological efficacy endpoints, it did not meet the program's primary cardiovascular safety (MACE) endpoint.

While the PRO 2 TECT data showed that vadadustat achieved both the primary and key secondary hematological efficacy endpoints, it did not meet the program's primary cardiovascular safety (MACE) endpoint.

These cardiovascular outcomes contrast with those reported within the INNO 2 VATE program, which evaluated vadadustat for the treatment of anemia due to CKD in DD-CKD adult patients.

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Food and Drug Administration, or FDA, for vadadustat in March of 2021 for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients.

Our 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.

If the FDA determines that the NDA is complete and acceptable for review, we expect to have frequent communications with the FDA with respect to the NDA, including attending meetings, responding to information requests, and engaging in labeling negotiations, among other things.

Our NDA submission was accepted for filing by the FDA in May 2021 and at the time of filing the NDA, the FDA indicated that they were not currently planning to hold an Advisory Committee meeting to discuss the for vadadustat.

The FDA also assigned the application standard review and a Prescription Drug User Fee Act (PDUFA) target action date of March 29, 2022.

We expect to have frequent communications with the FDA with respect to the NDA, including attending meetings, responding to information requests, and engaging in labeling negotiations, among other things.

We plan to provide updates, if and as appropriate, on these communications through our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K filed with the SEC.

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Ltd., to prepare a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients for submission to the European Medicines Agency, or EMA, expected in 2021.

However, as vadadustat did not meet the PRO 2 TECT program's primary safety endpoint, we are remaining cautious in our outlook for potential approval of vadadustat in NDD-CKD adult patients in the United States and Europe.

However, as vadadustat did not meet the PRO 2 TECT program's primary safety

endpoint, we are remaining cautious in our outlook for potential approval of vadadustat in NDD-CKD adult patients in the United States and Europe.

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

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Auryxia is our only product approved for sale in the United States and it generated approximately $33.0 million and $30.7 million in revenue from U.S.

product sales during the three months ended March 31, 2021 and 2020, respectively.

product sales during the three months ended June 30, 2021 and 2020, respectively.

We plan to commercialize vadadustat, subject to FDA approval, in the United States with our well-established, nephrology-focused commercial organization, while leveraging our collaboration with Otsuka and its U.S.

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We granted Otsuka exclusive rights to commercialize vadadustat in Europe, China and certain other markets, subject to marketing approvals.

We granted MTPC exclusive rights to commercialize vadadustat in Japan, where MTPC

commenced commercial sales of vadadustat under the trade name, Vafseo TM , in August 2020, and in certain other countries in Asia, subject to marketing approvals.

We granted MTPC exclusive rights to commercialize vadadustat in Japan, where MTPC commenced commercial sales of vadadustat under the trade name, Vafseo TM , in August 2020, and in certain other countries in Asia, subject to marketing approvals.

In addition, we granted Vifor (International) Ltd., or Vifor Pharma, an exclusive license to sell vadadustat to Fresenius Kidney Care Group LLC, or FKC, an affiliate of Fresenius Medical Care North America, or FMCNA, and to certain third party dialysis organizations approved by us, or Third Party Dialysis Organizations, which combined manage up to approximately 60% of the dialysis patients in the United States, which would be effective upon FDA approval of vadadustat, the earlier of vadadustat’s reimbursement under a bundled reimbursement model or using the Transitional Drug Add-On Payment Adjustment, or the TDAPA, and a milestone payment by Vifor Pharma.

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

Our net losses were $69.6 million and $60.7 million for the three months ended March 31, 2021 and 2020, respectively.

Our net losses were $83.0 million and $175.8 million for the three months ended June 30, 2021 and 2020, respectively, and $152.6 million and $236.5 million for the six months ended June 30, 2021 and 2020, respectively.

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

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We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties.

Additionally, we currently

utilize contract research organizations, or CROs, to carry out our clinical development activities.

Additionally, we currently utilize contract research organizations, or CROs, to carry out our clinical development activities.

If we obtain marketing approval for vadadustat, and as we continue to commercialize Auryxia, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

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

From inception through March 31, 2021, we raised approximately $734.1 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $164.3 million from at-the-market offerings, or ATM offerings, pursuant to sales agreements with Cantor Fitzgerald & Co., and $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma.

During the quarter ended March 31, 2021 and through the date of this Quarterly Report on Form 10-Q, we raised $33.0 million of net proceeds from ATM offerings.

From inception through June 30, 2021, we raised approximately $771.4 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $201.6 million from at-the-market offerings, or ATM offerings, pursuant to sales agreements with Cantor Fitzgerald & Co., and $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma.

During the quarter ended June 30, 2021 and through the date of this Quarterly Report on Form 10-Q, we raised $53.4 million of net proceeds from ATM offerings.

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

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

We believe our revenue growth was negatively impacted in the first quarter of 2021 primarily as the kidney patient populations that we serve continue to experience both higher hospitalization and mortality rates due to COVID-19.

We believe our revenue growth was negatively impacted in the first half of 2021 primarily as the kidney patient populations that we serve continue to experience both higher hospitalization and mortality rates due to COVID-19.

While we are unable to quantify the impact of the COVID-19 pandemic on future revenues and revenue growth, COVID-19 continues to adversely and disproportionately impact our patient population;

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

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

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

The restrictions on our customer-facing employees' in-person interactions with healthcare providers could negatively impact our access to healthcare providers and, ultimately, our sales.

Recently, such precautionary measures have been relaxed at certain healthcare facilities and, as a result, members of our sales force have resumed in person interactions with certain customers.

Nevertheless, restrictions may be put in place again due to a resurgence in COVD-19 cases, including those involving new variants of COVID-19 which may be more contagious and more severe than prior strains of the virus.

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

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

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

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

COVID-19 pandemic precautions have caused moderate delays in enrolling new clinical trials and may cause delays in enrolling other new clinical trials.

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Cost of Goods Sold

Cost of goods sold includes direct costs to manufacture commercial drug substance and drug product for Auryxia, as well as indirect costs including costs for packaging, shipping, insurance and quality assurance, idle capacity charges, write-offs for inventory that fails to meet specifications or is otherwise no longer suitable for commercial sale, and royalties due to the licensor of Auryxia related to the U.S.

Cost of goods sold includes direct costs to manufacture commercial drug substance and drug product for Auryxia, as well as indirect costs including costs for packaging, shipping, insurance and quality assurance, idle capacity charges, write-offs for inventory that fails to meet specifications or is otherwise no longer suitable for commercial sale, excess purchase commitment charges, and royalties due to the licensor of Auryxia related to the U.S.

product sales recognized during the period.

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

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of March 31, 2021 is estimated to be six years.

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

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of June 30, 2021 is estimated to be six years.

The fair value inventory step-up as a result of the Merger was fully amortized as of the first quarter of 2021.

Research and Development Expenses

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A change in the outcome of any of these variables with respect to the development of Auryxia and vadadustat could mean a significant change in the costs and timing associated with that development.

our clinical studies, we could be required to expend significant additional financial resources and time on the completion of clinical development.

From inception through March 31, 2021, we have incurred $1.3 billion in research and development expenses.

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

From inception through June 30, 2021, we have incurred $1.4 billion in research and development expenses.

We expect to have significant research and development expenditures for the foreseeable future as we continue the development of Auryxia and vadadustat.

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

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three and six months ended June 30, 2021 and 2020:

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

2021 2020 2021 2020

(in thousands) (in thousands)

Vadadustat external costs $ 12,917 $ 31,072 $ 29,720 $ 89,420

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

Comparison of the Three Months Ended June 30, 2021 and 2020

Three Months Ended Increase

March 31, 2021 March 31, 2020 (Decrease)

June 30, 2021 June 30, 2020 (Decrease)

(In Thousands)

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Amortization of intangibles 9,011 9,101 (90)

Impairment of intangible asset — 115,527 (115,527)

Total cost of goods sold 52,495 174,616 (122,121)

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

Net product revenue was $30.4 million for the three months ended March 31, 2021, compared to net product revenue of $29.2 million for the three months ended March 31, 2020.

Net product revenue was $33.0 million for the three months ended June 30, 2021, compared to net product revenue of $30.7 million for the three months ended June 30, 2020.

The increase was primarily due to an increase in units sold, partially offset by the negative impact from COVID-19.

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License, Collaboration and Other Revenue.

License, collaboration and other revenue was $21.9 million for the three months ended March 31, 2021 compared to $59.3 million for the three months ended March 31, 2020.

We recognized $20.7 million in collaboration revenue for the three months ended March 31, 2021 from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

License, collaboration and other revenue was $20.0 million for the three months ended June 30, 2021 compared to $59.4 million for the three months ended June 30, 2020.

We recognized $18.5 million in collaboration revenue for the three months ended June 30, 2021 from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

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

We recognized $57.9 million in collaboration revenue for the three months ended March 31, 2020 from our cost sharing arrangement under the Otsuka U.S.

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

Agreement and the Otsuka International Agreement.

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Cost of Goods Sold - Product .

Cost of goods sold of $25.6 million for the three months ended March 31, 2021 consisted of costs associated with the manufacturing of Auryxia, $21.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, and $5.1 million related to inventory reserves associated with a previously disclosed manufacturing quality issue related to Auryxia, partially offset by an $8.9 million non-cash gain related to a reduction to the liability for excess purchase commitments primarily as a result of modifications to certain of our supply agreements.

Cost of goods sold of $18.6 million for the three months ended March 31, 2020 consisted primarily of costs associated with the manufacturing of Auryxia and $11.2 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting.

Cost of goods sold of $43.5 million for the three months ended June 30, 2021 consisted of costs associated with the manufacturing of Auryxia and a $30.3 million million non-cash charge related to an increase to the liability for excess purchase commitments.

Refer to Note 14 to our condensed consolidated financial statements for further details on the excess purchase commitments liability.

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

Cost of Goods Sold - Amortization of Intangibles.

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

During the three months ended March 31, 2021, this intangible asset was being amortized using a straight-line method over its estimated useful life of approximately six years.

Amortization of intangibles during the three months ended March 31, 2021 and 2020 was $9.0 million and $9.1 million, respectively.

During the three months ended June 30, 2021, this intangible asset was being amortized using a straight-line method over its estimated useful life of approximately six years.

Amortization of intangibles during the three months ended June 30, 2021 and 2020 was $9.0 million and $9.1 million, respectively.

Cost of Goods Sold - Impairment of Intangible Asset.

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

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

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

Research and Development Expenses .

Research and development expenses were $40.6 million for the three months ended March 31, 2021, compared to $81.2 million for the three months ended March 31, 2020, a decrease of $40.6 million.

Research and development expenses were $37.2 million for the three months ended June 30, 2021, compared to $52.8 million for the three months ended June 30, 2020, a decrease of $15.6 million.

The decrease was primarily due to the following:

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

Although we expect our research and development expenses to continue to decrease in the near term compared to the full year 2020 as we completed our global Phase 3 clinical development program for vadadustat in 2020, we will continue to incur significant research and development expenses in future periods in support of our overall development program for vadadustat and ongoing or planned studies with respect to Auryxia, vadadustat and development of other potential product candidates.

Although we expect our research and development expenses to continue to decrease in the near

term compared to the full year 2020 as we completed our global Phase 3 clinical development program for vadadustat in 2020, we will continue to incur significant research and development expenses in future periods in support of our overall development program for vadadustat and ongoing or planned studies with respect to Auryxia, vadadustat and development of other potential product candidates.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $41.3 million for the three months ended March 31, 2021, compared to $38.0 million for the three months ended March 31, 2020.

The increase of $3.3 million was primarily due to higher promotional expenses.

In 2021, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia and for support of our ongoing research and development and potential commercialization of vadadustat and other product candidates to continue to increase modestly from 2020.

Selling, general and administrative expenses were $41.7 million for the three months ended June 30, 2021, compared to $35.5 million for the three months ended June 30, 2020.

The increase of $6.2 million was primarily due to higher marketing expenses.

For the remainder of 2021, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia and for support of our ongoing research and development and potential commercialization of vadadustat and other product candidates to continue to increase modestly from 2020.

License Expenses.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.7 million for each of the three months ended March 31, 2021 and 2020.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.9 million and $1.0 million the three months ended June 30, 2021 and 2020, respectively.

Other Expense, Net .

Other expense, net, was $4.6 million for the three months ended March 31, 2021 compared to $1.6 million for the three months ended March 31, 2020.

Other expense, net, for the three months ended March 31, 2021 was primarily due to interest expense associated with our Term Loans and non-cash interest expense on the liability related to the sale of our right to receive royalties and sales milestones from MTPC as further described in Note 5 to our condensed consolidated financial statements in Part I, Item 1.

Other expense, net, was $3.7 million for the three months ended June 30, 2021 compared to $1.9 million for the three months ended June 30, 2020.

Other expense, net, for the three months ended June 30, 2021 was primarily due to interest expense associated with our Term Loans and non-cash interest expense on the liability related to the sale of our right to receive royalties and sales milestones from MTPC as further described in Note 5 to our condensed consolidated financial statements in Part I, Item 1.

Financial Statements (unaudited).

Other expense, net, for the three months ended March 31, 2020 was primarily due to interest expense associated with our Term Loans.

Other expense, net, for the three months ended June 30, 2020 was primarily due to interest expense associated with our Term Loans.

Comparison of the Six Months Ended June 30, 2021 and 2020

Six Months Ended Increase

June 30, 2021 June 30, 2020 (Decrease)

(In Thousands)

Product revenue, net $ 63,367 $ 59,905 $ 3,462

License, collaboration and other revenue 41,850 118,715 (76,865)

Total revenues 105,217 178,620 (73,403)

Cost of goods sold:

Product 69,079 68,601 478

Amortization of intangibles 18,021 18,201 (180)

Impairment of intangible asset — 115,527 (115,527)

Total cost of goods sold 87,100 202,329 (115,229)

Operating expenses:

Research and development 77,825 134,050 (56,225)

Selling, general and administrative 82,979 73,465 9,514

License expense 1,590 1,720 (130)

Total operating expenses 162,394 209,235 (46,841)

Operating loss (144,277) (232,944) 88,667

Other expense, net (8,341) (3,554) (4,787)

Net loss $ (152,618) $ (236,498) $ 83,880

Product Revenue, Net .

Net product revenue is derived from sales of our only commercial product in the United States, Auryxia.

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

Net product revenue was $63.4 million for the six months ended June 30, 2021, compared to net product revenue of $59.9 million for the six months ended June 30, 2020.

The increase was primarily due to an increase in units sold, partially offset by the negative impact from COVID-19.

We believe our revenue growth continues to be negatively impacted primarily

as the kidney patient populations that we serve continue to experience both higher hospitalization and mortality rates due to COVID-19.

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $41.9 million for the six months ended June 30, 2021 compared to $118.7 million for the six months ended June 30, 2020.

We recognized $39.1 million in collaboration revenue for the six months ended June 30, 2021 from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

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

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

The $76.9 million decline in collaboration revenue was driven by lower payments recognized under both the Otsuka U.S.

Agreement and Otsuka International Agreement as we completed our global Phase 3 clinical development program for vadadustat in 2020 and are currently engaged in close-out activities with respect to the program.

We expect our Otsuka collaboration revenue to continue to decrease in the near term for that reason.

Cost of Goods Sold - Product .

Cost of goods sold of $69.1 million for the six months ended June 30, 2021 consisted of costs associated with the manufacturing of Auryxia, $21.3 million in non-cash charges related to an increase to the liability for excess purchase commitments, $21.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, and $5.4 million related to inventory reserves associated with a previously disclosed manufacturing quality issue related to Auryxia.

Refer to Note 14 to our condensed consolidated financial statements for further details of the increase to the liability for excess purchase commitments.

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

Cost of Goods Sold - Amortization of Intangibles.

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

During the six months ended June 30, 2021, this intangible asset was being amortized using a straight-line method over its estimated useful life of approximately six years.

Amortization of intangibles during the six months ended June 30, 2021 and 2020 was $18.0 million and $18.2 million, respectively.

Cost of Goods Sold - Impairment of Intangible Asset.

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

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

There were no such impairment charges during the six months ended June 30, 2021.

Research and Development Expenses .

Research and development expenses were $77.8 million for the six months ended June 30, 2021, compared to $134.1 million for the six months ended June 30, 2020, a decrease of $56.2 million.

The decrease was primarily due to the following:

(in millions)

Vadadustat development expenses $ (59.7)

Headcount, consulting and facilities (1.9)

Other research and development 5.4

Total net decrease $ (56.2)

program for vadadustat and ongoing or planned studies with respect to Auryxia, vadadustat and development of other potential product candidates.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $83.0 million for the six months ended June 30, 2021, compared to $73.5 million for the six months ended June 30, 2020.

The increase of $9.5 million was primarily due to higher marketing expenses and increased people costs.

For the remainder 2021, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia and for support of our ongoing research and development and potential commercialization of vadadustat and other product candidates to continue to increase modestly from 2020.

License Expenses.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $1.6 million and $1.7 million for the six months ended June 30, 2021 and 2020, respectively.

Other Expense, Net .

Other expense, net, was $8.3 million for the six months ended June 30, 2021 compared to $3.6 million for the six months ended June 30, 2020.

Other expense, net, for the six months ended June 30, 2021 was primarily due to interest expense associated with our Term Loans and non-cash interest expense on the liability related to the sale of our right to receive royalties and sales milestones from MTPC as further described in Note 5 to our condensed consolidated financial statements in Part I, Item 1.

Financial Statements (unaudited).

Other expense, net, for the six months ended June 30, 2020 was primarily due to interest expense associated with our Term Loans.

Liquidity and Capital Resources

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

As of March 31, 2021, we had cash and cash equivalents and available for sale securities of approximately $272.8 million.

As of June 30, 2021, we had cash and cash equivalents and available for sale securities of approximately $247.0 million.

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

Accordingly, available for sale securities, consisting principally of corporate and government debt securities stated at fair value, are also available as a source of liquidity.

At the inception of our collaboration agreements with Otsuka and MTPC, our collaborators

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

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

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

Three Months Ended

March 31, 2021 March 31, 2020

Six Months Ended

June 30, 2021 June 30, 2020

(In Thousands)

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Financing activities 111,846 200,155

Net (decrease) increase in cash, cash equivalents, and restricted cash $ 23,672 $ (31,996)

Net increase in cash, cash equivalents, and restricted cash $ 17,900 $ 98,036

Operating Activities .

Net cash used in operating activities of $70.7 million for the three months ended March 31, 2021 was largely driven by payroll-related expenses, rebate payments and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including fair value step-up of inventory sold or written off of $21.6 million, amortization of intangibles of $9.0 million, stock-based compensation expense of $6.0 million, write-downs of inventory of $5.1 million, and non-cash interest expense related to sale of future royalties of $2.2 million, partially offset by an $8.9 million non-cash gain primarily related to a reduction to the liability for excess purchase commitments.

Net cash used in operating activities of $89.6 million for the three months ended March 31, 2020 was largely driven by timing of payments on our Phase 3 development program for vadadustat and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including the fair value step-up of inventory sold or written off of $11.2 million, amortization of intangibles of $9.1 million, and stock-based compensation expense of $4.9 million.

Net cash used in operating activities of $133.9 million for the six months ended June 30, 2021 was largely driven by payroll-related expenses, rebate payments and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including fair value step-up of inventory sold or written off of $21.6 million, an increase to the liability for excess purchase commitments of $21.3 million, amortization of intangibles of $18.0 million, stock-based compensation expense of $12.5 million, write-downs of inventory of $5.4 million, and non-cash interest expense related to sale of future royalties of $4.4 million.

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

These payments were partially offset by adjustments for non-cash items, including the intangible asset impairment charge of $115.5 million, fair value step-up of inventory sold or written off of $31.1 million, amortization of intangibles of $18.2 million, stock-based compensation expense of $11.8 million, an increase to the liability for excess purchase commitments of $11.0 million and write-downs of

inventory of $10.1 million primarily associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Investing Activities .

Net cash provided by investing activities for the three months ended March 31, 2021 was $19.9 million and was comprised of proceeds from the sale of available for sale securities of $20.0 million, partially offset by immaterial purchases of equipment.

Net cash provided by investing activities for the six months ended June 30, 2021 was $39.9 million and was comprised of proceeds from the maturities of available for sale securities of $40.0 million, partially offset by immaterial purchases of equipment.

Financing Activities.

Net cash provided by financing activities for the three months ended March 31, 2021 was $74.5 million and consisted of net proceeds from the sale of future royalties of $44.8 million, net proceeds from the public issuance of common stock in connection with our ATM sales agreement of $29.3 million, and proceeds from the sale of stock under our employee stock purchase plan.

Net cash provided by financing activities for the six months ended June 30, 2021 was $111.8 million and consisted of net proceeds from the sale of future royalties of $44.8 million, net proceeds from the public issuance of common stock in connection with our ATM sales agreement of $66.7 million, and proceeds from the sale of stock under our employee stock purchase plan.

Operating Capital Requirements

We have one product, Auryxia, approved for commercial sale in the United States, but have not generated, and may not generate, enough product revenue from the sale of Auryxia to realize net profits from product sales.

We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of March 31, 2021, we had an accumulated deficit of $1.2 billion.

We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of June 30, 2021, we had an accumulated deficit of $1.3 billion.

We anticipate that we will continue to incur losses for the foreseeable future, and we expect to continue to incur additional research and development and selling, general and administrative expenses for our ongoing research and development and potential commercialization of vadadustat and our ongoing development and commercialization of Auryxia.

We expect our cash resources to fund our current operating plan beyond the expected U.S.

launch of our product candidate, vadadustat, assuming timely regulatory approval and the receipt of associated regulatory milestones.

Although we believe we have the cash resources to fund our operating plan beyond the expected the expected U.S.

launch of vadadustat, as noted above, we expect to continue to incur significant costs and we anticipate that we will need to obtain substantial additional funding in connection with our operating plan beyond that period.

We expect our cash resources to fund our current operating plan for at least twelve months from the date of this filing.

Additionally, we expect our cash runway would extend beyond the next twelve months assuming timely regulatory approval of vadadustat and the receipt of associated regulatory milestones.

We expect to continue to incur significant costs and we anticipate that we will need to obtain substantial additional funding in connection with our operating plan beyond that period.

We have based these estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

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If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected.

Contractual Obligations and Commitments

We lease 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.

In addition to such annual rent escalations, base rent payments for a portion of said premises commenced on January 1, 2017 in the monthly amount of approximately $22,000.

The Fourth Amendment to the Cambridge Lease, executed in May 2017, provided additional storage space to us and did not impact rent payments.

In April 2018, we entered into a Fifth Amendment to the Cambridge Lease, or the Fifth Amendment, for an additional 19,805 square feet of office space on the 12 th floor.

Monthly lease payments for the existing 45,362 square feet of office and lab space, under the Third Amendment, remain unchanged.

The new space leased by us 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.

In November 2020, we 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, we have a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease, which expires on February 28, 2023.

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

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

The sublease is subject and subordinate to the Boston Lease between Keryx and the landlord.

The term of the sublease commenced on October 16, 2019, upon receipt of the required consent from the landlord for the sublease agreement, and expires on February 27, 2023.

Foundation is obligated to pay Keryx rent that approximates the rent due from us to Keryx’s landlord with respect to the Boston Lease.

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

On November 11, 2019, Akebia, 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 us in two tranches, subject to certain terms and conditions, or the Term Loans.

Contractual Obligations

As of June 30, 2021, other than as disclosed in Note 14 to our condensed consolidated financial statements, there have been no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Annual Report on Form 10-K.

two tranches, subject to certain terms and conditions, or the Term Loans.

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

The Collateral Agent and 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, 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.

We and Keryx entered into a Guaranty and Security Agreement with the Collateral Agent, or the Guaranty and Security Agreement, on the Tranche A Funding Date.

Pursuant to the Guaranty and Security Agreement, our obligations under the Term Loans are unconditionally guaranteed by Keryx, or the Guarantee.

Additionally, our and Keryx’s obligations under the Term Loans and the Guarantee are secured by a first priority lien on certain assets of ours and Keryx’s, including Auryxia and certain related assets, cash, and certain equity interests held by us and Keryx, collectively the Collateral.

The Term Loans bear interest at a floating rate per annum equal to the three-month LIBOR rate plus 7.50%, subject to a 2.00% LIBOR floor and a 3.35% LIBOR cap, payable quarterly in arrears.

The Term Loans will mature on the fifth anniversary of the Tranche A Funding Date, or the Maturity Date.

We will repay the principal under the Term Loans in equal quarterly payments starting on the 33rd-month anniversary of the applicable Funding Date or, if certain conditions are met, it will have the option to repay the principal in equal quarterly payments starting on the 48th-month anniversary of the applicable Funding Date, or collectively the Amortization Schedule.

Under certain circumstances, unless certain liquidity conditions are met, the Maturity Date may decrease by up to one year, and the Amortization Schedule may correspondingly commence up to one year earlier.

On the Tranche A Funding Date, we paid to Pharmakon a facility fee equal to 2.00% of the aggregate principal amount of the Term Loans, or $2.0 million, in addition to other expenses incurred by Pharmakon and reimbursed by us, or Lender Expenses.

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 ours and our 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 March 31, 2021, we determined that no events of default had occurred.

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

As part of this analysis, we assessed the economic characteristics and risks of the Loan Agreement, including put and call features.

The terms and features assessed include a potential extension to the interest-only period dependent on both no event of default having occurred and continuing and on our achieving certain regulatory and revenue conditions.

We also assessed the acceleration of the obligations under the Loan Agreement under an event of default.

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

In accordance with ASC 815, we 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 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.

A more detailed description of the term loans can be found in Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Liability Related to Sale of Future Royalties

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We retain 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 us of an amount equal to the Aggregate Cap minus the aggregate amount of all Royalty Interest Payments actually received by HCR.

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

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

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

In order to determine the amortization of the liability, we are 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.

We impute 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 our control.

On a quarterly basis, we reassess the effective interest rate and adjust the rate prospectively as needed.

Manufacturing Agreements

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

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

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

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

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

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

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

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

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

As of March 31, 2021, we are required to reimburse BioVectra for certain costs in connection with the construction of the new facility and to purchase minimum quantities of Auryxia drug substance annually for a total cost of approximately $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, we have 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 us and Siegfried with certain early termination rights.

As of March 31, 2021, we are 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.

As part of purchase accounting, we 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.

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, we entered into a Supply Agreement with Esteve Química, S.A., or Esteve, or the Esteve Agreement.

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

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

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

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

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

Pursuant to the Esteve Agreement, we have agreed to purchase a certain percentage of the global demand for vadadustat drug substance from Esteve.

As of March 31, 2021, we have committed to purchase $44.7 million of vadadustat drug substance from Esteve through the fourth quarter of 2022.

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

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

Pursuant to the Patheon Agreement, we provide Patheon a long-term forecast on an annual basis, as well as short-term forecasts on a quarterly basis, or the Patheon Forecast.

The Patheon Forecast reflects our needs for commercial supply of vadadustat drug product produced by Patheon, represented as a quantity of drug product per calendar quarter.

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

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

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

As of March 31, 2021, we had a minimum commitment with Patheon for $1.0 million through the third quarter of 2021.

On April 2, 2020, we entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec, or WuXi STA, or the WuXi STA 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, we provide rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA DS Forecast.

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

The parties have agreed to a volume-based pricing structure under the WuXi STA 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, we have agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA.

As of March 31, 2021, we have committed to purchase $44.7 million of vadadustat drug substance from WuXi STA through the first quarter of 2022.

On February 10, 2021, we 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, we 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 we expect 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, we have 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 us and WuXi STA.

We 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 us and WuXi STA with at least 18 months’ prior written notice.

The WuXi STA DP Agreement allows us 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 our agreement with IQVIA to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of March 31, 2021 were approximately $8.3 million, of which Otsuka reimburses a significant portion back to us.

Substantive performance for the committed work with IQVIA was completed in 2020 and close out activities will be performed throughout 2021.

We also contract with various other organizations to conduct research and development activities with remaining contract costs to us of approximately $192.3 million as of March 31, 2021.

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

In some instances, the contracts may be cancelled by the third party upon written notice.

A more detailed description of the liability related to the sale of future royalties can be found in Note 5 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

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

During the three months ended March 31, 2021, we had the following material change to our critical accounting policies as reported in our Annual Report on Form 10-K:

During the six months ended June 30, 2021, we had the following material change to our critical accounting policies as reported in our Annual Report on Form 10-K:

Liability Related to Sale of Future Royalties

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Recent Accounting Pronouncements

For additional discussion of recent accounting pronouncements, please refer to New Accounting Pronouncements – Recently Adopted and New Accounting Pronouncements – Not Yet Adopted included within Note 2 to our condensed consolidated financial statements in Part I, Item 1.

For additional discussion of recent accounting pronouncements, please refer to New Accounting Pronouncements – Recently Adopted included within Note 2 to our condensed consolidated financial statements in Part I, Item 1.

Financial Statements (unaudited).

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis