What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-09 · 185 added, 110 removed, 226 unchanged (57% of the section changed)

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Auryxia is our only product approved for sale in the United States and it generated approximately $43.7 million and $33.0 million in revenue from U.S.

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

product sales during the three months ended June 30, 2022 and 2021, respectively.

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

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

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

We 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.

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

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

Our collaboration partner, Otsuka Pharmaceutical Co.

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

In addition, in May 2022, the Paediatric Committee of the European Medicines Agency, or the EMA, recommended that we not initiate such clinical trials in the European Union until the safety issues identified by the FDA were addressed.

As a result of the partial clinical hold and EMA’s recommendations, all activities in the United States and Europe for and related to our clinical trials of vadadustat in pediatric patients were suspended.

Our former 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 both DD-CKD and NDD-CKD adult patients to the European Medicines Agency, or EMA, in October 2021.

On June 30, 2022, we and Otsuka entered into a Termination and Settlement Agreement, or the Termination Agreement, and pursuant to the Termination Agreement, we and Otsuka agreed to a schedule by which the parties will work to transfer the MAA held by Otsuka for vadadustat to us.

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

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

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

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

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

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

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

In August of 2022, we announced initial findings from an investigator-sponsored clinical study by The University of Texas Health Science Center at Houston, or UTHealth, in Houston, Texas, evaluating the use of vadadustat as a potential therapy to prevent and treat acute respiratory distress syndrome, or ARDS, in patients with COVID-19 and hypoxemia, or the VSTAT Study.

The VSTAT Study was a phase 2, randomized, double-blind, placebo-controlled study conducted by UTHealth and partially funded by Akebia.

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

Department of Defense for the study.

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

nephrology commercial organization.

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

The VSTAT Study enrolled 449 adult patients at 5 hospitals who were randomized 1:1 to vadadustat 900mg or placebo once per day orally for up to 14 days while hospitalized.

The VSTAT Study measured the proportion of patients with either 6 (non-invasive ventilation or high flow oxygen devices), 7 (invasive mechanical ventilation or extracorporeal membrane oxygenation), or 8 (death) on the National Institute of Allergy and Infectious Disease Ordinal Scale, or NIAID-OS, at Day 14 (primary) and Day 7.

While a smaller proportion of patients in the vadadustat group had a score of 6, 7, or 8 on the NIAID-OS than in the placebo group at Day 14, the trial failed to meet its primary superiority threshold of >95% probability.

Those receiving vadadustat, however, did demonstrate 94% probability of conferring benefit on the NIAID-OS at Day 14.

While the VSTAT Study missed the primary endpoint, we are encouraged by the data and, subject to regulatory discussions, believe the data support further development of vadadustat as a potential treatment for ARDS due to COVID-19 or other causes.

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

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Operating Overview

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

Our net losses were $62.4 million and $69.6 million for the three months ended March 31, 2022 and 2021, respectively.

We have incurred net losses in each year since inception.

Our net income was $29.3 million for the three months ended June 30, 2022 and our net loss was $83.0 million for the three months ended June 30, 2021.

Our net losses were $33.1 million and $152.6 million for the six months ended June 30, 2022 and 2021, respectively.

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

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

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

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

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

The workforce reduction is expected to include net charges totaling approximately $14.8 million, including costs for one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits of $11.2 million and non-cash stock-based compensation expense of $3.3 million.

During the three months ended June 30, 2022, we recognized $14.5 million of restructuring charges in the condensed

consolidated statement of operations and comprehensive income (loss).

Refer to Note 5 in this Quarterly Report on Form 10-Q for further details.

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

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

• continue our commercialization activities for Auryxia and vadadustat, if we are able to obtain marketing approval for vadadustat following receipt of the CRL from the FDA in March 2022, and any other product or product candidate, including those that may be in-licensed or acquired;

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

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

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

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

• maintain marketing approvals for Auryxia and vadadustat, if we are able to obtain marketing approval for vadadustat following receipt of the CRL from the FDA in March 2022, and any other product, including those that may be in-licensed or acquired;

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

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

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

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

• continue to repay, and pay any associated pre-payment penalties, if applicable, the senior secured term loans in an aggregate principal amount of $100.0 million, or the Term Loans, that were made available to us pursuant to the loan agreement that we entered into with funds managed by Pharmakon Advisors LP, in November 2019, which was amended in February 2022, and further amended in July 2022, or as amended, the Loan Agreement;

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

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

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

We expect to finance future cash needs through product revenue, public or private equity or debt transactions, royalty transactions, strategic transactions, or a combination of these approaches.

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

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

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

During the quarter ended March 31, 2022, we raised $0.8 million of net proceeds from ATM offerings.

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

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

From inception through June 30, 2022, we raised approximately $793.5 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $223.7 million from at-the-market offerings, or ATM offerings, pursuant to prior sales agreements with Cantor Fitzgerald & Co., and $70.0 million from the sale of 7,571,429 shares of common stock to Vifor Pharma.

As of June 30, 2022, through our collaboration agreements with Otsuka and MTPC we received approximately $837.1 million in cost-share funding, and are not entitled to receive any additional cost-share funding.

On June 30, 2022, we entered into the Termination Agreement with Otsuka, pursuant to which we received a nonrefundable and non-creditable payment of $55.0 million in consideration for the covenants and agreements set forth in the Termination Agreement.

On November 11, 2019, we entered into the Loan Agreement with funds managed by Pharmakon, pursuant to which term loans in an aggregate principal amount of $100.0 million were made available to us in two tranches, subject to certain terms and conditions, or the Term Loans.

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

As of June 30, 2022, we had drawn down the full $100.0 million made available to us under the Loan Agreement.

On July 15, 2022, or the Effective Date, we 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 as amended by the First Amendment and Waiver between the Collateral Agent, the Lenders and us, 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 to our condensed consolidated financial statements).

Pursuant to Second Amendment and Waiver, we 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 to our condensed consolidated financial statements).

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

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Impacts of COVID-19 Pandemic

The ongoing severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), or COVID-19, pandemic has presented a substantial public health and economic challenge around the world and continues to affect our employees, patients, healthcare providers with whom we interact, customers, collaboration partners, CROs, contract manufacturing organizations, or CMOs, vendors, communities and business operations.

The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and continues to affect our employees, patients, healthcare providers with whom we interact, customers, collaboration partners, CROs, contract manufacturing organizations, or CMOs, vendors, communities and business operations.

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

We believe our revenue growth was negatively impacted in the first quarter of 2022 primarily as the kidney patient population that we serve continue to experience both high hospitalization and mortality rates due to COVID-19.

We believe our revenue growth was negatively impacted in the first half of 2022 primarily as the kidney patient population that we serve continue to experience both high hospitalization and mortality rates due to COVID-19.

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

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

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

Recently, such precautionary measures have been relaxed at certain healthcare facilities and, as a result, members of our

sales force have resumed in person interactions with certain customers.

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

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

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

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

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

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Financial Overview

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

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

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

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

We will not recognize any future revenue pursuant to our collaboration with Otsuka.

Cost of Goods Sold

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

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of March 31, 2022 is estimated to be six years.

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of June 30, 2022 is estimated to be six years.

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

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

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

From inception through June 30, 2022, we have incurred $1.5 billion in research and development expenses.

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

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

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands)

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three and six months ended June 30, 2022 and 2021:

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

2022 2021 2022 2021

(in thousands) (in thousands)

Vadadustat external costs $ 11,760 $ 12,917 $ 28,913 $ 29,720

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Results of Operations

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

Comparison of the Three Months Ended June 30, 2022 and 2021

Three Months Ended Increase

March 31, 2022 March 31, 2021 (Decrease)

June 30, 2022 June 30, 2021 (Decrease)

(in thousands)

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License expense 892 894 (2)

Restructuring 14,531 — 14,531

Total operating expenses 74,257 79,759 (5,502)

Operating income (loss) 33,902 (79,341) 113,243

Other expense, net (4,626) (3,697) (929)

Net income (loss) $ 29,276 $ (83,038) $ 112,314

Product Revenue, Net .

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

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

Net product revenue was $43.7 million for the three months ended June 30, 2022, compared to $33.0 million for the three months ended June 30, 2021.

The increase was primarily due to pricing and improved payer mix.

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $83.1 million for the three months ended June 30, 2022 compared to $20.0 million for the three months ended June 30, 2021.

On June 30, 2022, we and Otsuka entered into the Termination Agreement, which, among other things, terminated the cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

Agreement, and the Otsuka collaboration agreement for certain territories outside the United States, or the Otsuka International Agreement.

During the three months ended June 30, 2022, we recognized $55.0 million in collaboration revenue related to a payment to be received pursuant to the terms of the Termination Agreement with Otsuka, $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, or the MODIFY Study, in accordance with the current study protocol, at its own cost and expense.

Refer to Note 4 in this Quarterly Report on Form 10-Q for further details.

We will not recognize any future revenue under the Otsuka U.S.

Agreement or the Otsuka International Agreement.

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

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

Cost of Goods Sold - Product .

Cost of goods sold of $9.6 million for the three months ended June 30, 2022 consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, and $2.1 million related to excess and obsolescence reserves associated with inventory.

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

Refer to Note 13 to our condensed consolidated financial statements for further details on the excess purchase commitments liability.

Cost of Goods Sold - Amortization of Intangibles.

Amortization of intangibles relates to the acquired developed product rights for Auryxia, which is being amortized using a straight-line method over its estimated useful life of approximately six years.

Amortization of intangibles during each of the three months ended June 30, 2022 and 2021 was $9.0 million.

Research and Development Expenses .

Research and development expenses were $26.0 million for the three months ended June 30, 2022, compared to $37.2 million for the three months ended June 30, 2021, a decrease of $11.2 million.

The decrease was primarily due to the following:

(in millions)

Vadadustat development expenses $ (1.2)

Headcount, consulting, facilities and other (10.0)

Total net decrease $ (11.2)

The decrease in research and development expense was primarily due to decreased headcount related costs as a result of the reduction in force and decreased consulting costs.

Also during the three months ended June 30, 2021, we made an upfront payment of $3.0 million to Cyclerion Therapeutics, Inc.

for an exclusive global license to develop and commercialize praliciguat, an investigational oral sGC, stimulator, which was recorded to research and development expense and did not reoccur during the three months ended June 30, 2022.

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

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $32.8 million for the three months ended June 30, 2022, compared to $41.7 million for the three months ended June 30, 2021.

The decrease of $8.8 million was primarily due to decreased headcount related costs as a result of the reduction in force and lower marketing expenses.

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

License Expenses.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.9 million for each of the three months ended June 30, 2022 and 2021.

Restructuring .

Restructuring expenses were $14.5 million for the three months ended June 30, 2022 due to one-time termination benefits and contractual termination benefits for severance, healthcare, and non-cash stock-based compensation related to the reduction in force.

There were no restructuring expenses for the three months ended June 30, 2021.

Other Expense, Net .

Other expense, net, was $4.6 million for the three months ended June 30, 2022 compared to $3.7 million for the three months ended June 30, 2021.

The increase of $0.9 million was primarily due to non-cash interest expense related to a refund liability to a customer and a non-recurring decrease in the fair value of our derivative liability related to the Loan Agreement with Pharmakon that occurred during the quarter ended June 30, 2021.

Comparison of the Six Months Ended June 30, 2022 and 2021

Six Months Ended Increase

June 30, 2022 June 30, 2021 (Decrease)

(In Thousands)

Product revenue, net $ 85,151 $ 63,367 $ 21,784

License, collaboration and other revenue 103,307 $ 41,850 61,457

Total revenues 188,458 105,217 83,241

Cost of goods sold:

Product 31,923 $ 69,079 (37,156)

Amortization of intangibles 18,021 18,021 —

Total cost of goods sold 49,944 87,100 (37,156)

Operating expenses:

Research and development 69,860 77,825 (7,965)

Selling, general and administrative 77,134 82,979 (5,845)

License expense 1,580 1,590 (10)

Restructuring 14,531 — 14,531

Total operating expenses 163,105 162,394 711

Operating loss (24,591) (144,277) 119,686

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

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

The increase was primarily due to improved payer mix.

Net product revenue was $85.2 million for the six months ended June 30, 2022, compared to net product revenue of $63.4 million for the six months ended June 30, 2021.

The increase was primarily due to pricing and improved payor mix.

License, Collaboration and Other Revenue.

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

During the three months ended March 31, 2022, we recognized $19.1 million in collaboration revenue from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

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

We recognized $20.7 million in collaboration revenue for

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

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

The $1.6 million decline in collaboration revenue was driven by lower development costs incurred subject to cost sharing arrangements under both the Otsuka U.S.

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

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

License, collaboration and other revenue was $103.3 million for the six months ended June 30, 2022 compared to $41.9 million for the six months ended June 30, 2021.

On June 30, 2022, we and Otsuka entered into the Termination Agreement, which, among other things, terminated the cost sharing arrangement under the Otsuka U.S.

Agreement, and the Otsuka International Agreement.

During the six months ended June 30, 2022, we recognized $55.0 million in collaboration revenue related to a payment to be received pursuant to the terms of the Termination Agreement with Otsuka, $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 MODIFY Study, in accordance with the current study protocol, at its own cost and expense.

We also recognized $19.1 million in collaboration revenue for the six months ended June 30, 2022 from the Otsuka U.S.

Agreement and the Otsuka International Agreement prior to the termination, as well as royalty revenue under the MTPC Agreement.

We recognized $39.1 million in collaboration revenue for the six months ended June 30, 2021 from the Otsuka U.S.

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

Cost of Goods Sold - Product .

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

Cost of goods sold of $31.9 million for the six months ended June 30, 2022 consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, and $7.4 million related to excess and obsolescence reserves associated with inventory partially offset by a $0.8 million reduction to the liability for excess purchase commitments.

Refer to Note 13 to our condensed consolidated financial statements for further details on the excess purchase commitments liability.

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

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

Cost of Goods Sold - Amortization of Intangibles.

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

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

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

Amortization of intangibles during each of the six months ended June 30, 2022 and 2021 was $18.0 million.

Research and Development Expenses .

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

The increase was primarily due to the following:

Research and development expenses were $69.9 million for the six months ended June 30, 2022, compared to $77.8 million for the six months ended June 30, 2021, a decrease of $8.0 million.

The decrease was primarily due to the following:

(in millions)

Vadadustat development expenses $ (1.0)

Headcount, consulting and facilities 3.0

Other research and development (0.1)

Total net increase $ 3.2

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

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

Headcount, consulting, facilities and other (7.0)

Total net decrease (8.0)

The decrease in research and development expense was primarily due to decreased headcount related costs as a result of the reduction in force and decreased consulting costs.

Also during the six months ended June 30, 2021, we made an upfront payment of $3.0 million to Cyclerion Therapeutics, Inc.

for an exclusive global license to develop and commercialize praliciguat, an investigational oral sGC, stimulator, which was recorded to research and development expense which did not reoccur during the six months ended June 30, 2022.

Selling, General and Administrative Expenses .

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

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

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

Selling, general and administrative expenses were $77.1 million for the six months ended June 30, 2022, compared to $83.0 million for the six months ended June 30, 2021.

The decrease of $5.8 million was primarily due to decreased headcount related costs as a result of the reduction in force and lower marketing expense following receipt of the CRL for vadadustat.

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

License Expenses.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.7 million for each of the three months ended March 31, 2022 and 2021.

License expense related to royalties due to Panion relating to sales of Riona in Japan was $1.6 million for each of the six months ended June 30, 2022 and 2021.

Restructuring .

There were no restructuring expenses for the three months ended June 30, 2021.

Other Expense, Net .

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

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

Other expense, net, was $8.6 million for the six months ended June 30, 2022 compared to $8.3 million for the six months ended June 30, 2021.

The increase in other expense compared to June 30, 2021 was primarily related to non-cash interest related to a refund liability to a customer.

Liquidity and Capital Resources

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

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

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

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

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

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

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

On April 7, 2022, we entered into an Open Market Sale Agreement SM , or the Sales Agreement, with Jefferies LLC, or Jefferies, as agent, for the offer and sale of common stock at current market prices in amounts to be determined from time to time.

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

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

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

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

Three Months Ended

March 31, 2022 March 31, 2021

Six Months Ended

June 30, 2022 June 30, 2021

(in thousands)

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Financing activities 47,536 111,846

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

Net (decrease) increase in cash, cash equivalents, and restricted cash $ (4,858) $ 17,900

Operating Activities .

Net cash used in operating activities of $21.6 million for the three months ended March 31, 2022 was largely driven by payroll-related expenses, rebate payments and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including amortization of intangibles of $9.0 million, stock-based compensation expense of $4.5 million, write-downs of inventory of $5.3 million, and non-cash interest expense related to sale of future royalties of $2.3 million.

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

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

Net cash used in operating activities of $52.3 million for the six months ended June 30, 2022 was driven by the net operating loss for the period and changes in working capital at period end.

Net cash used in operating activities of $133.9 million for the six months ended June 30, 2021 was largely driven by the net operating loss for the period and changes in working capital at period end.

Investing Activities .

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

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

Net cash used in investing activities for the six months ended June 30, 2022 was $0.1 million and was comprised of purchases of equipment.

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

Financing Activities.

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

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

Net cash provided by financing activities for the six months ended June 30, 2022 was $47.5 million and consisted of net proceeds from refund liabilities to customers of $40.0 million, net proceeds from the issuance of common stock of $7.1 million, and proceeds from the sale of stock under our employee stock purchase plan.

Net cash provided by financing activities for the six months ended June 30, 2021 was $111.8 million and consisted of net proceeds from the sale of future royalties of $44.8 million, net proceeds from the public issuance of common stock in connection with our prior at-the-market sales agreement with Cantor Fitzgerald & Co.

of $66.7 million, and proceeds from the sale of stock under our employee stock purchase plan.

Operating Capital Requirements

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

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

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

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

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

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

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

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

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

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

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

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

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

We have incurred losses and cumulative negative cash flows from operations in each year since our inception in February 2007, and as of June 30, 2022, we had an accumulated deficit of $1.5 billion.

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

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

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

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

Since the end of the first quarter of 2022, we have made progress implementing some of the cost avoidance measures in order to continue to reduce our expense profile in line with being a single commercial product company and we have additional cost avoidance measures we plan to implement.

During the second quarter of 2022, we implemented a reduction of our workforce by approximately 42% across all areas of our company following receipt of the CRL.

This action reflects our determination to refocus our strategic priorities around our commercial product, Auryxia®, and our development portfolio, and is a step in a cost savings plan to significantly reduce our expense profile in line with being a single commercial product company (see Note 5 to our condensed consolidated financial statements).

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

In addition, pursuant to the Second Amendment and Waiver, on the Effective Date, we 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 to our condensed consolidated financial statements).

If an event of default occurs and is continuing under the Loan Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement, which we may not have the available cash resources to repay at such time.

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

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

If any of our 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The conditions above and the annual going concern covenant in our Loan Agreement raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements are issued.

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

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

while reasonably possible, is less than probable.

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

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

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Contractual Obligations

As of March 31, 2022, other than as disclosed in Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2021 Annual Report on Form 10-K.

As of June 30, 2022, other than as disclosed in Note 13 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2021 Annual Report on Form 10-K.

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

2 unchanged sentences

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.

On July 15, 2022, pursuant to the Loan Agreement, as amended, we 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.

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

14 unchanged sentences

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

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

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

7 unchanged sentences

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

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

During the six months ended June 30, 2022, we had the following material change to our critical accounting estimates as reported in our 2021 Annual Report on Form 10-K:

Refund Liability to Customer

7 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis