What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-09 · 271 added, 241 removed, 653 unchanged (44% of the section changed)

35 unchanged sentences

0 shares issued and

outstanding at March 31, 2022 and December 31, 2021

outstanding at June 30, 2022 and December 31, 2021

Common stock $ 0.00001 par value;

350,000,000 shares authorized at March 31, 2022 and December 31, 2021;

183,386,035 and 177,000,963 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

350,000,000 shares authorized at June 30, 2022 and December 31, 2021;

183,704,654 and 177,000,963 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,555,788 1,536,800

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AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share data)

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Product revenue, net $ 43,703 $ 32,959 $ 85,151 $ 63,367

9 unchanged sentences

License expense 892 894 1,580 1,590

Restructuring 14,531 — 14,531 —

Total operating expenses 74,257 79,759 163,105 162,394

Operating loss ( 58,493 ) ( 64,936 )

Operating income (loss) 33,902 ( 79,341 ) ( 24,591 ) ( 144,277 )

Other income (expense):

1 unchanged sentence

Other income 411 1,265 1,545 1,427

Net loss $ ( 62,421 ) $ ( 69,580 )

Net loss per share - basic and diluted $ ( 0.35 ) $ ( 0.45 )

Weighted-average number of common shares - basic and diluted 179,599,045 153,820,809

Comprehensive loss:

Net loss $ ( 62,421 ) $ ( 69,580 )

Net income (loss) $ 29,276 $ ( 83,038 ) $ ( 33,145 ) $ ( 152,618 )

Net income (loss) per share - basic $ 0.16 $ ( 0.51 ) $ ( 0.18 ) $ ( 0.97 )

Weighted-average number of common shares - basic 183,597,766 161,329,990 181,609,452 157,596,143

Net income (loss) per share - diluted $ 0.15 $ ( 0.51 ) $ ( 0.18 ) $ ( 0.97 )

Weighted-average number of common shares - diluted 190,375,317 161,329,990 181,609,452 157,596,143

Comprehensive income (loss):

Net income (loss) $ 29,276 $ ( 83,038 ) $ ( 33,145 ) $ ( 152,618 )

Other comprehensive loss - unrealized loss on debt securities — ( 3 ) — ( 7 )

Total comprehensive loss $ ( 62,421 ) $ ( 69,584 )

Total comprehensive income (loss) $ 29,276 $ ( 83,041 ) $ ( 33,145 ) $ ( 152,625 )

See accompanying notes to unaudited condensed consolidated financial statements.

12 unchanged sentences

employee stock purchase plan 154,276 — 367 — — 367

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

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

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

2 unchanged sentences

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

Issuance of common stock, net of

issuance costs 10,446,160 — 37,266 — — 37,266

Stock-based compensation expense — — 6,515 — — 6,515

Restricted stock unit vesting 685,174 — — — — —

Unrealized loss — — — ( 3 ) — ( 3 )

Net loss — — — — ( 83,038 ) ( 83,038 )

Balance at June 30, 2021 169,651,423 $ 2 $ 1,504,752 $ 6 $ ( 1,330,129 ) $ 174,631

Balance at December 31, 2021 177,000,963 $ 1 $ 1,536,800 $ 6 $ ( 1,460,351 ) $ 76,456

3 unchanged sentences

employee stock purchase plan 191,146 — 367 — — 367

Share-based compensation expense — — 4,536 — — 4,536

Stock-based compensation expense — — 4,536 — — 4,536

Restricted stock unit vesting 1,789,326 — — — — —

1 unchanged sentence

Balance at March 31, 2022 183,386,035 $ 2 $ 1,548,880 $ 6 $ ( 1,522,772 ) $ 26,116

Stock-based compensation expense — — 6,841 — — 6,841

Exercise of options 142,440 — 67 — — 67

Restricted stock unit vesting 176,179 — — — — —

Net income — — — — 29,276 29,276

Balance at June 30, 2022 183,704,654 $ 2 $ 1,555,788 $ 6 $ ( 1,493,496 ) $ 62,300

See accompanying notes to unaudited condensed consolidated financial statements

2 unchanged sentences

(in thousands)

Three Months Ended

March 31, 2022 March 31, 2021

Six Months Ended

June 30, 2022 June 30, 2021

Operating activities:

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Non-cash royalty revenue related to sale of future royalties ( 764 ) ( 116 )

Non-cash collaboration revenue ( 9,550 ) —

Non-cash interest expense 916 539

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Net cash provided by financing activities 47,536 111,846

Increase in cash, cash equivalents, and restricted cash 25,811 23,672

(Decrease) increase in cash, cash equivalents, and restricted cash ( 4,858 ) 17,900

Cash, cash equivalents, and restricted cash at beginning of the period 151,839 231,132

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

The Company is discussing the details of the CRL with the Company's collaboration partners.

The Company’s collaboration partner, Otsuka Pharmaceutical Co.

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

The Company held an end of review conference with the FDA and are in the process of determining next steps for a potential U.S.

approval for vadadustat as a treatment of anemia due to CKD in patients on dialysis.

On May 12, 2022, the Company received notice from its former collaboration partner, Otsuka Pharmaceutical Co.

Ltd., or Otsuka, that Otsuka had elected to terminate the Collaboration and License Agreement dated December 18, 2016, or the Otsuka U.S.

Agreement, and the Collaboration and License Agreement dated April 25, 2017, or the Otsuka International Agreement.

On June 30, 2022, the Company and Otsuka entered into a Termination and Settlement Agreement, or the Termination Agreement, pursuant to which, among other things, the Company and Otsuka agreed to terminate the Otsuka U.S.

Agreement and the Otsuka International Agreement as of June 30, 2022 (see Note 4 for further details).

In October 2021, Otsuka submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in adult patients with DD-CKD and NDD-CKD to the European Medicines Agency, or EMA .

In connection with the Termination Agreement, in July 2022, Otsuka filed a request with the EMA to transfer the MAA for vadadustat to the Company.

Vadadustat is approved in Japan as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD patients under the trade name Vafseo TM , and marketed and sold in Japan by Mitsubishi Tanabe Pharma Corporation, or MTPC.

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The mitigating effect of the Company’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

As of March 31, 2022, the Company had cash and cash equivalents of approximately $ 174.6 million.

As of June 30, 2022, the Company had cash and cash equivalents of approximately $ 143.9 million.

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

However, the Company's 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, including with certain supply and collaboration partners, and the reduction of certain infrastructure costs.

Therefore, because these cost avoidance initiatives and certain other elements of the Company's operating plan are outside of its control, including the amendment of certain contractual arrangements, including with supply and collaboration partners, and the reduction of certain infrastructure costs, there is uncertainty as to whether the Company's cash resources will be adequate to support its 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, the Company and BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, entered into the First Amendment and Waiver, or the First Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, dated November 11, 2019 (see Note 10).

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

If the Company does not satisfy the covenant as to going concern in any of these filings, the Company will be in default under the Loan Agreement.

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

In addition, on July 15, 2022, or the Effective Date, the Company entered into the Second 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 Second Amendment and Waiver, which amends and waives certain provisions of the loan agreement entered on November 11, 2019, between the Company, with Keryx Biopharmaceuticals, Inc., or Keryx, as guarantor, and the Collateral Agent, as collateral agent and a lender, and BioPharma Credit Investments V (Master) LP as a lender, or the Loan Agreement, as amended by the First Amendment and Waiver among the Collateral Agent, the Lenders and the Company, dated February 18, 2022, or the First Amendment and Waiver.

The Collateral Agent and the Lenders are collectively referred to as Pharmakon (see Note 11).

Pursuant to the Second Amendment and Waiver, on the Effective Date, the Company made prepayments totaling $ 25.0 million together with a prepayment premium of $ 0.5 million plus all accrued and unpaid interest on such prepayments of principal to the Effective Date, and Pharmakon agreed to waive or modify certain covenants in the Loan Agreement (see Note 11).

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 the Company may not have the available cash resources to repay at such time.

There is also uncertainty as to whether or not the Company will meet its quarterly and annual debt covenants under the Loan Agreement.

For example, pursuant to covenants in the Loan Agreement, the Company's Annual Reports on Form 10-K must not be subject to any qualification as a going concern.

If any of the Company's future Annual Reports on Form 10-K is subject to any qualification related to going concern, it will result in an event of default under the Loan Agreement.

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued.

1 unchanged sentence

However, the Company has concluded that the likelihood that its plan to extend its cash runway from one or more of these approaches will be successful, while reasonably possible, is less than probable.

Accordingly, the Company has 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.

If conditions that raise substantial doubt regarding the Company's ability to continue as a going concern still exist as of the filing of the Company's Quarterly Report on Form 10-Q for the quarter ending June 30, 2022, the Company will be in default under its Loan Agreement, as amended.

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

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

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

Interim results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any other future period.

results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any other future period.

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

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Securities and Exchange Commission on March 1, 2022, or the 2021 Annual Report on Form 10-K.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three months ended March 31, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2021 Annual Report on Form 10-K and are updated below as necessary.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three and six months ended June 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2021 Annual Report on Form 10-K and are updated below as necessary.

New Accounting Pronouncements – Not Yet Adopted

21 unchanged sentences

sales of Auryxia.

Total net product revenue was $ 41.4 million and $ 30.4 million for the three months ended March 31, 2022 and 2021, respectively.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2022 and 2021 (in thousands):

Total net product revenue was $ 43.7 million and $ 33.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 85.2 million and $ 63.4 million for the six months ended June 30, 2022 and 2021, respectively.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2022 and 2021 (in thousands):

and Discounts Rebates, Fees

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Credits/payments made ( 5,236 ) ( 43,803 ) ( 2,804 ) ( 51,843 )

Balance at March 31, 2022 $ 1,392 $ 26,237 $ 541 $ 28,170

Balance at June 30, 2022 $ 1,101 $ 26,172 $ 542 $ 27,815

Balance at December 31, 2020 $ 802 $ 39,912 $ 649 $ 41,363

2 unchanged sentences

Credits/payments made ( 5,588 ) ( 63,795 ) ( 3,715 ) ( 73,098 )

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

Balance at June 30, 2021 $ 1,292 $ 46,092 $ 550 $ 47,934

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

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

Accounts receivable, net related to product sales was approximately $ 27.7 million and $ 24.6 million as of March 31, 2022 and December 31, 2021, respectively.

Accounts receivable, net related to product sales was approximately $ 24.8 million and $ 24.6 million as of June 30, 2022 and December 31, 2021, respectively.

License, Collaboration and Other Significant Agreements

During the three months ended March 31, 2022 and 2021, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of March 31, 2022:

Three Months Ended March 31,

During the three and six months ended June 30, 2022 and 2021, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of June 30, 2022:

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

2022 2021 2022 2021

License, Collaboration and Other Revenue:

(in thousands)

(in thousands) (in thousands)

MTPC Agreement $ 434 $ 4,594 $ 8,398 $ 4,612

5 unchanged sentences

Total License, Collaboration and Other Revenue $ 83,056 $ 19,954 $ 103,307 $ 41,850

Three Months Ended

March 31, 2022

June 30, 2022

Short-Term Long-Term Total

2 unchanged sentences

MTPC Agreement $ 5,047 $ — $ 5,047

Agreement 6,192 16,087 22,279

Otsuka International Agreement 4,248 5,973 10,221

Vifor Pharma Agreement — 43,296 43,296

Total $ 5,047 $ 43,296 $ 48,343

The following table presents changes in the Company’s contract assets and liabilities during the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, 2022 Balance at

The following table presents changes in the Company’s contract assets and liabilities during the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended June 30, 2022 Balance at

Period Additions Deductions Balance at End

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

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Contract assets:

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

(1) Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement as of March 31, 2022 and 2021 and December 31, 2021 and 2020.

Also excludes accounts receivable related to amounts due to the Company from product sales which are included in the accompanying unaudited condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.

During the three months ended March 31, 2022 and 2021, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands):

Three Months Ended March 31,

Revenue Recognized in the Period from:

(1) Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement as of June 30, 2022 and 2021 and December 31, 2021 and 2020.

During the three and six months ended June 30, 2022 and 2021, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands):

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

Revenue Recognized in the Period:

2022 2021 2022 2021

Amounts included in deferred revenue at the beginning of the period $ 15,503 $ 5,822 $ 22,105 $ 10,895

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The Company allocates the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price.

The Company developed a best estimate of the standalone selling price for the Rights to

Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement and determined it is immaterial.

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

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

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

The deliverables associated with the License, Research and Clinical Supply Performance Obligation were satisfied as of June 30, 2018.

As of March 31, 2022, the transaction price was comprised of:

As of June 30, 2022, the transaction price was comprised of:

(i) the up-front payment of $ 20.0 million, (ii) the cost for the Phase 2 studies of $ 20.5 million, (iii) the cost of all clinical supply provided to MTPC for the Phase 3 studies, (iv) $ 10.0 million in development milestones received, (v) $ 25.0 million in regulatory milestones received, comprised of $ 10.0 million relating to the NDA filing in Japan and $ 15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $ 2.0 million in royalties from net sales of Vafseo.

As of March 31, 2022, all development milestones and $ 25.0 million in regulatory milestones have been achieved.

As of June 30, 2022, all development milestones and $ 25.0 million in regulatory milestones have been achieved.

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

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

The Company recognized $ 0.3 million of revenue and immaterial revenue from MTPC royalties for the three months ended March 31, 2022 and 2021, respectively.

During the three and six months ended June 30, 2022, the Company recognized revenue from MTPC royalties totaling approximately $ 0.4 million and $ 0.7 million, respectively, and approximately $ 0.1 million during each of the three and six months ended June 30, 2021.

As noted above, in February 2021, the Company entered into the Royalty Agreement, whereby the Company sold its right to receive these royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 6 for additional information).

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

As of March 31, 2022, the Company recorded $ 0.2 million in accounts receivable, no deferred revenue, and no contract assets.

There were no asset or liability balances classified as long-term in the unaudited condensed consolidated balance sheet as of March 31, 2022.

As of June 30, 2022, the Company recorded $ 0.2 million in accounts receivable, no deferred revenue, and no contract assets.

There were no asset or liability balances classified as long-term in the unaudited condensed consolidated balance sheet as of June 30, 2022.

Supply of Drug Product to MTPC

In March 2020, in connection with the MTPC Agreement, the Company and MTPC entered into a letter agreement, pursuant to which the Company agreed to supply MTPC with certain vadadustat process validation drug product for commercial use and MTPC agreed to reimburse the Company for certain manufacturing-related expenses.

In connection with this arrangement, the Company invoiced the upfront payment of $ 10.4 million, which it received during the three months ended June 30, 2020.

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

No revenues were recognized during each of the three months ended March 31, 2022 and 2021 for drug product that was delivered during the applicable period.

As of March 31, 2022, the Company recorded no accounts receivable, no deferred revenue, $ 1.9 million in other current liabilities and no other non-current liabilities for drug product that was subject to return by MTPC.

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

1 unchanged sentence

A more detailed description of this supply agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

The Company recognized $ 7.6 million and no revenue under the MTPC Supply Agreement during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the Company recorded $ 12.9 million in accounts receivable, no deferred revenue, $ 18.3 million in other current liabilities and $ 5.0 million in other non-current liabilities.

The Company recognized no revenue and $ 7.6 million in revenue under the MTPC Supply Agreement during the three and six months ended June 30, 2022, respectively, and $ 4.5 million during each of the three and six months ended June 30, 2021.

As of June 30, 2022, the Company recorded $ 0.4 million in accounts receivable, $ 5.0 million in deferred revenue, $ 19.5 million in other current liabilities and no other non-current liabilities.

Collaboration and License Agreement with Otsuka Pharmaceutical Co.

On December 18, 2016, the Company entered into a collaboration and license agreement with Otsuka, or the Otsuka U.S.

The collaboration is focused on the development and commercialization of vadadustat in the United States.

The Company is responsible for leading the development of vadadustat, for which it submitted an NDA to the FDA in March of 2021, and for which it received a CRL in March 2022.

The Company will co-commercialize vadadustat in the United States with Otsuka, subject to the approval of vadadustat by the FDA.

The Company controls and retains final decision-making authority with respect to certain matters, including U.S.

pricing strategy and manufacturing.

On December 18, 2016, the Company entered into the Otsuka U.S.

The collaboration was focused on the development and commercialization of vadadustat in the United States.

The Company was responsible for leading the development of vadadustat, for which it submitted an NDA to the FDA in March 2021, and for which it received a CRL in March 2022.

Under the terms of the Otsuka U.S.

Agreement, the Company granted to Otsuka a co-exclusive, non-sublicensable license under certain intellectual property controlled by the Company solely to perform medical affairs activities and to conduct non-promotional and commercialization activities related to vadadustat in the United States in accordance with the associated plans.

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

Additionally, the parties agreed not to promote, market or sell any competing product in the

territory covered by the Otsuka U.S.

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

A more detailed description of this collaboration agreement and the Company's evaluation of this agreement under ASC 606 can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

The Company has identified three performance obligations in connection with its obligations under the Otsuka U.S.

The Company identified three performance obligations in connection with its obligations under the Otsuka U.S.

Agreement as follows:

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(ii) Rights to Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation).

The Company allocates the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price.

The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price.

The Company developed a best estimate of standalone selling price for the Committee Performance Obligation after considering the nature of the services to be performed and estimates of the associated effort and rates applicable to such services that would be expected to be realized under similar contracts.

The Company developed a best estimate of standalone selling price for the Future IP Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement.

The Company developed a best estimate of standalone selling price for the Future IP Performance Obligation primarily based on the likelihood that additional

intellectual property covered by the license conveyed would be developed during the term of the arrangement.

The Company did not develop a best estimate of standalone selling price for the License Performance Obligation due to the following:

(i) the best estimates of standalone selling price associated with the Future IP Performance Obligation was determined to be immaterial and (ii) the period of performance and pattern of recognition for the License Performance Obligation and the Committee Performance Obligation was determined to be similar.

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

The Company re-evaluated the transaction price in each reporting period and as uncertain events were resolved or other changes in circumstances occurred.

The Company determined that under ASC 606, the contract was modified in the second quarter of 2019, when the Company elected to require Otsuka to increase the aggregate percentage of current global development costs it funds under the Otsuka U.S.

Agreement and the Otsuka International Agreement, as defined below, from 52.5 % to 80 %, or the Otsuka Funding Option, and the Company became eligible to receive the Additional Funding (defined below) amount.

In connection with the modification, the Company adjusted the transaction price to include the Additional Funding amount as additional variable consideration.

The Company constrains the variable consideration to an amount for which a significant revenue reversal is not probable.

The Company estimates the additional funding as a result of exercising the Otsuka Funding Option, or the Additional Funding, will total approximately $ 149.6 million or more, depending on the actual costs incurred toward the current global development plan.

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

As of March 31, 2022, the Additional Funding was $ 117.4 million.

As of March 31, 2022, the transaction price totaling $ 514.4 million was comprised of:

(i) the up-front payment of $ 125.0 million, (ii) the cost share payment with respect to amounts incurred by the Company through December 31, 2016 of $ 33.8 million, and (iii) the estimate of the net cost share consideration to be received of approximately $ 355.6 million with respect to amounts incurred by the Company subsequent to December 31, 2016.

As of March 31, 2022, the Company is eligible to receive up to $ 65.0 million in regulatory milestone payments for the first HIF product to achieve the associated event and up to $ 575 million in commercial milestone payments associated with aggregate sales of licensed products.

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

As of March 31, 2022, no development or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

During the three months ended March 31, 2022 and 2021, the Company recognized revenue totaling approximately $ 5.6 million and $ 13.7 million, respectively, with respect to the Otsuka U.S.

Agreement and the Otsuka International Agreement, as defined below, from 52.5 % to 80 %, or the Otsuka Funding Option, and the Company became eligible to receive the amount from the Otsuka Funding Option.

In connection with the modification, the Company adjusted the transaction price to include the amount from the Otsuka Funding Option as additional variable consideration.

The Company constrained the variable consideration to an amount for which a significant revenue reversal is not probable.

Pursuant to the Otsuka U.S.

Agreement, the Company received:

(i) an up-front payment of $ 125.0 million, (ii) a cost share payment with respect to amounts incurred by the Company through December 31, 2016 of $ 33.8 million, and (iii) net cost share consideration with respect to amounts incurred by the Company under the global development plan of approximately $ 319.2 million with respect to amounts incurred by the Company subsequent to December 31, 2016.

On May 12, 2022, the Company received notice from Otsuka that it had elected to terminate the Otsuka U.S.

Agreement and the Otsuka International Agreement.

On June 30, 2022, the Company and Otsuka entered into the Termination Agreement, pursuant to which, among other things, the Company and Otsuka agreed to terminate, as of June 30, 2022, the Otsuka U.S.

Agreement and the Otsuka International Agreement.

In July 2022, the Company received a nonrefundable and non-creditable payment of $ 55.0 million in consideration for the covenants and agreements set forth in the Termination Agreement, including the settlement and release of all disputes and claims as provided therein.

The Company determined that the Termination Agreement met the definition of a contract modification and was accounted for as a cumulative catch-up adjustment at the time of modification under ASC 606.

During the three months ended June 30, 2022, the Company recognized $ 81.1 million of collaboration revenue from Otsuka in its condensed consolidated statement of operations and comprehensive income (loss).

This is primarily comprised of the $ 55.0 million payment to be received pursuant to the Termination Agreement, $ 15.5 million related to previously deferred revenue as of the date of termination and $ 9.6 million of non-cash consideration related to Otsuka's obligations to complete certain agreed upon clinical activities related to the Phase 3b clinical trial of vadadustat Otsuka is conducting.

During the six months ended June 30, 2022, the Company recognized $ 92.3 million of collaboration revenue from the Otsuka U.S.

Agreement and the Otsuka International Agreement in its condensed consolidated statement of operations and comprehensive income (loss).

During the three and six months ended June 30, 2021, the Company recognized revenue totaling $ 9.2 million and $ 22.8 million, respectively, with respect to the Otsuka U.S.

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

As of March 31, 2022, there was approximately $ 22.3 million of deferred revenue related to the Otsuka U.S.

Agreement of which $ 6.2 million is classified as current and $ 16.1 million is classified as long-term in the accompanying unaudited condensed consolidated balance sheet based on the performance period of the underlying obligations.

Additionally, as of March 31, 2022, there was $ 9.0 million in accounts receivable and $ 2.7 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of June 30, 2022, there was no deferred revenue related to the Otsuka U.S.

Additionally, as of June 30, 2022, there was $ 55.0 million in accounts receivable and $ 9.6 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of December 31, 2021, there was approximately $ 2.0 million in contract liabilities (included in accounts payable) and $ 3.0 million in prepaid expenses and other current assets in the consolidated balance sheet.

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

Agreement represent joint operating activities in which both parties are active participants and of which both parties are exposed to significant risks and rewards that are dependent on the success of the activities.

Accordingly, the Company is accounting for the joint medical affairs, commercialization and non-promotional activities in accordance with ASC No.

808, Collaborative Arrangements .

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

During the three months ended March 31, 2022 and 2021, the Company incurred approximately $ 7.6 million and $ 1.0 million, respectively, of

costs related to the cost-sharing provisions of the Otsuka U.S.

Agreement, of which approximately $ 3.8 million and $ 0.5 million are reimbursable by Otsuka and recorded as a reduction to research and development expense during the three months ended March 31, 2022 and 2021, respectively.

During the three months ended March 31, 2022, Otsuka incurred no costs related to the cost-sharing provisions of the Otsuka U.S.

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

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

International Collaboration and License Agreement with Otsuka Pharmaceutical Co.

On April 25, 2017, the Company entered into a collaboration and license agreement with Otsuka, or the Otsuka International Agreement.

The collaboration is focused on the development and commercialization of vadadustat in Europe, Russia, China, Canada, Australia, the Middle East and certain other territories, collectively, the Otsuka International Territory.

On April 25, 2017, the Company entered into the Otsuka International Agreement.

The collaboration was focused on the development and commercialization of vadadustat in Europe, Russia, China, Canada, Australia, the Middle East and certain other territories, collectively, the Otsuka International Territory.

Under the terms of the Otsuka International Agreement, the Company granted to Otsuka an exclusive, sublicensable license under certain intellectual property controlled by the Company to develop and commercialize vadadustat and products containing or comprising vadadustat in the Otsuka International Territory.

Additionally, under the terms of this agreement, the Company is responsible for leading the development of vadadustat.

Otsuka has the sole responsibility, at its own cost, for the commercialization of vadadustat in the Otsuka International Territory, subject to the approval by the relevant regulatory authorities.

Additionally, under the terms of this agreement, the Company was responsible for leading the development of vadadustat.

Otsuka had the sole responsibility, at its own cost, for the commercialization of vadadustat in the Otsuka International Territory, subject to the approval by the relevant regulatory authorities.

The Company has accounted for the Otsuka International Agreement separately from the collaboration arrangement with Otsuka with respect to the U.S.

due to the lack of interrelationship and interdependence of the elements and payment terms within each of the contracts as they relate to the respective territories.

Accordingly, the Company has applied the guidance in ASC 606 solely in reference to the terms and conditions of the Otsuka International Agreement, while the Otsuka U.S.

Agreement has continued to be accounted for as a discrete agreement in its own right.

The Company evaluated the Otsuka International Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, Otsuka, is a customer.

The Company has identified three performance obligations in connection with its obligations under the Otsuka International Agreement as follows:

The Company identified three performance obligations in connection with its obligations under the Otsuka International Agreement as follows:

(i) License and Development Services Combined (License Performance Obligation);

(ii) Rights to Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation).

The Company allocates the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price.

(ii) Rights to

Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation).

The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price.

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

As of March 31, 2022, the transaction price totaling $ 316.9 million was comprised of:

(i) the up-front payment of $ 73.0 million, (ii) the cost share payment with respect to amounts incurred by the Company during the quarter ended March 31, 2017 of $ 0.2 million, and (iii) an estimate of the net cost share consideration to be received with respect to amounts incurred by the Company subsequent to March 31, 2017 of $ 243.7 million.

As of March 31, 2022, the Company is eligible to receive up to $ 17.0 million in regulatory milestone payments for the licensed HIF product if the Company achieves the associated event within 12 to 24 months of the first HIF product approval.

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

As of March 31, 2022, no development or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

During the three months ended March 31, 2022 and 2021, the Company recognized revenue totaling approximately $ 5.5 million and $ 7.0 million, respectively, with respect to the Otsuka International Agreement.

The Company re-evaluated the transaction price in each reporting period and as uncertain events were resolved or other changes in circumstances occurred.

Pursuant to the Otsuka International Agreement, the Company received:

(i) an up-front payment of $ 73.0 million, (ii) the cost share payment with respect to amounts incurred by the Company during the quarter ended March 31, 2017 of $ 0.2 million, and (iii) the net cost share consideration with respect to amounts incurred by the Company under the global development plan subsequent to March 31, 2017 of $ 216.7 million.

As discussed above, the Otsuka International Agreement was terminated on June 30, 2022 pursuant to the Termination Agreement.

Refer to earlier in this Note 4 for further details of the recognition of this Termination Agreement in the Company's condensed consolidated statement of operations and comprehensive income (loss).

During the three and six months ended June 30, 2021, the Company recognized revenue totaling approximately $ 4.7 million and $ 11.7 million, respectively, with respect to the Otsuka International Agreement.

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

As of March 31, 2022, there was

approximately $ 10.2 million of deferred revenue related to the Otsuka International Agreement of which $ 4.2 million is classified as current and $ 6.0 million is classified as long-term in the accompanying unaudited condensed consolidated balance sheet based on the performance period of the underlying obligations.

Additionally, as of March 31, 2022, there was $ 11.3 million in accounts receivable and $ 1.2 million in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet.

As of June 30, 2022, there was no deferred revenue related to the Otsuka International Agreement.

As of June 30, 2022, there were no accounts receivable and no prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet specific to the Otsuka International Agreement.

As of December 31, 2021, there was approximately $ 0.9 million in contract liabilities (included in accounts payable) and $ 1.3 million in prepaid expenses and other current assets in the consolidated balance sheet.

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A more detailed description of this collaboration agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

On August 1, 2022, the Company notified Janssen that it was exercising its right to terminate the Janssen Agreement, and Janssen agreed to the termination which became effective on August 2, 2022.

Cyclerion Therapeutics License Agreement

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Under the terms of the Cyclerion Agreement, the Company made an upfront payment of $ 3.0 million in cash to Cyclerion, which was paid during the second quarter of 2021 and recorded to research and development expense in June 2021.

Substantially all of the fair value of the assets acquired in conjunction with the Cyclerion Agreement was concentrated in the acquired license.

Substantially all of the fair value of the assets acquired in conjunction with the Cyclerion Agreement was concentrated in the

acquired license.

As a result, the Company accounted for this transaction as an asset acquisition under ASU No.

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Vifor Pharma License Agreement

Summary of Agreement

Summary of License Agreement

On May 12, 2017, the Company entered into a License Agreement, or the Vifor Agreement, with Vifor (International) Ltd., or Vifor Pharma, pursuant to which the Company granted Vifor Pharma an exclusive license to sell vadadustat solely to Fresenius Kidney Care Group LLC, or FKC, an affiliate of Fresenius Medical Care North America, or FMCNA, in the United States.

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On February 18, 2022, the Company and Vifor Pharma entered into a Second Amended and Restated License Agreement, or the Vifor Second Amended Agreement, which amends and restates the Vifor First Amended Agreement.

Pursuant to the Vifor Second Amended Agreement, the Company 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 the Company, to independent dialysis organizations that are members of certain group

purchasing organizations, and to certain non-retail specialty pharmacies, or collectively, the Supply Group, in the United States, or the Territory.

Pursuant to the Vifor Second Amended Agreement, Vifor Pharma agreed that it would not sell or otherwise supply vadadustat until the FDA has granted regulatory approval for vadadustat in the DD-CKD Indication in the Territory and until Vifor Pharma has entered a supply agreement with the applicable member of the Supply Group.

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

Vifor Pharma may also terminate the Vifor Second Amended Agreement upon thirty days ' notice following receipt of the CRL from the FDA for vadadustat.

Investment Agreement

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In addition, the First Investment Agreement contains voting agreements made by Vifor Pharma with respect to the 2017 Shares.

The 2017 Shares have not been registered pursuant to the Securities Act of 1933, as amended, or the Securities Act, and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.

In connection with entering into the Vifor Second Amended Agreement, on February 18, 2022, the Company and Vifor Pharma entered into an investment agreement, or the Second Investment Agreement, pursuant to which the Company sold an aggregate of 4,000,000 shares of its common stock, par value $ 0.00001 per share, or the 2022 Shares, to Vifor Pharma for a total of $ 20 million on February 22, 2022.

The 2017 Shares have not been

registered pursuant to the Securities Act of 1933, as amended, or the Securities Act, and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.

In connection with entering into the Vifor Second Amended Agreement, on February 18, 2022, the Company and Vifor Pharma entered into an investment agreement, or the Second Investment Agreement, pursuant to which the Company sold an aggregate of 4,000,000 shares of its common stock, or the 2022 Shares, to Vifor Pharma for a total of $ 20 million on February 22, 2022.

The amount representing the premium over the grant date fair value on the date of the transaction, $ 13.6 million, was determined by the Company to represent the consideration related to the Vifor Second Amended Agreement.

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The transaction price at inception was comprised of:

(i) the up-front payment of $ 25.0 million, (ii) the premium on paid by Vifor Pharma on the First Investment Agreement of $ 4.7 million, and (iii) the premium paid by Vifor Pharma on the Second Investment Agreement of $ 13.6 million.

(i) the up-front payment of $ 25.0 million, (ii) the premium paid by Vifor Pharma on the First Investment Agreement of $ 4.7 million, and (iii) the premium paid by Vifor Pharma on the Second Investment Agreement of $ 13.6 million.

Pursuant to the terms of the Vifor Second Amended Agreement, these payments from Vifor Pharma are non-refundable and non-creditable against any other amount due to the Company.

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The Company constrains the variable consideration to an amount for which a significant revenue reversal is not probable.

Therefore, the Company determined that the entire transaction price at inception was constrained under ASC 606, and the Company has recorded the transaction price to deferred revenue as of March 31, 2022.

Refund Liability to Customer

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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 were not material.

The amortization of the discount was $ 1.1 million and the amortization of the deferred gain was $ 0.8 million for the three and six months ended June 30, 2022.

Of the $ 40.3 million total refund liability, net of deferred gain and discount, the Company classified $ 14.2 million as a short-term refund liability based on management's estimate of potential amounts that could be refundable within a one-year period as a result of anticipated changes to the Company's operating plan following the CRL.

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On August 21, 2021, the Company and Vifor Pharma executed an amendment to the Letter Agreement whereby the parties agreed that Vifor Pharma would sell the PRV to a third party, and the Company and Vifor Pharma would share the proceeds from the sale based on certain terms.

In the fourth quarter of 2021, Vifor Pharma sold the PRV to a third party, and Vifor

Pharma paid the Company $ 8.6 million in proceeds from the sale, which was recorded as contra research and development expense.

In the fourth quarter of 2021, Vifor Pharma sold the PRV to a third party, and Vifor Pharma paid the Company $ 8.6 million in proceeds from the sale, which was recorded as contra research and development expense.

These proceeds were subsequently paid to Otsuka as reimbursement for their contribution to the purchase of the PRV, as required under a separate letter agreement executed with Otsuka.

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License Agreement with Panion & BF Biotech, Inc.

As a result of the merger with Keryx Biopharmaceuticals, Inc., or Keryx, or the Merger, the Company had a license agreement, which was amended from time to time, with Panion & BF Biotech, Inc., or Panion, under which Keryx, the Company's wholly owned subsidiary, was the contracting party, or the Panion License Agreement, pursuant to which Keryx in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, or the Licensor Territory, for the development and commercialization of ferric citrate.

As a result of the merger with Keryx, or the Merger, the Company had a license agreement, which was amended from time to time, with Panion & BF Biotech, Inc., or Panion, under which Keryx, the Company's wholly owned subsidiary, was the contracting party, or the Panion License Agreement, pursuant to which Keryx in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, or the Licensor Territory, for the development and commercialization of ferric citrate.

On April 17, 2019, the Company and Panion entered into a second amended and restated license agreement, or the Panion Amended License Agreement, which amends and restates in full the Panion License Agreement, effective as of April 17, 2019.

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A more detailed description of this license agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

The Company recognized royalty payments due to Panion of approximately $ 2.5 million during each of the three months ended March 31, 2022 and 2021, relating to the Company’s sales of Auryxia in the United States and JT and Torii’s net sales of Riona in Japan, as the Company is required to pay a mid-single digit percentage of net sales of ferric citrate in the Company’s licensed territories to Panion under the terms of the Panion Amended License Agreement.

The Company recognized royalty payments due to Panion of approximately $ 3.5 million and $ 2.8 million during the three months ended June 30, 2022 and 2021, respectively, and $ 6.6 million and $ 5.3 million during the six months ended June 30, 2022 and 2021, respectively, relating to the Company’s sales of Auryxia in the United States and JT and Torii’s net sales of Riona in Japan, as the Company is required to pay a mid-single digit percentage of net sales of ferric citrate in the Company’s licensed territories to Panion under the terms of the Panion Amended License Agreement.

Sublicense Agreement with Japan Tobacco, Inc.

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

The Company recognized license revenue of $ 1.1 million and $ 1.2 million during the three months ended March 31, 2022 and 2021, respectively, related to royalties earned on net sales of Riona in Japan.

The Company recognized license revenue of $ 1.5 million during each of the three months ended June 30, 2022 and 2021 and $ 2.6 million during each of the six months ended June 30, 2022 and 2021 related to royalties earned on net sales of Riona in Japan.

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

Restructuring

On April 4, 2022, the Board of Directors of the Company approved a reduction of the Company’s workforce by approximately 42 % across all areas of the Company ( 47 % inclusive of the closing of the majority of open positions) following the receipt of a CRL from the FDA to the Company’s NDA for vadadustat for the treatment of anemia due to CKD in adult patients.

This workforce reduction was substantially completed as of June 30, 2022.

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

This workforce reduction is expected to be substantially complete by the end of January 2023.

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

The workforce reduction is expected to include total restructuring charges of approximately $ 14.8 million.

During each of the three and six months ended June 30, 2022, the Company recognized $ 14.5 million of restructuring charges in the condensed consolidated statement of operations.

These charges included $ 11.2 million of one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits and $ 3.3 million of non-cash share-based compensation expense.

The charges were recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits or ASC 420, Exit or Disposal Cost Obligations, depending on the employee .

The Company will fully recognize the remaining $ 0.3 million in the third quarter of 2022.

Details of the restructuring liability activity for the Company's workforce reduction for the period ended June 30, 2022 are as follows:

June 30, 2022

(in thousands)

Balance at December 31, 2021 $ —

Restructuring charges 14,531

Stock-based compensation expense ( 3,303 )

Severance payments and adjustments ( 4,313 )

Balance at June 30, 2022 $ 6,915

Liability Related to Sale of Future Royalties

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

The annual effective interest rate as of March 31, 2022 was 17.7 % which is reflected as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

The annual effective interest rate as of June 30, 2022 was 15.1 % which is reflected as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

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

A more detailed description of Royalty Agreement can be found in Note 5 of the Notes to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

The following table shows the activity within the liability account for the three months ended March 31, 2022:

March 31, 2022

The following table shows the activity within the liability account for the six months ended June 30, 2022:

June 30, 2022

(in thousands)

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

Assets measured or disclosed at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 are summarized below:

Assets measured or disclosed at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are summarized below:

Fair Value Measurements Using

1 unchanged sentence

(in thousands)

March 31, 2022

June 30, 2022

Cash and cash equivalents $ 143,893 $ — $ — $ 143,893

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

The Company recorded a derivative liability related to the Company’s Loan Agreement with Pharmakon of $ 1.1 million and $ 1.8 million as of March 31, 2022 and December 31, 2021, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.

The estimated fair value of the derivative liability on both March 31, 2022 and December 31, 2021 was determined using a scenario-based approach and discounted cash flow model that includes principal and interest payments under various scenarios involving clinical development success for vadadustat and various cash flow assumptions.

The Company recorded a derivative liability related to the Company’s Loan Agreement with Pharmakon of $ 1.1 million and $ 1.8 million as of June 30, 2022 and December 31, 2021, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of June 30, 2022 and December 31, 2021.

The estimated fair value of the derivative liability on both June 30, 2022 and December 31, 2021 was determined using a scenario-based approach and discounted cash flow model that includes principal and interest payments under various scenarios involving clinical development success for vadadustat and various cash flow assumptions.

The Company used a 0 % probability of clinical development success due to receipt of a CRL from the FDA for vadadustat.

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Balance at December 31, 2021 $ 1,820

Change in fair value of derivative liability, recorded as other expense ( 710 )

Change in fair value of derivative liability, recorded as other income ( 710 )

Balance at March 31, 2022 $ 1,110

The Company had no other assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at March 31, 2022 and December 31, 2021.

Change in fair value of derivative liability, recorded as other income —

Balance at June 30, 2022 $ 1,110

The Company had no other assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at June 30, 2022 and December 31, 2021.

The components of inventory are summarized as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in thousands)

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in thousands)

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Total inventory $ 58,066 $ 79,059

Inventory amounts written down as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold totaled $ 5.3 million and $ 5.1 million during the three months ended March 31, 2022 and 2021, respectively.

In addition, there were no related step-up charges during the three months ended March 31, 2022 and $ 8.7 million related step-up charges during the three months ended March 31, 2021.

During the three months ended March 31, 2022, the Company recorded a $ 3.2 million reduction to the excess purchase commitment liability related to Auryxia inventory previously identified as excess, reflecting Auryxia inventory that was received during the period.

Inventory amounts written down as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold totaled $ 2.1 million and $ 0.4 million during the three months ended June 30, 2022 and 2021, respectively, and $ 7.4 million and $ 5.4 million during the six months ended June 30, 2022 and 2021, respectively.

The increase in inventory amounts written down for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021 was primarily due to higher write-downs to inventory reserves related to expired inventory.

In addition, there were no related step-up charges during the six months ended June 30, 2022 and $ 8.7 million related step-up charges during the six months ended June 30, 2021.

During the six months ended June 30, 2022, the Company recorded a $ 9.8 million reduction to the excess purchase commitment liability related to Auryxia inventory previously identified as excess, reflecting Auryxia inventory that was received during the period.

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

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Intangible Assets

The following table presents the Company’s intangible assets at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

The following table presents the Company’s intangible assets at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

Gross Carrying

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

The Company recorded $ 9.0 million in amortization expense related to the developed product rights for Auryxia during each of the three months ended March 31, 2022 and 2021.

The Company recorded $ 9.0 million in amortization expense related to the developed product rights for Auryxia during each of the three months ended June 30, 2022 and 2021, and $ 18.0 million during each of the six months ended June 30, 2022 and 2021.

The Company's goodwill results from the acquisition of Keryx in December 2018.

Goodwill was $ 55.1 million as of March 31, 2022 and December 31, 2021.

Goodwill was $ 55.1 million as of June 30, 2022 and December 31, 2021.

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

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

During the first quarter of 2022, the Company evaluated business factors, including the receipt of a CRL from the FDA for vadadustat, to determine if there were events or changes in circumstance to indicate that the fair value of the reporting unit was less than its carrying value.

The Company determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying value and, accordingly, determined that there was no impairment of goodwill during the three months ended March 31, 2022.

However, the future occurrence of events including, but not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions and an adverse action or assessment by a regulator could indicate potential impairment and trigger an interim impairment assessment of goodwill.

Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic or market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action by a regulator.

During the six months ended June 30, 2022, the Company evaluated business factors, including the receipt of a CRL from the FDA for vadadustat, the Company's market capitalization as impacted by a recent decline in the Company's stock price, and the impact of the Otsuka Termination Agreement on the Company's future cash flows to determine if there were events or changes in circumstance to indicate that the fair value of the reporting unit was less than its carrying value.

The Company performed qualitative interim impairment assessments of the Company's goodwill balance as of each of the three months ended March 31, 2022 and June 30, 2022.

The Company determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying value and, therefore, did not perform a further quantitative interim impairment test for any period.

The Company's qualitative assessments were based on the Company's estimates and assumptions, a number of which are dependent on external factors and actual results may differ materially from these estimates.

In addition, the future occurrence of events including, but not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions and an adverse action or assessment by a regulator could indicate potential impairment and trigger an interim impairment assessment of goodwill, which could result in an impairment of goodwill.

As a result of the significance of goodwill, the Company's results of operations and financial position in a future period could be negatively impacted should an impairment test be triggered that results in an impairment of goodwill.

Accrued Expenses

Accrued expenses as of March 31, 2022 and December 31, 2021 are as follows:

March 31, 2022 December 31, 2021

Accrued expenses as of June 30, 2022 and December 31, 2021 are as follows:

June 30, 2022 December 31, 2021

(in thousands)

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Accrued commercial manufacturing 3,420 3,843

Accrued restructuring 6,915 —

Accrued other 9,782 11,263

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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 Collateral Agent and the lenders are collectively referred to as Pharmakon (see Note 1 to our condensed consolidated financial statements).

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.

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

On February 18, 2022, the Loan Agreement was amended, which amendment waived the provision under the Loan Agreement that required the Company to not be subject to any qualification as a going concern within the Company's 2021 Annual Report on Form 10-K.

Pursuant to the Loan Agreement, as amended, the Company's filings of Form 10-Q for fiscal quarters ending June 30, 2022 and September 30, 2022, and its future Annual Reports on Form 10-K, must not be subject to any qualification as to going concern.

On February 18, 2022, the Loan Agreement was amended by the First Amendment and Waiver, which waived the provision under the Loan Agreement that required the Company to not be subject to any qualification as a going concern within the Company's 2021 Annual Report on Form 10-K.

Pursuant to the First Amendment and Waiver, the Company's filings of Form 10-Q for fiscal quarters ending June 30, 2022 and September 30, 2022, and its future Annual Reports on Form 10-K, must not be subject to any qualification as to going concern, which requirement as to the Company's filings on Form 10-Q was waived in the Second Amendment and Waiver.

If the Company does not satisfy the covenant as to going concern in any of these filings, the Company will be in default under the Loan Agreement.

There is uncertainty as to whether or not the Company will meet its future quarterly and annual debt covenants related to qualification as to going concern.

There is uncertainty as to whether or not the Company will meet its future annual debt covenants related to qualification as to going concern.

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.

Therefore, as of March 31, 2022, the Company continued to classify the borrowings under the Loan Agreement as current.

Therefore, as of June 30, 2022, the Company continued to classify the borrowings under the Loan Agreement as current.

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, 2022 and December 31, 2021, the Company determined that no events of default had occurred.

As of June 30, 2022 and December 31, 2021, the Company determined that no events of default had occurred.

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

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

The fair value of the derivative liability related to the Company’s Loan Agreement with Pharmakon was $ 1.1 million and $ 1.8 million as of March 31, 2022 and December 31, 2021, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of March 31, 2022.

The Company recognized interest expense related to the Loan Agreement of $ 2.7 million during each of the three months ended March 31, 2022 and 2021.

The fair value of the derivative liability related to the Company’s Loan Agreement with Pharmakon was $ 1.1 million and $ 1.8 million as of June 30, 2022 and December 31, 2021, respectively.

The Company classified the derivative liability as a non-current liability on the unaudited condensed consolidated balance sheet as of June 30, 2022.

The Company recognized interest expense related to the Loan Agreement of $ 2.7 million during each of the three months ended June 30, 2022 and 2021, and $ 5.4 million for each of the six months ended June 30, 2022 and 2021.

Second Amendment and Waiver to Loan Agreement with Pharmakon

On July 15, 2022, or the Effective Date, the Company and Pharmakon entered into the Second Amendment and Waiver, or the Second Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, as amended by the First Amendment and Waiver.

Pursuant to the Second Amendment and Waiver, on the Effective Date, the Company made a $ 5.0 million prepayment of the principal of the tranche A loan, or the Second Amendment Effective Date Tranche A Prepayment, and a $ 20.0 million prepayment of principal of the tranche B loan, or the Second Amendment Effective Date Tranche B Prepayment, in each case, together with any and all accrued and unpaid interest on such prepayments of principal to the Effective Date.

In connection therewith, the Company also paid $ 0.5 million in prepayment premiums under the Loan Agreement.

Subject to the payment in full of Second Amendment Effective Date Tranche A Prepayment and the Second Amendment Effective Date Tranche B Prepayment, Pharmakon agreed to, among other things, (1) increase the amount of the working capital facility established in connection with the Company’s Second Amended and Restated License Agreement with Vifor Pharma, which facility is part of the definition of Permitted Indebtedness (as such term is defined in the Loan Agreement) under the Loan Agreement, that the Company is permitted to repay to Vifor Pharma without causing an acceleration of the liabilities under the Loan Agreement, (2) waive the requirement that the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ending June 30, 2022 and September 30, 2022 not be subject to any qualification as to going concern, and (3) waive certain amounts payable under the Loan Agreement in connection with the Second Amendment Effective Date Tranche B Prepayment.

Future principal payments pursuant to the contractual terms of the Loan Agreement, as amended by the Second Amendment and Waiver, are as follows (in thousands):

(in thousands)

2022 $ 33,000

Total before unamortized discount and issuance costs 100,000

unamortized discount and issuance costs ( 1,842 )

Total term loans $ 98,158

Stockholders’ Equity

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

As of March 31, 2022, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $ 0.00001 per share, of which 183,386,035 and 177,000,963 shares were issued and outstanding as of March 31, 2022 and December 31, 2021, respectively;

and 25,000,000 shares of undesignated preferred stock, par value $ 0.00001 per share, of which no shares were issued and outstanding as of March 31, 2022 and December 31, 2021.

As of June 30, 2022, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $ 0.00001 per share, of which 183,704,654 and 177,000,963 shares were issued and outstanding as of June 30, 2022 and December 31, 2021, respectively;

and 25,000,000 shares of undesignated preferred stock, par value $ 0.00001 per share, of which no shares were issued and outstanding as of June 30, 2022 and December 31, 2021.

At-the-Market Facility

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

On March 12, 2020, the Company filed a prospectus supplement relating to the Company's sales agreement with Cantor Fitzgerald & Co., or the Prior Sales Agreement, pursuant to which it was able to offer and sell up to $ 65.0 million of its common stock at current market prices from time to time.

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

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

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

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

Through December 31, 2021, the Company sold 21,128,065 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 72.4 million.

On March 1, 2022, the Company filed a prospectus relating to the sales agreement, pursuant to which it was authorized to offer and sell up to $ 25.3 million of its common stock at current market prices from time to time.

During the three months ended March 31, 2022 and through the date of this Quarterly

Report on Form 10-Q, the Company sold 404,600 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 0.8 million.

On March 1, 2022, the Company filed a prospectus relating to the Prior Sales Agreement, pursuant to which it was authorized to offer and sell up to $ 25.3 million of its common stock at current market prices from time to time.

On March 16, 2022, the Company terminated the Prior Sales Agreement.

During the three months ended March 31, 2022, the Company sold 404,600 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 0.8 million.

On April 7, 2022, the Company 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, the Company filed a prospectus supplement relating to the Sales Agreement, pursuant to which it is able to offer and sell under the Sales Agreement up to $ 26.0 million of its 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, the Company has not sold any shares of its common stock under this program.

The Company maintains one stock incentive plan, the 2014 Incentive Plan, or the 2014 Plan, as well as the 2014 Employee Stock Purchase Plan, or the 2014 ESPP.

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On June 6, 2019, the Company’s stockholders approved the Amended and Restated 2014 Employee Stock Purchase Plan, or the ESPP.

The Company also maintains an inducement award program that is separate from the Company's equity plans under which inducement awards may be granted consistent with Nasdaq Listing Rule 5635(c)(4).

During the three months ended March 31, 2022, the Company granted 279,000 options to purchase shares of the Company’s common stock to new hires as inducements material to such employees' entering into employment with the Company, of which 279,000 options remained outstanding as of March 31, 2022.

The Company also maintains an inducement award program that is separate from the Company's equity plans under which inducement awards may be granted consistent with

Nasdaq Listing Rule 5635(c)(4).

During the six months ended June 30, 2022, the Company granted 297,000 options to purchase shares of the Company’s common stock to new hires as inducements material to such employees' entering into employment with the Company, of which 174,000 options remained outstanding as of June 30, 2022.

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

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The Company grants annual service-based stock options to employees under the 2014 Plan.

During the three months ended March 31, 2022, the Company issued 2,833,500 options to employees.

During the six months ended June 30, 2022, the Company issued 3,233,500 options to employees.

In addition, the Company issues stock options to directors, new hires and occasionally to other employees not in connection with the annual grant process.

During the six months ended June 30, 2022, the Company issued 140,700 options to directors under the 2014 Plan.

Options granted by the Company generally vest over periods of between 12 and 48 months, subject, in each case, to the individual’s continued service through the applicable vesting date.

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The Company also grants performance-based stock options to employees under the 2014 Plan.

The Company issued no performance-based stock options during the three months ended March 31, 2022.

The Company issued 400,000 performance-based stock options during the six months ended June 30, 2022.

The performance-based stock options granted by the Company generally vest in connection with the achievement of specified commercial and regulatory milestones.

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

The Company also grants annual service-based restricted stock units, or RSUs, to employees under the 2014 Plan.

During the three months ended March 31, 2022, the Com pany issued 2,914,308 RSUs to employees.

The Company also occasionally issues RSUs not in connection with the annual grant process to employees.

The Company also grants annual service-based restricted stock units, or RSUs, to employees and directors under the 2014 Plan.

The Company also occasionally issues RSUs not in connection with the annual grant process to employees and directors.

During the six months ended June 30, 2022, the Company issued 5,212,308 RSUs to employees and 95,900 RSUs to directors under the 2014 Plan.

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

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

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

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

The Company also grants performance-based restricted stock units, or PSUs, to employees under the 2014 Plan.

The Company issued no PSUs during the three months ended March 31, 2022.

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

The Company issued 400,000 PSUs during the six months ended June 30, 2022.

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

The PSUs also generally feature a time-based vesting component.

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

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

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

As of March 31, 2022, the maximum aggregate number of shares of the Company’s common stock available for future issuance under the ESPP is 4,981,995 .

As of June 30, 2022, the maximum aggregate number of shares of the Company’s common stock available for future issuance under the ESPP is 4,981,995 .

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

The per-share purchase price at the end of each offering period is equal to the lesser of eighty-five percent ( 85 %) of the closing price of the Company’s common stock at the beginning or end of the offering period.

The Company issued 191,146 shares under the ESPP during the three months ended March 31, 2022.

The Company issued 191,146 shares under the ESPP during the six months ended June 30, 2022.

Commitments and Contingencies

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The lease agreements do not contain residual value guarantees.

Operating lease costs were $ 1.8 million and $ 1.7 million for the three months ended March 31, 2022 and 2021, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.8 million for each of the three months ended March 31, 2022 and 2021.

Operating lease costs were $ 1.8 million and $ 1.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 3.6 million and $ 3.3 million for the six months ended June 30, 2022 and 2021, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.8 million for each of the three months ended June 30, 2022 and 2021 and $ 3.7 million and $ 3.5 million for the six months ended June 30, 2022 and 2021, respectively.

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

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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 Keryx to its

landlord with respect to the Boston Lease.

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

Sublease rental income is recorded to other income.

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

Keryx recorded $ 0.5 million and $ 0.4 million in sublease rental income from Foundation during the three months ended March 31, 2022 and 2021, respectively.

The Company has not entered into any material short-term leases or financing leases as of March 31, 2022.

The total security deposit in connection with the Cambridge Lease is $ 1.6 million as of March 31, 2022.

Keryx recorded $ 0.4 million in sublease rental income from Foundation during each of the three months ended June 30, 2022 and 2021, respectively, and $ 0.9 million during each of the six months ended June 30, 2022 and 2021.

The Company has not entered into any material short-term leases or financing leases as of June 30, 2022.

The total security deposit in connection with the Cambridge Lease is $ 1.6 million as of June 30, 2022.

Additionally, the Company recorded $ 1.4 million for the security deposit under the Boston Lease.

Both the Cambridge Lease and the Boston Lease have their security deposits in the form of a letter of credit, all of which are included as restricted cash in other assets in the Company’s unaudited condensed consolidated balance sheets as of March 31, 2022.

As of March 31, 2022, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter are as follows:

As of June 30, 2022, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter are as follows:

Leases Lease Payments

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In arriving at the operating lease liabilities, the Company applied incremental borrowing rates ranging from 6.65 % to 7.25 %, which were based on the remaining lease term at either the date of adoption of ASC 842 or the effective date of any subsequent lease term extensions.

As of March 31, 2022, the remaining lease terms ranged from 4.45 years to 9.34 years.

As of March 31, 2022, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities:

As of June 30, 2022, the remaining lease terms ranged from 4.20 years to 9.09 years.

As of June 30, 2022, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities:

(in thousands)

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

gives notice of its intention to terminate within a specified time prior to the end of the then-current term.

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

As of March 31, 2022, the Company is required to reimburse BioVectra for certain costs in connection with the construction of the new facility and to purchase minimum quantities of Auryxia drug substance annually for a total cost of approximately $ 83.6 million through the end of the contract term.

As of June 30, 2022, the Company is required to reimburse BioVectra for certain costs in connection with the construction of the new facility and to purchase minimum quantities of Auryxia drug substance annually for a total cost of approximately $ 82.4 million through the end of the contract term.

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

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In the first quarter of 2022, the Company notified Siegfried that the Company has elected not to exercise the option to extend the term of the Siegfried Agreement through December 31, 2023.

As of March 31, 2022, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $ 13.5 million through the year ending December 31, 2022.

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

As of June 30, 2022, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $ 10.5 million through the year ending December 31, 2022.

The Company has 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 Company regularly reviews its estimate of the excess purchase commitment liability including a review of assumptions of expected future demand, estimates of anticipated expiry of inventory under firm purchase commitments that are estimated to expire before they could be sold as well as any modifications to supply agreements during each reporting period.

The excess purchase commitment liability relating to these executory contracts was $ 72.7 million and $ 76.7 million as of March 31, 2022 and December 31, 2021, respectively.

During the quarter ended March 31, 2022, the Company reviewed the detailed assumptions above and recorded a $ 0.8 million reduction to the excess purchase commitments liability within cost of goods sold.

During the quarter ended March 31, 2022, the Company reduced the excess purchase commitment liability by $ 3.2 million for inventory received that had previously been identified as excess.

The excess purchase commitment liability relating to these executory contracts was $ 66.9 million and $ 76.7 million as of June 30, 2022 and December 31, 2021, respectively.

During the quarter ended June 30, 2022, the Company reviewed the detailed assumptions above and reduced the excess purchase commitment liability by $ 5.8 million for inventory received that had been previously identified as excess.

During the quarter ended March 31, 2022, the Company recorded a $ 0.8 million reduction to the excess purchase commitments liability within cost of goods sold and reduced the excess purchase commitment liability by $ 3.2 million for inventory received that had previously been identified as excess.

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

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

As of March 31, 2022, the Company has committed to purchase $ 39.0 million of vadadustat drug substance from Esteve through the second quarter of 2023.

As of June 30, 2022, the Company has committed to purchase $ 32.4 million of vadadustat drug substance from Esteve through the second quarter of 2023.

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

5 unchanged sentences

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

As of March 31, 2022, the Company had a minimum commitment with Patheon for $ 3.9 million through the fourth quarter of 2022.

As of June 30, 2022, the Company had a minimum commitment with Patheon for $ 3.3 million through the fourth quarter of 2022.

On April 2, 2020, the Company entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec, or WuXi STA, as amended on April 15, 2021, or the WuXi STA DS Agreement.

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Pursuant to the WuXi STA DS Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA.

As of March 31, 2022, the Company has committed to purchase $ 77.9 million of vadadustat drug substance from WuXi STA through the end of 2023.

As of June 30, 2022, the Company has committed to purchase $ 62.0 million of vadadustat drug substance from WuXi STA through the end of 2023.

On February 10, 2021, the Company entered into a Supply Agreement with WuXi STA, or the WuXi STA DP Agreement.

The WuXi STA DP Agreement includes the terms and conditions under which WuXi STA will manufacture and supply vadadustat

drug product for commercial purposes.

The WuXi STA DP Agreement includes the terms and conditions under which WuXi STA will manufacture and supply vadadustat drug product for commercial purposes.

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

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Pursuant to the WuXi STA DP Agreement, the Company has agreed to purchase a certain percentage of global demand for vadadustat drug product from WuXi STA.

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

The parties have agreed to a

volume-based pricing structure under the WuXi STA DP Agreement.

The vadadustat drug product price will remain fixed for the first 12 months and thereafter shall be annually reviewed by the Company and WuXi STA.

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Other Third-Party Contracts

Under the Company’s agreement with IQVIA to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of March 31, 2022 were approximately $ 4.7 million, of which Otsuka reimburses a significant portion back to the Company.

Under the Company’s agreement with IQVIA to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of June 30, 2022 were approximately $ 4.6 million.

Substantive performance for the committed work with IQVIA was completed in 2020 and close out activities will be performed throughout 2022.

The Company also contracts with various other organizations to conduct research and development activities with remaining contract costs to the Company of approximately $ 211.9 million at March 31, 2022.

The Company also contracts with various other organizations to conduct research and development activities with remaining contract costs to the Company of approximately $ 175.7 million at June 30, 2022.

The scope of the services under these research and development contracts can be modified and the contracts cancelled by the Company upon written notice.

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Changes in Company estimates could have a material impact on the Company’s results and financial position.

As of March 31, 2022, the Company does not have any significant legal disputes that require a loss liability to be recorded.

As of June 30, 2022, the Company does not have any significant legal disputes that require a loss liability to be recorded.

The Company continually monitors the need for a loss liability for litigation and related matters.

Net Loss per Share

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

Therefore, basic and diluted net loss per share were the same for all periods presented in the unaudited condensed consolidated statement of operations and comprehensive loss.

The shares in the table below were excluded from the calculation of diluted net loss per share, prior to the use of the treasury stock method, due to their anti-dilutive effect:

As of March 31,

For purposes of the diluted net income (loss) per share calculation for the three and six months ended June 30, 2022, as well as the three and six months ended June 30, 2021, preferred stock, stock options, warrants, restricted stock and RSUs are considered to be common stock equivalents and have been excluded from the calculation of diluted net income (loss) per share, as their effect would be anti-dilutive for periods presented.

Therefore, basic and diluted net loss per share were the same for all periods presented in the unaudited condensed consolidated statement of operations and comprehensive loss, except for the three months ended June 30, 2022, as the Company had net income for the period.

The shares in the table below were excluded from the calculation of diluted net income (loss) per share, prior to the use of the treasury stock method, due to their anti-dilutive effect:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Warrant — 509,611 — 509,611

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Subsequent Events

Reduction in Force

workforce reduction will be substantially completed by the end of the second quarter of 2022.

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

This workforce reduction is expected to be substantially complete by the end of January 2023.

The Company plans to seek to effect additional measures to further reduce its operating expenses and increase revenue from Auryxia.

Affected employees in the workforce reductions were offered separation benefits, including severance payments, healthcare coverage and related benefits.

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

The Company may incur additional costs not currently contemplated due to events associated with or resulting from the workforce reduction.

The charge that the Company expects to incur in connection with the workforce reductions is an estimate and is subject to a number of assumptions, and actual results may differ materially.

At-the-Market Facility Agreement

On April 7, 2022, the Company 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, the Company filed a prospectus supplement relating to the sales agreement, pursuant to which it is able to offer and sell under the sales agreement up to $ 26.0 million of its 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, the Company has not sold any shares of its common stock under this program.

Second Amendment and Waiver to Loan Agreement with Pharmakon

On July 15, 2022, the Company and Pharmakon entered into the Second Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, as amended by the First Amendment and Waiver.

Refer to Note 11 in this Quarterly Report on Form 10-Q for further details.

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

What changed 10-Q

Item 1. Financial Statements