What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-04 · 177 added, 242 removed, 159 unchanged (72% of the section changed)

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The following information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S.

Securities and Exchange Commission, or the SEC, on February 25, 2021, or the 2020 Annual Report on Form 10-K, including the audited consolidated financial statements and related notes therein.

Securities and Exchange Commission, or the SEC, on March 1, 2022, or the 2021 Annual Report on Form 10-K, including the audited consolidated financial statements and related notes therein.

This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties.

As a result of

many factors, such as those set forth under “Risk Factors” in Part II, Item 1A.

As a result of many factors, such as those set forth under “Risk Factors” in Part II, Item 1A.

of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

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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.

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

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

We established ourselves as a leader in the kidney community, and we remain committed to our purpose as we believe our current and future products have the ability to deliver value.

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

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

(1) the control of serum phosphorus levels in adult patients with chronic kidney disease, or CKD, on dialysis, or DD-CKD, or the Hyperphosphatemia Indication, and (2) the treatment of iron deficiency anemia, or IDA, in adult patients with CKD not on dialysis, or NDD-CKD, or the IDA Indication.

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

Auryxia is our only product approved for sale in the United States and it generated approximately $41.4 million and $30.4 million in revenue from U.S.

product sales during the three months ended March 31, 2022 and 2021, respectively.

• Vadadustat is an investigational oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH, inhibitor 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 stimulates erythropoietin, or EPO, production and can lead to red blood cell, or RBC, production and improved oxygen delivery to tissues.

The significance of the HIF pathway was recognized by the 2019 Nobel Prize and the 2016 Albert Lasker Basic Medical Research Award, which honored the three physician-scientists who discovered the HIF pathway and elucidated this primary oxygen sensing mechanism that is essential for survival.

We believe that, based on the HIF-PHI mechanism of action and clinical data to date, vadadustat has the potential to set a new oral standard of care for the treatment of anemia due to chronic kidney disease, or CKD.

We completed the global Phase 3 clinical development program for vadadustat in 2020, which included two separate programs, INNO 2 VATE and PRO 2 TECT.

INNO 2 VATE evaluated vadadustat for the treatment of anemia due to CKD in adult patients on dialysis, or DD-CKD, and PRO 2 TECT evaluated vadadustat for the treatment of anemia due to CKD in adult patients not on dialysis, or NDD-CKD.

In May of 2020, we announced positive top-line results from our Phase 3 INNO 2 VATE program that showed vadadustat was non-inferior to darbepoetin alfa, an injectable erythropoiesis-stimulating agent, or ESA, with respect to hematological efficacy (change in hemoglobin concentration) and cardiovascular safety (assessed in a time to the first occurrence of a major adverse cardiovascular event (MACE) analysis, which is the composite of all-cause mortality, nonfatal myocardial infarction, or a nonfatal stroke) in treating anemia due to CKD in DD-CKD adult patients.

In addition to meeting the primary endpoints of the INNO 2 VATE program, vadadustat met the key secondary hematological efficacy endpoint in each of the two studies in the program and also met the program's key secondary safety endpoints.

The results of the INNO 2 VATE program were presented at American Society of Nephrology, or ASN, in October of 2020 and published in the New England Journal of Medicine in April of 2021.

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.

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.

The results of the PRO 2 TECT program were presented at ASN in October of 2020 and published in the New England Journal of Medicine in April of 2021.

Simultaneous with the PRO 2 TECT ASN presentation, we presented additional analyses, conducted by Akebia, of data from the PRO 2 TECT program that revealed that the greater number of MACE events observed among vadadustat patients as compared to the active comparator was primarily related to an excess of non-cardiovascular death and death-of-unknown-causes in regions outside of the United States where significant differences in treatment patterns for NDD-CKD patients were observed.

We 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 both DD-CKD and NDD-CKD adult patients.

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 NDA 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.

On March 29, 2022, we received a complete response letter, or CRL, from the U.S.

Food and Drug Administration, or FDA.

The CRL provided that the FDA had completed its review of our new drug application, or NDA, for vadadustat for the treatment of anemia due to CKD in adult patients, and determined that it could not approve the NDA in its present form.

We are discussing the details of the CRL with our collaboration partners and plan to request an end of review conference with the FDA within 90 days of receipt of the CRL.

Also, on April 1, 2022, we were notified by the FDA that the FDA had placed a partial clinical hold on our clinical trials of vadadustat in pediatric patients with anemia due to CKD in the United States.

As a result of the partial clinical hold, all activities in the United States for and related to our clinical trials of vadadustat in pediatric patients are being suspended.

Our collaboration partner, Otsuka Pharmaceutical Co.

Ltd., submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in adult patients to the European Medicines Agency, or EMA, in October 2021.

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.

Ltd., submitted 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 to the European Medicines Agency, or EMA, in October 2021.

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 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.

Our collaboration partner in Japan, Mitsubishi Tanabe Pharma Corporation, or MTPC, commenced commercial sales of vadadustat in Japan under the trade name, Vafseo TM , in August 2020.

In addition, MTPC filed new drug applications for vadadustat for the treatment of anemia due to CKD in adult patients in Taiwan in January of 2022 and in Korea in March 2022.

In addition to anemia due to CKD, we believe that vadadustat has the potential to treat other serious or life-threatening conditions, including preventing and lessening the severity of acute respiratory distress syndrome, or ARDS, a complication of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), or COVID-19, infection.

More specifically, in July of 2020, we announced an investigator-sponsored clinical study by The University of Texas Health Science Center at Houston, or UTHealth, in Houston, Texas, evaluating the use of vadadustat as a potential therapy to prevent and lessen the severity of ARDS in up to 400 adult patients who have been hospitalized due to COVID-19.

Within this randomized, double-blind, placebo-controlled study, patients will be dosed with vadadustat or a placebo starting within 24 hours of hospital admission and continuing for up to 14 days.

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

In January of 2021, UTHealth announced that it had been awarded $5.1 million in funding from the U.S.

Department of Defense, or DOD, to expand this clinical trial at its facilities.

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

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

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 CKD, including DD-CKD and NDD-CKD, under the trade name Riona (ferric citrate hydrate).

Auryxia is our only product approved for sale in the United States and it generated approximately $36.8 million and $34.4 million in revenue from U.S.

product sales during the three months ended September 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.

More specifically, in July of 2020, we announced an investigator-sponsored clinical study by The University of Texas Health Science Center at Houston, or UTHealth, in Houston, Texas, evaluating the use of vadadustat as a potential therapy to prevent and lessen the severity of ARDS in adult patients who have been hospitalized due to COVID-19.

Within this randomized, double-blind, placebo-controlled study, patients were dosed with vadadustat or a placebo starting within 24 hours of hospital admission and continuing for up to 14 days.

UTHealth enrolled 449 patients in the study, and the last patient completed the study in March 2022.

The study was conducted under an FDA Investigational New Drug application with UTHealth as the study sponsor.

UTHealth was awarded $5.1 million in funding from the U.S.

Department of Defense for the study.

If we are successful in addressing the deficiencies noted in the CRL and in the event we receive FDA approval of vadadustat in the United States, we plan to commercialize vadadustat in the United States with our well-established, nephrology-focused commercial organization, which we may expand if vadadustat is approved, while leveraging our collaboration with Otsuka and its U.S.

nephrology commercial organization.

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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.

During the term of the license agreement, Vifor Pharma is not permitted to sell any HIF product that competes with vadadustat in the United States to FKC or its affiliates or to any Third Party Dialysis Organization, and we may not directly supply vadadustat to FKC or any other affiliate of FMCNA or any Third Party Dialysis Organization.

In addition, in February 2022, we entered into a Second Amended and Restated License Agreement, or the Vifor Second Amended Agreement, with Vifor (International) Ltd., or Vifor Pharma, which amended and restated the Amended and Restated License Agreement, dated April 8, 2019, or the Vifor First Amended Agreement.

Pursuant to the Vifor Second Amended Agreement, we granted Vifor Pharma an exclusive license to sell vadadustat to Fresenius Medical Care North America and its affiliates, including Fresenius Kidney Care Group LLC, to certain third-party dialysis organizations approved by us, to independent dialysis organizations that are members of group purchase organizations, and to certain non-retail specialty pharmacies in the United States, or the Territory.

We refer to Fresenius Medical Care North America and its affiliates, these organizations and specialty pharmacies collectively as the "Supply Group".

We currently retain rights to commercialize vadadustat for use in the non-dialysis dependent CKD market and to sell to dialysis organizations outside of the Supply Group.

During the term of the Vifor Second Amended Agreement, Vifor Pharma is not permitted to sell any HIF product that competes with vadadustat in the Territory to the Supply Group.

In addition, we continue to explore additional development opportunities to expand our pipeline and portfolio of novel therapeutics through both internal research and external innovation.

Our development pipeline includes several earlier stage opportunities, including praliciguat, an investigational oral soluble guanylate cyclase, or sGC, stimulator, that we licensed from Cyclerion Therapeutics, Inc., or Cyclerion, in June 2021.

We are planning to develop praliciguat for the treatment of focal segmental glomerulosclerosis, which is highly complementary of our strategy to identify and develop novel therapeutics for people impacted by kidney diseases.

Operating Overview

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

Our net losses were $59.5 million and $60.0 million for the three months ended September 30, 2021 and 2020, respectively, and $212.2 million and $296.5 million for the nine months ended September 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.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

The amount of our future net losses will depend, in part, on the rate of our future expenditures, and our financial position will depend, in part, on product revenue, collaboration revenue, and our ability to obtain additional funding.

Our net losses were $62.4 million and $69.6 million for the three months ended March 31, 2022 and 2021, 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 conducting clinical trials of, and seeking regulatory approval for, vadadustat, providing general and administrative support for these operations and protecting our intellectual property.

Our ability to achieve profitability depends in part on our ability to manage our expenses.

Following receipt of the CRL, in April 2022, we implemented a reduction of our workforce by approximately 42% across all areas of our company (47% inclusive of the closing of the majority of open positions).

On May 5, 2022, we implemented a further reduction in workforce consisting of several members of management.

These actions reflects our determination to refocus our strategic priorities around our commercial product, Auryxia®, and our development portfolio, and are steps in a cost savings plan to significantly reduce our expense profile in line with being a single commercial product company.

We expect to record restructuring charges of approximately $16.5 million in the aggregate primarily related to one-time termination benefits and contractual termination benefits primarily related to severance, non-cash stock-based compensation expense, healthcare and related benefits primarily in the second quarter of 2022.

Refer to Note 14 in this Quarterly Report on Form 10-Q for further details.

Even in light of the reduction in workforce, we expect to continue to incur significant expenses and operating losses for the foreseeable future.

In addition to any additional costs not currently contemplated due to the events associated with or resulting from the workforce reduction noted above, our ability to achieve profitability and our financial position will depend, in part, on the rate of our future expenditures, on our product revenue from Auryxia, collaboration revenue, our ability to successfully implement cost avoidance measures and reduce overhead costs and our ability to obtain additional funding.

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

• conduct and enroll patients in any clinical trials, including any post-marketing approval studies, any Phase 4 studies or any other clinical trials for Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired;

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

• adapt to any regulatory changes, including changes relating to reimbursement;

• adapt to any changes in reimbursement practices by third party payors;

• continue our commercialization activities for Auryxia and, pending the results of the anticipated end of review conference that we plan to request with the FDA within 90 days of receipt of the CRL, and future decisions with respect to vadadustat, vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired;

• address the issues identified in the CRL for vadadustat that we received from the FDA, including conducting any additional clinical trials that may be required;

• conduct and enroll patients in any clinical trials, including post-marketing studies or any other clinical trials for Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired;

• seek marketing approvals for vadadustat and any other product candidate, including those that may be in-licensed or acquired;

• maintain marketing approvals for Auryxia, vadadustat, if approved, and any other product, including those that may be in-licensed or acquired;

• have Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired, manufactured for clinical trials and for commercial sale;

• seek to discover and develop additional product candidates or platforms that may lead to the discovery of additional product candidates;

• maintain marketing approvals for Auryxia and, pending the results of the anticipated end of review conference that we plan to request with the FDA within 90 days of receipt of the CRL, and future decisions with respect to vadadustat, vadadustat if approved, and any other product, including those that may be in-licensed or acquired;

• have Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired, manufactured for commercial sale and clinical trials;

• conduct discovery and development activities for additional product candidates or platforms that may lead to the discovery of additional product candidates;

• engage in transactions, including strategic, merger, collaboration, acquisition and licensing transactions, pursuant to which we would market and develop commercial products, or develop and commercialize other product candidates and technologies;

• begin to repay the senior secured term loans in an aggregate principal amount of $100.0 million, or the Term Loans, that were made available to us pursuant to the loan agreement that we entered into with funds managed by Pharmakon Advisors LP, or Pharmakon, in November 2019 and amended in February 2022, or as amended, the Loan Agreement;

• make royalty, milestone or other payments under our license agreements and any future license agreements;

• maintain, protect and expand our intellectual property portfolio;

• attract, hire and retain qualified personnel;

• continue to create additional infrastructure and expend additional resources to support our operations as a fully integrated, publicly traded biopharmaceutical company;

• experience any delays or encounter issues with any of the above.

• make decisions with respect to our personnel, including the retention of key employees;

• make decisions with respect to our infrastructure, including to support our operations as a fully integrated publicly traded biopharmaceutical company;

• experience any additional delays or encounter issues with any of the above.

We have not generated, and may not generate, enough product revenue to realize net profits from product sales.

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

From inception through September 30, 2021, we raised approximately $787.5 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $217.7 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 September 30, 2021 and through the date of this Quarterly Report on Form 10-Q, we raised $16.1 million of net proceeds from ATM offerings.

From inception through March 31, 2022, we raised approximately $793.5 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $223.7 million from at-the-market offerings, or ATM offerings, pursuant to prior sales agreements with Cantor Fitzgerald & Co., and $70.0 million from the sale of 7,571,429 shares of common stock to Vifor Pharma.

During the quarter ended March 31, 2022, we raised $0.8 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.

Of these commitments, we received approximately $272.0 million at the onset of the collaboration agreements.

On November 11, 2019, we entered into a loan agreement, or the Loan Agreement, with funds managed by Pharmakon Advisors LP, or Pharmakon, 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.

As of March 31, 2021, we had drawn down the full amount $100.0 million made available to us under the Loan Agreement.

On November 11, 2019, we entered into the Loan Agreement with funds managed by Pharmakon, 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.

As of March 31, 2021, we had drawn down the full $100.0 million made available to us under the Loan Agreement.

In addition, on February 25, 2021, we received an upfront payment of $44.8 million (net of certain transaction expenses) in connection with our sale to HealthCare Royalty Partners IV, L.P., or HCR, of the right to receive all royalties and sales milestones payable to us under our collaboration agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions described elsewhere in this Quarterly Report on Form 10-Q.

Finally, on February 18, 2022, we entered into a Second Amended and Restated License Agreement, or the Vifor Second Amended Agreement, with Vifor Pharma.

Pursuant to the Vifor Second Amended Agreement, Vifor Pharma made an upfront payment to us of $25 million in lieu of the previously disclosed milestone payment of $25 million that Vifor Pharma was to pay to us following approval of vadadustat by the FDA.

Also pursuant to the Vifor Second Amended Agreement, Vifor contributed $40 million to a working capital fund established to partially fund our costs of purchasing vadadustat from our contract manufacturers, or the Working Capital Fund, which amount of funding will fluctuate, and which funding we will repay to Vifor Pharma over time.

Impacts of COVID-19 Pandemic

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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 three quarters of 2021 primarily as the kidney patient populations that we serve continue to experience both high hospitalization and mortality rates due to COVID-19.

We believe our revenue growth was negatively impacted in the first quarter of 2022 primarily as the kidney patient population that we serve continue to experience both high 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;

therefore, we expect COVID-19 to continue to have a negative impact on our revenue growth for the foreseeable future.

The majority of our office-based employees began working from home in March 2020, and continue to primarily work from home.

In October 2021, we announced a requirement that all of our employees be fully vaccinated by January 1, 2022, subject to limited medical and religious exemptions.

At this time, it is not possible to predict with certainty the exact impact that our vaccine requirement will have on us or on our workforce, and the requirement may result in employee distraction, absences, resignations, attrition and difficulty securing future labor needs which could have an adverse effect on our business, results of operations and cash flows.

As a result of the COVID-19 pandemic we adopted a flexible workplace policy allowing employees to work from home on a full or part-time basis, which may make it difficult for us to maintain our corporate culture or retain employees.

Moreover, our future success substantially depends on the management skills of our executives and certain other key employees.

The unanticipated loss or unavailability of key employees due to the pandemic could harm our ability to operate our business or execute our business strategy and we may not be successful in finding and integrating suitable successors in the event any of our key employees leave or are unavailable.

In addition, several healthcare facilities have previously restricted access for non-patients, including the members of our sales force.

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In addition, the direct and indirect impacts of the pandemic or the response efforts to the pandemic, including among others, competition for labor and resources and increases in labor, sourcing, manufacturing and shipping costs, may cause disruptions to, closures of, or other impacts on our CMOs and other vendors in our supply chain on which we rely for the supply of our products and product candidates.

For example, areas of China have recently implemented lockdowns for COVID-19, which could impact the global supply chain.

At this time, our third party contract manufacturers 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 manufacturers' 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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For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part II, Item 1A.

Risk Factors.

Risk Factors below.

Financial Overview

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

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

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

We expect our revenue to continue to be generated primarily from our collaborations with Otsuka and MTPC and any other collaborations into which we may enter, as well as commercial sales of Auryxia and, if approved, vadadustat, in the United States, and royalty revenue from Japan Tobacco, Inc., or JT, and its subsidiary, Torii Pharmaceutical Co., Ltd., or Torii, based on net sales of Riona in Japan.

We expect our revenue to continue to be generated primarily from our commercial sales of Auryxia and collaborations with Otsuka and MTPC and any other collaborations into which we may enter, and royalty revenue from Japan Tobacco, Inc., and its subsidiary, Torii Pharmaceutical Co., Ltd., collectively JT and Torii, based on net sales of Riona in Japan.

Cost of Goods Sold

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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 September 30, 2021 is estimated to be six years.

Cost of goods sold also includes costs to manufacture drug product provided to MTPC for commercial sale of Vafseo in Japan.

As a result of the merger with Keryx Biopharmaceuticals, Inc., or Keryx, or 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, 2022 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.

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• costs associated with preclinical, clinical and regulatory activities;

• costs associated with pre-launch inventory build for vadadustat in the United States and Europe, for which we received a CRL from the FDA in the United States in March 2022.

Research and development costs are expensed as incurred.

Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We cannot determine with certainty the duration and completion costs of current or future clinical studies of Auryxia and vadadustat or if, when, or to what extent we will generate revenue from the commercialization and sale of vadadustat, if approved.

We cannot determine with certainty the duration and completion costs of current or future clinical studies of Auryxia and vadadustat or if, when, or to what extent we will receive marketing approval for vadadustat or generate revenue from the commercialization and sale of vadadustat, if approved.

We may never succeed in achieving marketing approval for vadadustat.

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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 September 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, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired.

From inception through March 31, 2022, we have incurred $1.5 billion in research and development expenses.

We expect to incur significant research and development expenditures for the foreseeable future as we continue the development of Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired.

Our direct research and development expenses consist principally of external costs, such as fees paid to clinical trial sites, consultants, central laboratories and CROs in connection with our clinical studies, and drug substance and drug product manufacturing for clinical studies.

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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 and nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

(in thousands) (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 months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands)

Vadadustat external costs $ 17,153 $ 16,803

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Results of Operations

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

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended Increase

September 30, 2021 September 30, 2020 (Decrease)

March 31, 2022 March 31, 2021 (Decrease)

(in thousands)

17 unchanged sentences

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

Net product revenue was $36.8 million for the three months ended September 30, 2021, compared to net product revenue of $34.4 million for the three months ended September 30, 2020.

The increase was due to lower volume rebates related to the negative impact to sales volume as a result of COVID-19 and improved payer mix.

We believe our revenue growth continues to be negatively impacted primarily as the kidney patient populations that we serve continue to experience high hospitalization and mortality rates due to COVID-19.

As an oral drug, Auryxia is covered by Medicare only under Part D.

However, in September 2018, CMS decided that Auryxia would no longer be covered by Medicare for the IDA Indication.

While this decision does not impact CMS coverage of the Hyperphosphatemia Indication, it requires Part D plan sponsors to impose prior authorization or other steps to ensure that Auryxia is used only for the Hyperphosphatemia Indication.

However, due to the COVID-19 pandemic, CMS has issued a guidance that expressly encouraged Part D plans to waive all prior authorization requirements.

This guidance was issued in March of 2020 and updated in May of 2020.

In both versions of the guidance, CMS clarified that due to COVID-19, Part D plan sponsors are encouraged to waive prior authorization requirements.

Further, on October 15, 2019, we filed a complaint in the United States District Court for the District of Massachusetts against CMS and the U.S.

Department of Health and Human Services challenging CMS’s decision that Auryxia would no longer be covered by Medicare for the IDA Indication and imposing a prior authorization requirement for Auryxia in the Hyperphosphatemia Indication, or the CMS Decision.

On October 22, 2021, the parties agreed to dismiss the litigation.

See Part II, Item 1.

Legal Proceedings for further information.

While we believe that the vast majority of the Medicare prescriptions written for Auryxia today are for the Hyperphosphatemia Indication and therefore will continue to be covered by Medicare with prior authorization, the CMS Decision has had and will continue to have an adverse impact on the sales and future growth of Auryxia for the Hyperphosphatemia Indication and the IDA Indication.

Net product revenue was $41.4 million for the three months ended March 31, 2022, compared to net product revenue of $30.4 million for the three months ended March 31, 2021.

The increase was primarily due to improved payer mix.

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $12.0 million for the three months ended September 30, 2021 compared to $25.6 million for the three months ended September 30, 2020.

We recognized $10.6 million in collaboration revenue for the three months ended September 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 $23.9 million in collaboration revenue for the three months ended September 30, 2020 from our cost sharing arrangement under the Otsuka U.S.

License, collaboration and other revenue was $20.3 million for the three months ended March 31, 2022 compared to $21.9 million for the three months ended March 31, 2021.

During the three months ended March 31, 2022, we recognized $19.1 million in collaboration revenue 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 commercial and royalty revenue under our collaboration agreement with MTPC, or the MTPC Agreement.

We recognized $20.7 million in collaboration revenue for

the three months ended March 31, 2021 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement, as well as royalty revenue under our collaboration agreement with MTPC.

1 unchanged sentence

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.

The decrease in Otsuka collaboration revenue was partially offset by an increase in royalty revenue under the MTPC Agreement.

Cost of Goods Sold - Product .

Cost of goods sold of $6.9 million for the three months ended September 30, 2021 consisted of costs associated with the manufacturing of Auryxia partially offset by a $6.0 million reduction to the liability for excess purchase commitments, primarily due to the settlement of all patent litigation proceedings related to Abbreviated New Drug Applications filed with respect to Auryxia, which allows for generic versions of Auryxia beginning in March 2025.

Cost of goods sold of $22.3 million for the three months ended March 31, 2022 consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, and $5.3 million related to excess and obsolescence reserves associated with Auryxia partially offset by a $0.8 million reduction to the liability for excess purchase commitments.

Refer to Note 12 to our condensed consolidated financial statements for further details on the excess purchase commitments liability.

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

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

Cost of Goods Sold - Amortization of Intangibles.

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

During the three months ended September 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 September 30, 2021 and 2020 was $9.0 million and $6.1 million, respectively.

The increase in amortization charges is due to the prospective adjustment of the estimated useful life of the developed product rights for Auryxia that occurred in the fourth quarter of 2020.

Research and Development Expenses .

Research and development expenses were $40.5 million for the three months ended September 30, 2021, compared to $46.9 million for the three months ended September 30, 2020, a decrease of $6.4 million.

The decrease was primarily due to the following:

(in millions)

Vadadustat development expenses $ (10.2)

Headcount, consulting and facilities 1.2

Other research and development 2.6

Total net decrease $ (6.4)

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

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $46.4 million for the three months ended September 30, 2021, compared to $40.2 million for the three months ended September 30, 2020.

The increase of $6.2 million was primarily due to increases in headcount related costs and one-time legal costs.

For the remainder of 2021, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia 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 $0.9 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively.

Other Expense, Net .

Other expense, net, was $4.7 million for the three months ended September 30, 2021 compared to $1.9 million for the three months ended September 30, 2020.

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

Comparison of the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended Increase

September 30, 2021 September 30, 2020 (Decrease)

(in thousands)

Product revenue, net $ 100,120 $ 94,297 $ 5,823

License, collaboration and other revenue 53,853 144,311 (90,458)

Total revenues 153,973 238,608 (84,635)

Cost of goods sold:

Product 76,012 92,840 (16,828)

Amortization of intangibles 27,032 24,307 2,725

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

Total cost of goods sold 103,044 232,674 (129,630)

Operating expenses:

Research and development 118,296 180,907 (62,611)

Selling, general and administrative 129,336 113,636 15,700

License expense 2,460 2,430 30

Total operating expenses 250,092 296,973 (46,881)

Operating loss (199,163) (291,039) 91,876

Other expense, net (12,999) (5,418) (7,581)

Net loss $ (212,162) $ (296,457) $ 84,295

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 $100.1 million for the nine months ended September 30, 2021, compared to net product revenue of $94.3 million for the nine months ended September 30, 2020.

The increase was primarily due to an increase in units sold and improved payer mix.

partially offset by the negative impact from COVID-19.

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $53.9 million for the nine months ended September 30, 2021 compared to $144.3 million for the nine months ended September 30, 2020.

We recognized $49.7 million in collaboration revenue for the nine months ended September 30, 2021 from our cost sharing arrangement under the Otsuka U.S.

Agreement and the Otsuka International Agreement, and royalty revenue under the MTPC Agreement.

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

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

The $85.7 million decline in collaboration revenue was driven by lower payments recognized under both the Otsuka U.S.

We expect our Otsuka collaboration revenue to continue to decrease in the remainder of 2021 for that reason.

Cost of Goods Sold - Product .

Cost of goods sold of $76.0 million for the nine months ended September 30, 2021 consisted of costs associated with the manufacturing of Auryxia, $15.4 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 $7.1 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 $92.8 million for the nine months ended September 30, 2020 consisted primarily of costs associated with the manufacturing of Auryxia and $39.5 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, $18.6 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation, and $10.3 million in non-cash charges related to an increase to the liability for excess purchase commitments.

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 - Amortization of Intangibles.

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

During the nine months ended September 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 nine months ended September 30, 2021 and 2020 was $27.0 million and $24.3 million, respectively.

The increase in amortization charges is due to the prospective adjustment of the estimated useful life of the developed product rights for Auryxia that occurred in the fourth quarter of 2020.

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 Decision 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 nine months ended September 30, 2020.

There were no such impairment charges during the nine months ended September 30, 2021.

During the three months ended March 31, 2022, this intangible asset was being amortized using a straight-line method over its estimated useful life of approximately six years.

Amortization of intangibles during each of the three months ended March 31, 2022 and 2021 was $9.0 million.

Research and Development Expenses .

Research and development expenses were $118.3 million for the nine months ended September 30, 2021, compared to $180.9 million for the nine months ended September 30, 2020, a decrease of $62.6 million.

The decrease was primarily due to the following:

Research and development expenses were $43.8 million for the three months ended March 31, 2022, compared to $40.6 million for the three months ended March 31, 2021, an increase of $3.2 million.

The increase was primarily due to the following:

(in millions)

2 unchanged sentences

Other research and development (0.1)

Total net decrease $ (62.6)

Total net increase $ 3.2

The increase in research and development expense was primarily due to increased headcount compared to March 31, 2021.

Although we expect our research and development expenses to decrease in the near term as we continue our close out activities, we will continue to incur significant research and development expenses in future periods in support of ongoing or planned studies with respect to Auryxia and vadadustat and development of other potential product candidates.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $129.3 million for the nine months ended September 30, 2021, compared to $113.6 million for the nine months ended September 30, 2020.

The increase of $15.7 million was primarily due to higher marketing expenses, increased headcount related costs, and one-time legal costs.

For the remainder of 2021, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia to continue to increase modestly from 2020.

Selling, general and administrative expenses were $44.3 million for the three months ended March 31, 2022, compared to $41.3 million for the three months ended March 31, 2021.

The increase of $3.0 million was primarily due to higher marketing expense in anticipation of the potential approval of vadadustat.

For the remainder of 2022, we expect our selling, general and administrative expenses to decrease from 2021 as we significantly reduce our expense profile in line with being a single commercial product company.

License Expenses.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $2.5 million and $2.4 million for the nine months ended September 30, 2021 and 2020, respectively.

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, 2022 and 2021.

Other Expense, Net .

Other expense, net, was $13.0 million for the nine months ended September 30, 2021 compared to $5.4 million for the nine months ended September 30, 2020.

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

Other expense, net, was $3.9 million for the three months ended March 31, 2022 compared to $4.6 million for the three months ended March 31, 2021.

The decrease of $0.7 million was primarily due to a decrease in the fair value of our derivative liability related to the Loan Agreement with Pharmakon.

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 September 30, 2021, we had cash and cash equivalents and available for sale securities of approximately $207.2 million.

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

As of March 31, 2022, we had cash and cash equivalents of approximately $174.6 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.

On April 7, 2022, we entered into an Open Market Sale Agreement SM , or the sales agreement, with Jefferies LLC, or Jefferies, as agent, for the offer and sale of common

stock at current market prices in amounts to be determined from time to time.

Also, on April 7, 2022, we filed a prospectus supplement relating to the sales agreement, pursuant to which we are able to offer and sell under the sales agreement up to $26.0 million of our common stock at current market prices from time to time.

From the date of filing of the prospectus supplement through the date of the filing of this Quarterly Report on Form 10-Q, we have not sold any shares of our common stock under this program.

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, 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:

Nine Months Ended

September 30, 2021 September 30, 2020

Three Months Ended

March 31, 2022 March 31, 2021

(in thousands)

3 unchanged sentences

Financing activities 47,545 74,477

Net (decrease) increase in cash, cash equivalents, and restricted cash $ (21,888) $ 21,916

Net increase in cash, cash equivalents, and restricted cash $ 25,811 $ 23,672

Operating Activities .

Net cash used in operating activities of $190.2 million for the nine months ended September 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 amortization of intangibles of $27.0 million, fair value step-up of inventory sold or written off of $21.6 million, stock-based compensation expense of $18.1 million, an increase to the liability for excess purchase commitments of $15.4 million, write-downs of inventory of $7.1 million, and non-cash interest expense related to sale of future royalties of $6.8 million.

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

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

Net cash used in operating activities of $21.6 million for the three months ended March 31, 2022 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 amortization of intangibles of $9.0 million, stock-based compensation expense of $4.5 million, write-downs of inventory of $5.3 million, and non-cash interest expense related to sale of future royalties of $2.3 million.

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

Investing Activities .

Net cash provided by investing activities for the nine months ended September 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.

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

Net cash used in investing activities for the three months ended March 31, 2022 was $0.1 million and was comprised of purchases of equipment.

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.

Financing Activities.

Net cash provided by financing activities for the nine months ended September 30, 2021 was $128.3 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 $82.8 million, and proceeds from the sale of stock under our employee stock purchase plan.

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

Net cash provided by financing activities for the three months ended March 31, 2022 was $47.5 million and consisted of net proceeds from refund liabilities to customers of $40.0 million, net proceeds from the issuance of common stock of $7.2 million, and proceeds from the sale of stock under our employee stock purchase plan.

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.

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 September 30, 2021, we had an accumulated deficit of $1.4 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 for at least twelve months from the date of this filing.

If we receive regulatory approval of vadadustat in the U.S., we expect to incur significant incremental costs to our current operating plan to commercialize vadadustat, including costs of marketing, manufacturing and distribution.

The potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones is an important source of funding of our cash runway.

However, we will require additional funding to fund our operating plan beyond the next twelve months.

There are numerous risks and uncertainties associated with research, development and commercialization activities, and actual results could vary materially as a result of a number of factors, many of which are outside of our control.

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.

Furthermore, our regulatory milestones may not be achieved, we may not receive the anticipated funding from our collaboration partners, and we may not secure other sources of financing.

If we are unable to obtain sufficient funding, we could be required to delay our development efforts, limit activities and reduce costs, which could adversely affect our business prospects.

The period over which our cash runway extends is also dependent on the execution of our commercial plan, which is dependent on the overall market, the competitive environment, and the execution of reimbursement strategies.

We expect to finance future cash needs through product revenue, public or private equity or debt transactions, payments from our collaborators (including associated regulatory approval milestones), royalty transactions, strategic transactions, or a combination of these approaches.

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

Additional funds may not be available to us on acceptable terms or at all.

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

If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders or increased fixed payment obligations, and any such securities may have rights senior to those of our common stock.

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

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors.

We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of March 31, 2022, we had an accumulated deficit of $1.5 billion.

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

However, our operating plan includes assumptions pertaining to cost avoidance measures and the reduction of overhead costs that would result from the amendment of certain contractual arrangements, including with certain supply and collaboration partners, and reduction of certain infrastructure costs.

The outcome of certain of these measures are outside of our control, such as the potential amendment of certain contractual arrangements with supply and collaboration partners.

In April 2022, we announced a reduction of our workforce by approximately 42% across all areas of our company (47% inclusive of the closing of the majority of open positions) following the receipt of the CRL.

On May 5, 2022, we implemented a further reduction in workforce consisting of several members of management.

These actions reflect our determination to refocus our strategic priorities around our commercial product, Auryxia®, and our development portfolio, and are steps in a cost savings plan to significantly reduce our expense profile in line with being a single commercial product company (see Note 14).

However, because these cost avoidance initiatives and certain other elements of our operating plan are outside of our control, there is uncertainty as to whether our cash resources will be adequate to support our operations for a period through at least the next twelve months from the date of issuance of these financial statements.

In addition, on February 18, 2022, we entered into the First Amendment and Waiver with BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, or the First Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, dated November 11, 2019.

The Collateral Agent and the lenders are collectively referred to as Pharmakon (see Note 10).

Pursuant to the covenants in the Loan Agreement, as amended, our Quarterly Reports on Form 10-Q for the fiscal quarters ending June 30, 2022 and September 30, 2022 and our future Annual Reports on Form 10-K must not be subject to any qualification as to going concern.

If any of these filings are subject to any qualification related to going concern, it will result in an event of default under the Loan Agreement.

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, which we may not have the available cash resources to repay at such time.

Should we not be able to meet the quarterly or annual covenants in the future, we would seek a waiver of this provision.

However, there can be no assurances that we would be successful in obtaining such waiver.

We believe that the execution of the cost avoidance measures detailed previously, future decisions by the FDA or other foreign regulatory agencies related to the potential regulatory approval of vadadustat, our ability to generate additional value from vadadustat through partnerships, or other transactions could potentially further extend our cash runway for a period greater than twelve months.

However, because these cost avoidance initiatives and certain other elements of our operating plan are outside of our control, they cannot be considered probable in the context of our going concern assessment.

Therefore, there can be no assurance that our cash resources will fund our operating plan for the period anticipated by us.

In addition, while future decisions by the FDA or other foreign regulatory agencies related to the potential regulatory approval of vadadustat or our ability to generate additional value from vadadustat through partnerships or other transactions may potentially further extend our cash runway, such future decisions are not contemplated in our operating plan.

We expect to finance future cash needs through product revenue, payments from our collaborators, strategic transactions, or a combination of these approaches.

We plan to reduce our need for future financing through the amendment of certain contractual arrangements related to vadadustat, expense management, and savings from our previously announced workforce reduction.

Assuming we are successful in those endeavors, we will require additional funding to fund our strategic growth beyond Auryxia or to pursue later stage development and commercial activities for any additional product or product candidates, including those that may be in-licensed or acquired.

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

Going Concern

Our operating plan includes assumptions pertaining to cost avoidance measures and the reduction of overhead costs that would result from the planned amendment of certain contractual arrangements with supply and collaboration partners, and reduction of certain infrastructure costs.

However, because these cost avoidance initiatives and certain other elements of our operating plan are outside of our control, including the amendment of certain contractual arrangements and the reduction of certain infrastructure costs, there is uncertainty as to whether our cash resources will be adequate to support our operations for a period through at least the next twelve months from the date of issuance of these financial statements.

The conditions above, and the quarterly and annual going concern covenants in our Loan Agreement that begin with the filing of our Quarterly Report for the quarter ending June 30, 2022, raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements are issued.

Management’s plans to alleviate the conditions that raise substantial doubt include cost avoidance measures, including amending certain contractual arrangements, and deprioritizing and cancelling of certain infrastructure activities, for us to continue as a going concern for a period of twelve months from the date the financial statements are issued.

However, we have concluded that the likelihood that our plan to extend our cash runway from one or more of these approaches will be successful,

while reasonably possible, is less than probable.

Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves numerous risks and uncertainties, and actual results could vary as a result of a number of factors, many of which are outside our control.

We have based this estimate on assumptions that may be substantially different than actual results, and we could utilize our available capital resources sooner than we currently expect.

Our future funding requirements, both near- and long-term, will depend on many factors including, but not limited to, those described under Part II, Item 1A.

Risk Factors.

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.

Our future funding requirements, both near- and long-term, will depend on many factors including, but not limited to, those described under Part I, Item 1A.

Risk Factors under the heading "Risks Related to our Financial Position, Need for Additional Capital and Growth Strategy."

Contractual Obligations

As of September 30, 2021, other than as disclosed in Note 14 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, 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.

As of March 31, 2022, other than as disclosed in Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, 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 2021 Annual Report on Form 10-K.

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.

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Liability Related to Sale of Future Royalties

On February 25, 2021, we entered into the Royalty Agreement with HealthCare Royalty Partners IV, L.P., or HCR, pursuant to which we sold to HCR our right to receive royalties and sales milestones for vadadustat in the MTPC Territory, such payments collectively the Royalty Interest Payments, in each case, payable to us 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.

On February 25, 2021, we entered into a royalty interest acquisition agreement, or the Royalty Agreement, with HCR, pursuant to which we sold to HCR our right to receive royalties and sales milestones for vadadustat in the MTPC Territory, such payments collectively the Royalty Interest Payments, in each case, payable to us 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, we will receive 85% of the Royalty Interest Payments for the remainder of that year.

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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 September 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

Refund Liability to Customer

On February 18, 2022, pursuant to the Vifor Second Amended Agreement, Vifor Pharma contributed $40 million to the Working Capital Fund, established to partially fund our costs of purchasing vadadustat from its contract manufacturers, which amount of funding will fluctuate, and which funding we will repay to Vifor over time.

The $40 million initial contribution to the Working Capital Fund represents 50% of the amount of purchase orders that the Company has placed with its contract manufacturers for the supply of vadadustat for the United States, or the Territory, already delivered as of the effective date of the Vifor Second Amended Agreement, and to be delivered through the end of 2022.

We have recorded the Working Capital Fund as a refund liability under ASC 606.

We accounted for the refund liability as a debt arrangement with zero coupon interest.

We imputed interest on the refund liability to the customer at a rate of 15.0% per annum and recorded an initial discount on the refund liability to the customer and a related deferred gain as of the date the funds were received from Vifor Pharma, which was March 18, 2022.

The discount on the note payable is being amortized to interest expense using the effective interest method over the expected term of the refund liability.

The deferred gain is being amortized to interest income on a straight-line basis over the expected term of the refund liability.

The amortization of the discount and the amortization of the deferred gain as of March 31, 2022 was not material.

A more detailed description of the refund liability can be found in Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates and Significant Judgments

Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S.

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The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements.

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

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue, inventory, our excess purchase commitment liability, liabilities related to sale of future royalties, refund liabilities to customers, impairment of intangible assets and income taxes.

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

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

During the nine months ended September 30, 2021, we had the following material change to our critical accounting policies as reported in our 2020 Annual Report on Form 10-K:

Liability Related to Sale of Future Royalties

We treat the liability related to sale of future royalties (see Note 5 to our condensed consolidated financial statements in Part I, Item 1.

Financial Statements (unaudited) included in this Quarterly Report on Form 10-Q) 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 our current estimates of future royalties expected to be paid over the life of the arrangement.

We will periodically assess the expected royalty payments.

To the extent our 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, we 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 in Part I, Item 1.

Financial Statements (unaudited) included in this Quarterly Report on Form 10-Q.

There were no other material changes to our critical accounting policies as reported in our 2020 Annual Report on Form 10-K.

During the three months ended March 31, 2022, we had the following material change to our critical accounting estimates as reported in our 2021 Annual Report on Form 10-K:

Refund Liability to Customer

We treat the refund liability to customer as a zero-coupon debt financing, which is recorded at net present value.

We recorded an initial discount on the refund liability to the customer and a corresponding deferred gain to the refund liability to customer on the condensed consolidated balance sheet as of the date the funds were received from Vifor Pharma, which was March 18, 2022.

The discount on the note payable is being amortized to interest expense using the effective interest method over the expected term of the refund liability.

The deferred gain is being amortized to interest income on a straight-line basis over the expected term of the refund liability.

Recent Accounting Pronouncements

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.

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

Financial Statements (unaudited) included in this Quarterly Report on Form 10-Q.

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