What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 196 added, 183 removed, 741 unchanged (34% of the section changed)

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(in thousands, except share and per share data)

September 30,

2022 December 31,

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0 shares issued and

outstanding at June 30, 2022 and December 31, 2021

outstanding at September 30, 2022 and December 31, 2021

Common stock $ 0.00001 par value;

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

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

183,951,583 and 177,000,963 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,559,206 1,536,800

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AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Total operating expenses 59,191 87,698 222,296 250,092

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

Operating loss ( 48,174 ) ( 54,886 ) ( 72,765 ) ( 199,163 )

Other income (expense):

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Other income 1,167 427 2,712 1,854

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 )

Loss on extinguishment of debt ( 906 ) — ( 906 ) —

Net loss $ ( 51,865 ) $ ( 59,544 ) $ ( 85,010 ) $ ( 212,162 )

Net loss per share - basic and diluted $ ( 0.28 ) $ ( 0.34 ) $ ( 0.47 ) $ ( 1.30 )

Weighted-average number of common shares - basic and diluted 183,882,446 173,782,151 182,375,443 163,050,769

Comprehensive loss:

Net loss $ ( 51,865 ) $ ( 59,544 ) $ ( 85,010 ) $ ( 212,162 )

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

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

Total comprehensive loss $ ( 51,865 ) $ ( 59,544 ) $ ( 85,010 ) $ ( 212,169 )

See accompanying notes to unaudited condensed consolidated financial statements.

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

Issuance of common stock, net of

issuance costs 4,730,466 — 16,092 — — 16,092

Proceeds from sale of stock under

employee stock purchase plan 152,917 — 379 — — 379

Share-based compensation expense — — 5,592 — — 5,592

Restricted stock unit vesting 17,183 — — — — —

Net loss — — — — ( 59,544 ) ( 59,544 )

Balance at September 30, 2021 174,551,989 $ 2 $ 1,526,815 $ 6 $ ( 1,389,673 ) $ 137,150

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

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

Share-based compensation expense — — 3,375 — — 3,375

Proceeds from sale of stock under

employee stock purchase plan 144,000 — 43 — — 43

Restricted stock unit vesting 102,929 — — — — —

Net loss — — — — ( 51,865 ) ( 51,865 )

Balance at September 30, 2022 183,951,583 $ 2 $ 1,559,206 $ 6 $ ( 1,545,361 ) $ 13,853

See accompanying notes to unaudited condensed consolidated financial statements

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(in thousands)

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

Operating activities:

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Non-cash collaboration revenue ( 9,550 ) —

Non-cash R&D expense 3,941 —

Non-cash interest expense 1,467 852

Non-cash operating lease expense ( 1,818 ) ( 1,415 )

Non-cash loss on extinguishment of debt 406 —

Fair value step-up of inventory sold or written off — 21,575

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Proceeds from the exercise of stock options 67 —

Payments on debt ( 33,000 ) —

Net cash provided by financing activities 14,599 128,328

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

(Decrease) in cash, cash equivalents, and restricted cash ( 3,990 ) ( 21,888 )

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 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.

In July 2022, the Company held an end of review meeting with the FDA to inform the Company's next steps with respect to the potential U.S.

approval of vadadustat, if any, and in October 2022, the Company submitted a Formal Dispute Resolution Request, or FDRR, with the FDA.

The FDRR focuses on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult patients on dialysis in light of safety concerns expressed by the FDA in the CRL related to the rate of adjudicated thromboembolic events driven by vascular access thrombosis for vadadustat compared to the active comparator and the risk of drug-induced liver injury.

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

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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.

In connection with the Termination Agreement, Otsuka transferred the MAA for vadadustat with the EMA 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 Company’s management completed its going concern assessment in accordance with Accounting Standards Codification, or ASC, 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , or ASC 205-40.

Pursuant to the requirements of ASC 205-40, the Company’s management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Pursuant to the requirements of ASC 205-40, the Company’s management must evaluate whether there are conditions or events,

considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

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

As of September 30, 2022, the Company had cash and cash equivalents of approximately $ 144.8 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 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.

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 contractual arrangements with certain supply and collaboration partners, and the reduction of operating expenses.

Therefore, because these cost avoidance measures and certain other elements of the Company's operating plan are outside of its control, including the planned amendment of contractual arrangements with certain supply and collaboration partners, and the reduction of operating expenses, 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.

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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.

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

Management’s plans to alleviate the conditions that raise substantial doubt through cost avoidance measures, including amending contractual arrangements with certain supply and collaboration partners, and reducing operating expenses, for the Company to continue as a going concern for a period of twelve months from the date the financial statements are issued.

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.

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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.

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.

Interim results for the three and nine months ended September 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 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.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three and nine months ended September 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

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sales of Auryxia.

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):

Total net product revenue was $ 42.2 million and $ 36.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 127.4 million and $ 100.1 million for the nine months ended September 30, 2022 and 2021, respectively.

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

and Discounts Rebates, Fees

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Credits/payments made ( 8,194 ) ( 65,611 ) ( 3,669 ) ( 77,474 )

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

Balance at September 30, 2022 $ 1,428 $ 25,369 $ 498 $ 27,295

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

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Credits/payments made ( 8,593 ) ( 99,518 ) ( 4,979 ) ( 113,090 )

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

Balance at September 30, 2021 $ 1,119 $ 44,236 $ 536 $ 45,891

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 $ 24.8 million and $ 24.6 million as of June 30, 2022 and December 31, 2021, respectively.

Accounts receivable, net related to product sales was approximately $ 24.0 million and $ 24.6 million as of September 30, 2022 and December 31, 2021, respectively.

License, Collaboration and Other Significant Agreements

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,

During the three and nine months ended September 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 September 30, 2022:

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

2022 2021 2022 2021

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Total License, Collaboration and Other Revenue $ 6,725 $ 12,003 $ 110,032 $ 53,853

June 30, 2022

September 30, 2022

Short-Term Long-Term Total

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Total $ 1,265 $ 43,296 $ 44,561

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

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

Nine Months Ended September 30, 2022 Balance at

Period Additions Deductions Balance at End

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

Six Months Ended June 30, 2021

Nine Months Ended September 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 June 30, 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 June 30, 2022 and December 31, 2021.

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,

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

During the three and nine months ended September 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 September 30, Nine Months Ended September 30,

Revenue Recognized in the Period:

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

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

As of September 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) $ 2.4 million in royalties from net sales of Vafseo.

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

As of September 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.

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.

During the three and nine months ended September 30, 2022, the Company recognized revenue from MTPC royalties totaling approximately $ 0.4 million and $ 1.2 million, respectively, and approximately $ 0.3 million and $ 0.4 million during the three and nine months ended September 30, 2021, respectively.

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 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.

As of September 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 September 30, 2022.

Supply of Drug Product to MTPC

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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 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.

The Company recognized $ 5.1 million in revenue and $ 12.7 million in revenue under the MTPC Supply Agreement during the three and nine months ended September 30, 2022, respectively, and $ 2.2 million and $ 6.7 million during the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the Company recorded $ 0.2 million in accounts receivable, $ 1.3 million in deferred revenue and $ 18.6 million in other current liabilities.

Collaboration and License Agreement with Otsuka Pharmaceutical Co.

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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.

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 the 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 related to activities that will be jointly conducted by the Company and Otsuka pursuant to the terms of the Otsuka U.S.

The co-exclusive license related to activities that would 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.

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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 amount from the Otsuka Funding Option.

Agreement and the Otsuka International Agreement 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.

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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 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.

During the three and nine months ended September 30, 2022, the Company recognized $ 0 and $ 92.3 million of collaboration revenue from the Otsuka U.S.

Agreement and the Otsuka International Agreement combined in its condensed consolidated statement of operations and comprehensive loss.

The collaboration revenue for the nine months ended September 30, 2022 is primarily comprised of the $ 55.0 million payment 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 three and nine months ended September 30, 2021, the Company recognized collaboration revenue totaling $ 6.1 million and $ 29.0 million, respectively, with respect to the Otsuka U.S.

Additionally, as of September 30, 2022, there was $ 5.6 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.

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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 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.

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 loss.

During the three and nine months ended September 30, 2021, the Company recognized collaboration revenue totaling approximately $ 1.9 million and $ 13.5 million, respectively, with respect 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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On June 4, 2021, the Company entered into a License Agreement, the Cyclerion Agreement, with Cyclerion Therapeutics Inc., or Cyclerion, pursuant to which Cyclerion granted the Company an exclusive global license under certain intellectual property rights to research, develop and commercialize praliciguat, an investigational oral soluble guanylate stimulator.

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.

Under the terms of the Cyclerion Agreement, the Company made an upfront payment of $ 3.0 million in cash to Cyclerion, which was paid 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.

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

2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business .

the Definition of a Business .

The upfront payment was charged to expense at acquisition, as it relates to a development stage compound with no alternative future use.

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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.

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, an affiliate of Fresenius Medical Care North America, or FMCNA, in the United States.

On April 8, 2019, the Company and Vifor Pharma entered into an Amended and Restated License Agreement, or the Vifor First Amended Agreement, which amended and restated in full the Vifor Agreement.

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, the Company granted Vifor Pharma an exclusive license to sell vadadustat to FMCNA 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, 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, 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.

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.

1 unchanged sentence

In addition, the Second Investment Agreement contains voting agreements made by Vifor Pharma with respect to the 2022 Shares.

The 2022 Shares have not been registered pursuant to 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/or Rule 506 promulgated thereunder, as the transaction does not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act.

The 2022 Shares have not been registered pursuant to 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/or Rule 506 promulgated thereunder, as the transaction did not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act.

Revenue Recognition

10 unchanged sentences

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 June 30, 2022.

Refund Liability to Customer

2 unchanged sentences

The amount of the Working Capital Fund will be reviewed at specified intervals and is adjusted based on a number of factors including outstanding supply commitments for vadadustat for the Territory and agreed upon vadadustat inventory levels held by the Company for the Territory.

Upon termination or expiration of the Vifor Second Amended Agreement for any reason other than convenience by Vifor Pharma (including following receipt of a CRL for vadadustat), the Company will be required to refund the outstanding balance of the Working Capital Fund on the date of termination or expiration.

Upon termination or expiration of the Vifor Second Amended Agreement for any reason other than convenience by Vifor Pharma (including following receipt of the CRL for vadadustat), the Company will be required to refund the outstanding balance of the Working Capital Fund on the date of termination or expiration.

The Company has recorded the Working Capital Fund as a refund liability under ASC 606.

3 unchanged sentences

The Company imputed interest on the refund liability to the customer at a rate of 15.0 % per annum, which was determined based on certain factors, including the Company's credit rating, comparable securities yield, and the expected repayment period of the Working Capital Fund.

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

The Company recorded an

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

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

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

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.

The amortization of the discount was $ 1.1 million and $ 2.3 million for the three and nine months ended September 30, 2022, respectively.

The amortization of the deferred gain was $ 0.9 million and $ 1.8 million for the three and nine months ended September 30, 2022, respectively.

Of the $ 40.5 million total refund liability, net of deferred gain and discount, the Company classified $ 13.7 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.

15 unchanged sentences

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 $ 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.

The Company recognized royalty payments due to Panion of approximately $ 2.9 million and $ 3.0 million during the three months ended September 30, 2022 and 2021, respectively, and $ 9.5 million and $ 8.3 million during the nine months ended September 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 $ 1.5 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 recognized license revenue of $ 1.2 million and $ 1.4 million during the three months ended September 30, 2022 and 2021, respectively, and $ 3.9 million and $ 4.1 million during the nine months ended September 30, 2022 and 2021, respectively, related to royalties earned on net sales of Riona in Japan.

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

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 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 the CRL from the FDA to the Company’s NDA for vadadustat for the treatment of anemia due to CKD in adult patients.

The 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.

The workforce reduction is expected to be substantially complete by the end of May 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 $ 14.7 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.

During the three and nine months ended September 30, 2022, the Company recognized $ 0.2 million and $ 14.7 million, respectively, of restructuring charges in the condensed consolidated statement of operations.

These charges included $ 11.4 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

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

September 30, 2022

(in thousands)

3 unchanged sentences

Severance payments and adjustments ( 7,220 )

Balance at June 30, 2022 $ 6,915

Balance at September 30, 2022 $ 4,238

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

The annual effective interest rate as of September 30, 2022 was 13.6 % 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 six months ended June 30, 2022:

June 30, 2022

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

September 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 June 30, 2022 and December 31, 2021 are summarized below:

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

Fair Value Measurements Using

1 unchanged sentence

(in thousands)

June 30, 2022

September 30, 2022

Cash and cash equivalents $ 144,761 $ — $ — $ 144,761

11 unchanged sentences

The Company’s Loan Agreement with Pharmakon (see Note 11) contains certain provisions that change the underlying cash flows of the debt instrument, including a potential extension to the interest-only period dependent on both (i) no event of default having occurred and continuing and (ii) the Company achieving certain regulatory and revenue conditions.

One of the regulatory conditions was approval of vadadustat by August 2022, however, in March 2022, the Company received a CRL from the FDA stating that the FDA had determined that it could not approve the NDA for vadadustat in its present form.

One of the regulatory conditions was approval of vadadustat by August 2022, however, in March 2022, the Company received the CRL from the FDA stating that the FDA had determined that it could not approve the NDA for vadadustat in its present form.

Therefore, the Company is no longer eligible for the interest-only extension period and this no longer changes the underlying cash flows of the debt instrument.

3 unchanged sentences

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 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.

The Company recorded a derivative liability related to the Company’s Loan Agreement with Pharmakon of $ 0.8 million and $ 1.8 million as of September 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 September 30, 2022 and December 31, 2021.

The estimated fair value of the derivative liability on both September 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 the CRL from the FDA for vadadustat.

Should the Company’s assessment of the probabilities around these scenarios change, including for changes in market conditions, there could be a change to the fair value of the derivative liability.

5 unchanged sentences

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.

Change in fair value of derivative liability, recorded as other income ( 350 )

Balance at September 30, 2022 $ 760

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

The components of inventory are summarized as follows:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands)

4 unchanged sentences

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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands)

3 unchanged sentences

Total inventory $ 52,222 $ 79,059

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.

Inventory amounts written down as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold totaled $ 2.6 million and $ 1.7 million during the three months ended September 30, 2022 and 2021, respectively, and $ 10.0 million and $ 7.1 million during the nine months ended September 30, 2022 and 2021, respectively.

The increase in inventory amounts written down for the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 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 nine months ended September 30, 2022 and $ 8.7 million related step-up charges during the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, the Company recorded $ 14.8 million of long-term inventory reserves and related reduction to the excess purchases 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.

2 unchanged sentences

Intangible Assets

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

June 30, 2022

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

September 30, 2022

Gross Carrying

11 unchanged sentences

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 June 30, 2022 and 2021, and $ 18.0 million during each of the six months ended June 30, 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 September 30, 2022 and 2021, and $ 27.0 million during each of the nine months ended September 30, 2022 and 2021.

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

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

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

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

1 unchanged sentence

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.

During the nine months ended September 30, 2022, the Company evaluated business factors, including the receipt of the CRL from the FDA for vadadustat, the Company's market capitalization as impacted by a recent decline in the Company's stock price, the impact of the Otsuka Termination Agreement on the Company's future cash flows, and the increase to the Company's excess purchase commitment liability 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, June 30, 2022, and September 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.

3 unchanged sentences

Accrued Expenses

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

June 30, 2022 December 31, 2021

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

September 30, 2022 December 31, 2021

(in thousands)

22 unchanged sentences

The Company will repay the principal under the Term Loans in equal quarterly payments starting on the 33 rd-month anniversary of the applicable Funding Date, or the Amortization Schedule.

If certain conditions are met, it would have the option to repay the principal in equal quarterly payments starting on the 48 th-month anniversary of the applicable Funding Date.

If certain conditions were met, it would have had the option to repay the principal in equal quarterly payments starting on the 48 th-month anniversary of the applicable Funding Date.

One of these conditions was approval of vadadustat;

however, the Company received a CRL from the FDA in March 2022 stating that the FDA had determined that it could not approve the NDA in its present form.

however, the Company received the CRL from the FDA in March 2022 stating that the FDA had determined that it could not approve the NDA in its present form.

Therefore, the Company is no longer eligible for this option to delay repayment of the principal under the Loan Agreement.

As of September 30, 2022, the Company made its first quarterly principal payment under the Term Loans of $ 8.0 million.

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

3 unchanged sentences

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

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

anniversary of the applicable Funding Date in an amount equal to foregone interest through the second anniversary of the applicable Funding Date.

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

5 unchanged sentences

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

Therefore, as of September 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 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.

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

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

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

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

In accordance with ASC 815, 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 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.

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

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 amended and waived 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.

During each of the three and nine months ended September 30, 2022, the Company recorded a debt extinguishment loss of $ 0.9 million.

Subject to the payment in full of the 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 67,000

1 unchanged sentence

Total term loans $ 65,947

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.

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

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

In addition, under certain circumstances, a default interest rate will apply

on all outstanding obligations during the occurrence and continuance of an event of default.

The fair value of the derivative liability related to the Company’s Loan Agreement with Pharmakon was $ 0.8 million and $ 1.8 million as of September 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 September 30, 2022.

The Company recognized interest expense related to the Loan Agreement of $ 2.1 million and $ 2.7 million during the three months ended September 30, 2022 and 2021, respectively, and $ 7.5 million and $ 8.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Stockholders’ Equity

1 unchanged sentence

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 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.

As of September 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 183,951,583 and 177,000,963 shares were issued and outstanding as of September 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 September 30, 2022 and December 31, 2021.

At-the-Market Facility

13 unchanged sentences

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 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 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 nine months ended September 30, 2022, the Company granted 400,000 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 266,000 options remained outstanding as of September 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.

8 unchanged sentences

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

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

During the nine months ended September 30, 2022, the Company issued 3,233,500 options to employees under the 2014 Plan.

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.

During the nine months ended September 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.

2 unchanged sentences

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

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

The Company issued 400,000 performance-based stock options under the 2014 Plan during the nine months ended September 30, 2022.

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

3 unchanged sentences

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.

During the nine months ended September 30, 2022, the Company issued 5,216,908 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 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.

(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 vests on the first anniversary and the remaining two thirds vests in eight substantially equal 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 400,000 PSUs during the six months ended June 30, 2022.

The Company issued 400,000 PSUs during the nine months ended September 30, 2022.

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

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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 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 .

As of September 30, 2022, the maximum aggregate number of shares of

the Company’s common stock available for future issuance under the ESPP is 4,837,995 .

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 six months ended June 30, 2022.

The Company issued 335,146 shares under the ESPP during the nine months ended September 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 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.

Operating lease costs were $ 1.8 million and $ 1.7 million for the three months ended September 30, 2022 and 2021, respectively, and $ 5.4 million and $ 5.0 million for the nine months ended September 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 September 30, 2022 and 2021 and $ 5.5 million and $ 5.3 million for the nine months ended September 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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Keryx continues to be obligated for all payment terms pursuant to the Boston Lease, and the Company will guaranty Keryx’s obligations under the sublease.

Keryx recorded $ 0.4 million 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.

Keryx recorded $ 0.5 million and $ 0.4 million in sublease rental income from Foundation during the three months ended September 30, 2022 and 2021, respectively, and $ 1.4 million and $ 1.3 million during the nine months ended September 30, 2022 and 2021, respectively.

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

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

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:

As of September 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 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:

As of September 30, 2022, the remaining lease terms ranged from 3.95 years to 8.84 years.

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

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.

As of September 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 $ 74.8 million through the end of the contract term.

quantity of drug substance of Auryxia at predetermined prices.

The price per kilogram will decrease with an increase in quantity above the minimum purchase quantity.

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The Siegfried Agreement provides the Company and Siegfried with certain early termination rights.

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 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.

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

As of September 30, 2022, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $ 9.9 million through the year ending December 31, 2022.

Certain of the Company's commercial supply agreements are executory contracts 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 $ 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.

The excess purchase commitment liability relating to these executory contracts was $ 74.3 million and $ 76.7 million as of September 30, 2022 and December 31, 2021, respectively.

During the quarter ended September 30, 2022, the Company increased the excess purchase commitment liability and recorded a $ 13.2 million charge to cost of goods sold as a result of a routine long-term forecast update and continued declines in the binder market and a reduction in its contractual purchase commitment with a supplier.

During the quarter ended September 30, 2022, the Company also reduced the excess purchase commitment liability by $ 5.8 million for inventory received that had previously been identified as excess.

The Company considered whether the increase in the excess purchase commitment liability was a potential indicator of impairment of the Auryxia asset group as of September 30, 2022.

As part of its assessment, the Company reviewed the Auryxia net sales and estimated future cash flows included in its forecast and concluded that the increase in excess purchase commitment liability was not an indicator of impairment of the Auryxia asset group as of September 30, 2022.

During the quarter ended June 30, 2022, the Company 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.

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

As of September 30, 2022, the Company has committed to purchase $ 26.9 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.

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

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

The Patheon Agreement has an initial term, which began on March 11, 2020 and ends on June 30, 2023.

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

As of September 30, 2022, the Company had a minimum commitment with Patheon for $ 3.2 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 June 30, 2022, the Company has committed to purchase $ 62.0 million of vadadustat drug substance from WuXi STA through the end of 2023.

As of September 30, 2022, the Company has committed to purchase $ 19.2 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.

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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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The WuXi STA DP Agreement has an initial term of four years , beginning February 10, 2021 and ending February 10, 2025.

The WuXi STA DP Agreement may be renewed or extended by mutual agreement of the Company and WuXi STA with at least 18 months’ prior written notice.

The WuXi STA DP Agreement allows the Company to terminate the agreement on 180 calendar days’ prior written notice to WuXi STA for any reason.

In addition, each party has the ability to terminate the WuXi STA DP Agreement upon the occurrence of certain conditions.

Other Third-Party Contracts

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

Under the Company’s agreement with IQVIA to provide contract research organization services for the PRO 2 TECT and INNO 2 VATE programs, the total remaining contract costs as of September 30, 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 $ 175.7 million at June 30, 2022.

The Company also contracts with various other organizations to conduct research and development activities with remaining contract costs to the Company of approximately $ 176.3 million at September 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 June 30, 2022, the Company does not have any significant legal disputes that require a loss liability to be recorded.

As of September 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 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

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 September 30,

Warrant — 509,611

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Total 18,816,539 17,482,066

Subsequent Events

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