What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 133 added, 121 removed, 290 unchanged (47% of the section changed)

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Auryxia is our only product approved for sale in the United States and it generated approximately $42.2 million and $36.8 million in revenue from U.S.

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

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

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

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

We 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, we 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, we submitted a Formal Dispute Resolution Request, or FDRR, to 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.

Based on the typical FDRR process, we expect to receive a response to the FDRR from the FDA by the end of 2022.

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

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

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

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

Our former collaboration partner, Otsuka Pharmaceutical Co.

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

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

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

Ltd., or Otsuka, submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients to the EMA, in October 2021, and in each of the United Kingdom, Switzerland, and Australia in the first quarter of 2022.

On June 30, 2022, we and Otsuka entered into a Termination and Settlement Agreement, or the Termination Agreement, and pursuant to the Termination Agreement, Otsuka has transferred the MAAs for vadadustat with the EMA, and in the United Kingdom, Switzerland and Australia to us.

Based on the current review timeline, we expect a decision on the MAA from EMA in the first quarter of 2023.

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

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

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

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

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

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

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

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

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

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

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

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

One indication of interest is the treatment of focal segmental glomerulosclerosis, which is highly complementary of our strategy to identify and develop novel therapeutics for people impacted by kidney diseases.

Operating Overview

We have incurred net losses in each year since inception.

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

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

Our net losses were $51.9 million and $59.5 million for the three months ended September 30, 2022 and 2021, respectively.

Our net losses were $85.0 million and $212.2 million for the nine months ended September 30, 2022 and 2021, respectively.

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

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

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

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

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

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

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

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

consolidated statement of operations and comprehensive income (loss).

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

The workforce reduction included net charges totaling approximately $14.7 million, including costs for one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits of $11.4 million and non-cash stock-based compensation expense of $3.3 million.

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

Refer to Note 5 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.

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

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

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

• address the issues identified in the CRL for vadadustat that we received from the FDA and, in the event our FDRR is accepted by the FDA, pursue our appeal of the CRL for vadadustat with the FDA;

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

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

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

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

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

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

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

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

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

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

On July 15, 2022, or the Effective Date, we entered into the Second Amendment and Waiver with BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, or the Second Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement as amended by the First Amendment and Waiver between the Collateral Agent, the Lenders and us, dated February 18, 2022, or the First Amendment and Waiver.

The Collateral Agent and the Lenders are collectively referred to as Pharmakon (see Note 11 to our condensed consolidated financial statements).

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

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

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

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

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

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

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

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

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

We believe our revenue growth was negatively impacted by the COVID-19 pandemic in 2021 and the first three quarters of 2022 primarily as the CKD patient populations that we serve experienced both high hospitalization and mortality rates due to COVID-19, and the pandemic had an adverse impact on the phosphate binder market in which Auryxia competes.

Labor shortages and costs have adversely impacted dialysis providers.

These impacts have refocused clinical efforts in addressing bone and mineral disorders like hyperphosphatemia to more acute operational issues to ensure patients receive dialysis treatments and still some patients have been rescheduled or missed treatments due to labor shortages.

We believe, this and potentially other factors, has led to the reduction in the phosphate binder market, which has not experienced growth since early 2020.

While we are unable to quantify the impact of the COVID-19 pandemic on future revenues and revenue growth, the COVID-19 pandemic and the ongoing impacts from the COVID-19 pandemic continue to adversely and disproportionately impact CKD patients and the phosphate binder market;

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

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

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

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

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

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

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

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

sales force have resumed in person interactions with certain customers.

The restrictions on our customer-facing employees' in-person interactions with healthcare providers have, and could continue to, negatively impact our access to healthcare providers and, ultimately, our sales, including with respect to vadadustat, if approved.

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

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

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

Given this uncertain environment and the disproportionate impact of the COVID-19 pandemic on CKD patients, we are actively monitoring the demand in the United States for Auryxia and will be for vadadustat, if approved, including the potential for further declines or changes in prescription trends and customer orders, which could have a material adverse effect on our business, results of operations and financial condition.

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

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

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

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

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

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

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

We are using remote monitoring and central monitoring, where possible.

This uncertain COVID-19 pandemic environment has presented new risks to our business.

This uncertain pandemic environment has presented new risks to our business.

While we are working aggressively to mitigate the impacts on our business, we are mindful that many of these risks and the impact to the larger healthcare market are outside of our control.

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

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

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of

September 30, 2022 is estimated to be six years.

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

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• costs associated with preclinical, clinical and regulatory activities;

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

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

Research and development costs are expensed as incurred.

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

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

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

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

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

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

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

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

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

2022 2021 2022 2021

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Results of Operations

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

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

Three Months Ended Increase

June 30, 2022 June 30, 2021 (Decrease)

September 30, 2022 September 30, 2021 (Decrease)

(in thousands)

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Total operating expenses 59,191 87,698 (28,507)

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

Operating loss (48,174) (54,886) 6,712

Other expense, net (2,785) (4,658) 1,873

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

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

Net loss $ (51,865) $ (59,544) $ 7,679

Product Revenue, Net .

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

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

Net product revenue was $42.2 million for the three months ended September 30, 2022, compared to $36.8 million for the three months ended September 30, 2021.

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

License, Collaboration and Other Revenue.

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

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

License, collaboration and other revenue was $6.7 million for the three months ended September 30, 2022 compared to $12.0 million for the three months ended September 30, 2021.

The decrease is primarily due to a reduction in revenue from the Otsuka collaboration agreement because on June 30, 2022, we and Otsuka

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

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

During the three months ended June 30, 2022, we recognized $55.0 million in collaboration revenue related to a payment to be received pursuant to the terms of the Termination Agreement with Otsuka, $15.5 million related to previously deferred revenue as of the date of termination and $9.6 million of non-cash consideration related to Otsuka's obligations to complete certain agreed upon clinical activities related to the Phase 3b clinical trial of vadadustat Otsuka is conducting, or the MODIFY Study, in accordance with the current study protocol, at its own cost and expense.

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

Refer to Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.

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

Agreement or the Otsuka International Agreement.

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

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

Cost of Goods Sold - Product .

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

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

Cost of goods sold of $28.9 million for the three months ended September 30, 2022 consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, $2.6 million related to excess and obsolescence reserves associated with inventory, and a $13.2 million non-cash charge related to an increase to the liability for excess purchase commitments.

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

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

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

Cost of Goods Sold - Amortization of Intangibles.

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

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

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

Research and Development Expenses .

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

Research and development expenses were $27.4 million for the three months ended September 30, 2022, compared to $40.5 million for the three months ended September 30, 2021, a decrease of $13.1 million.

The decrease was primarily due to the following:

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

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

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

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

Although we expect our research and development expenses to continue to decrease for the remainder of 2022, compared to 2021, we will continue to incur significant research and development expenses in future periods in support of ongoing or planned studies with respect to Auryxia and vadadustat and development of other potential product candidates.

Selling, General and Administrative Expenses .

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

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

Selling, general and administrative expenses were $30.9 million for the three months ended September 30, 2022, compared to $46.4 million for the three months ended September 30, 2021.

The decrease of $15.4 million was primarily due to decreased headcount related costs as a result of the reduction in force, lower one-time legal costs, and lower marketing expenses.

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

License Expenses.

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

License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.7 million for the three months ended September 30, 2022 compared to $0.9 million for the three months ended September 30, 2021.

Restructuring .

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

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

Restructuring expenses were $0.2 million for the three months ended September 30, 2022 due to one-time termination benefits for severance, healthcare, and related benefits related to the reduction in force.

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

Other Expense, Net .

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

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

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

Six Months Ended Increase

June 30, 2022 June 30, 2021 (Decrease)

Other expense, net, was $2.8 million for the three months ended September 30, 2022 compared to $4.7 million for the three months ended September 30, 2021.

The decrease of $1.9 million was primarily due to a decrease in interest expense as a result of principal prepayments totaling $25.0 million made on the Term Loans pursuant to the Second Amendment and Waiver in the three months ended September 30, 2022, reducing our outstanding balance on the Term Loans.

The decrease was also related to a decrease in the fair value of our derivative liability related to the Loan Agreement with Pharmakon during the three months ended September 30, 2022.

Loss on Extinguishment of Debt.

During the three months ended September 30, 2022, the Company recorded a debt extinguishment loss of $0.9 million related to the principal prepayments made on the Term Loans pursuant to the Second Amendment and Waiver.

Comparison of the Nine Months Ended September 30, 2022 and 2021

Nine Months Ended Increase

September 30, 2022 September 30, 2021 (Decrease)

(in thousands)

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Other expense, net (11,339) (12,999) 1,660

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

Net loss (85,010) (212,162) 127,152

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

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

Net product revenue was $127.4 million for the nine months ended September 30, 2022, compared to net product revenue of $100.1 million for the nine months ended September 30, 2021.

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

License, Collaboration and Other Revenue.

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

License, collaboration and other revenue was $110.0 million for the nine months ended September 30, 2022, compared to $53.9 million for the nine months ended September 30, 2021.

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

Agreement, and the Otsuka International Agreement.

During the six months ended June 30, 2022, we recognized $55.0 million in collaboration revenue related to a payment to be received pursuant to the terms of the Termination Agreement with Otsuka, $15.5 million related to previously deferred revenue as of the date of termination and $9.6 million of non-cash consideration related to Otsuka's obligations to complete certain agreed upon clinical activities related to the MODIFY Study, in accordance with the current study protocol, at its own cost and expense.

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

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

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

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

During the nine months ended September 30, 2022, we recognized $55.0 million in collaboration revenue related to a payment received pursuant to the terms of the Termination Agreement with Otsuka, $15.5 million related to previously deferred revenue as of the date of termination and $9.6 million of non-cash consideration related to Otsuka's obligations to complete certain agreed upon clinical activities related to the MODIFY Study, in accordance with the current study protocol, at its own cost and expense.

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

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

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

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

Cost of Goods Sold - Product .

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

Cost of goods sold of $60.9 million for the nine months ended September 30, 2022 consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, $10.0 million related to excess and obsolescence reserves associated with inventory, and a $12.4 million increase to the liability for excess

purchase commitments.

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

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

Cost of goods sold of $76.0 million for the nine months ended September 30, 2021 consisted primarily of costs associated with the manufacturing of Auryxia, $15.4 million in non-cash charges related to an increase to the liability for excess purchase commitments, $21.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, and $7.1 million related to inventory reserves associated with a previously disclosed manufacturing quality issue related to Auryxia.

Cost of Goods Sold - Amortization of Intangibles.

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

Amortization of intangibles during each of the nine months ended September 30, 2022 and 2021 was $27.0 million.

Research and Development Expenses .

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

Research and development expenses were $97.2 million for the nine months ended September 30, 2022, compared to $118.3 million for the nine months ended September 30, 2021, a decrease of $21.1 million.

The decrease was primarily due to the following:

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Total net decrease (21.1)

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

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

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

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

Also during the nine months ended September 30, 2021, we made an upfront payment of $3.0 million to Cyclerion for an exclusive global license to develop and commercialize praliciguat, an investigational oral sGC, stimulator, which was recorded to research and development expense which did not reoccur during the nine months ended September 30, 2022.

Although we expect our research and development expenses for the remainder of 2022 to continue to decrease compared to 2021, we will continue to incur significant research and development expenses in future periods in support of ongoing or planned studies with respect to Auryxia and vadadustat and development of other potential product candidates.

Selling, General and Administrative Expenses .

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

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

Selling, general and administrative expenses were $108.1 million for the nine months ended September 30, 2022, compared to $129.3 million for the nine months ended September 30, 2021.

The decrease of $21.3 million was primarily due to decreased headcount related costs as a result of the reduction in force, decreased one-time legal costs, and lower marketing expense following receipt of the CRL for vadadustat.

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

License Expenses.

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

License expense related to royalties due to Panion relating to sales of Riona in Japan was $2.3 million and $2.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Restructuring .

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

Restructuring expenses were $14.7 million for the nine months ended September 30, 2022 due to one-time termination benefits and contractual termination benefits for severance, healthcare, and non-cash stock-based compensation related to the reduction in force.

There were no restructuring expenses for the nine months ended September 30, 2021.

Other Expense, Net .

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

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

Other expense, net, was $11.3 million for the nine months ended September 30, 2022 compared to $13.0 million for the nine months ended September 30, 2021.

The decrease in other expense compared to September 30, 2021 was primarily due to a decrease in interest expense as a result of principal prepayments totaling $25.0 million made on the Term Loans pursuant to the Second Amendment and Waiver in the nine months ended September 30, 2022, reducing our outstanding balance on the Term Loans.

The decrease was also related to a decrease in the fair value of our derivative liability related to the Loan Agreement with Pharmakon during the nine months ended September 30, 2022.

Loss on Extinguishment of Debt.

Liquidity and Capital Resources

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

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

As of September 30, 2022, we had cash and cash equivalents of approximately $144.8 million.

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

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

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

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

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

(in thousands)

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Financing activities 14,599 128,328

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

Net (decrease) in cash, cash equivalents, and restricted cash $ (3,990) $ (21,888)

Operating Activities .

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

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

Net cash used in operating activities of $18.5 million for the nine months ended September 30, 2022 was driven by the net operating loss for the period and changes in working capital at period end.

Net cash used in operating activities of $190.2 million for the nine months ended September 30, 2021 was largely driven by the net operating loss for the period and changes in working capital at period end.

Investing Activities .

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

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

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

Net cash provided by investing activities for the nine months ended September 30, 2021 was $39.9 million and was primarily comprised of proceeds from the sale of available for sale securities of $40.0 million.

Financing Activities.

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

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

Net cash provided by financing activities for the nine months ended September 30, 2022 was $14.6 million and consisted of net proceeds from refund liabilities to customers of $40.0 million, net proceeds from the issuance of common stock of $7.1 million, and proceeds from the sale of stock under our employee stock purchase plan, partially offset by principal payments of debt of $33.0 million.

Net cash provided by financing activities for the nine months ended September 30, 2021 was $128.3 million and consisted of net proceeds from the sale of future royalties of $44.8 million, net proceeds from the public issuance of common stock in connection with our prior at-the-market sales agreement with Cantor Fitzgerald & Co.

of $82.8 million, and proceeds from the sale of stock under our employee stock purchase plan.

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

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

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

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

We anticipate that we will continue to incur losses for the foreseeable future, and we expect to continue to incur additional research and development expenses related to vadadustat and our

development pipeline, and research and development and selling, general and administrative expenses for our ongoing development and commercialization of Auryxia.

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

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

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

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

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

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

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

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

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

During 2022, we implemented some of the cost avoidance measures, and we have additional cost avoidance measures we plan to implement.

For example, during the third quarter of 2022, we reduced future contractual commitments with certain supply partners, and we continue to work with our supply partners to further reduce costs.

In addition, during the second quarter of 2022, we reduced our workforce by approximately 42% across all areas of our company following receipt of the CRL.

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

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

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

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

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

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

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

However, these future decisions or transactions are not contemplated in our operating plan.

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

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

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

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

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

We plan to reduce our need for future financing through the planned amendment of contractual arrangements with certain supply and collaboration partners, expense management, and cost avoidance measures in line with being a single commercial product company.

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

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Going Concern

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

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

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

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

Our 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 reduction of operating expenses.

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

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

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

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

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Contractual Obligations

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

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

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

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The first tranche of $80.0 million, or Tranche A, was drawn on November 25, 2019, or the Tranche A Funding Date, and the second tranche of $20.0 million, or Tranche B, was drawn on December 10, 2020, or the Tranche B Funding Date.

On July 15, 2022, pursuant to the Loan Agreement, as amended, we made prepayments totaling $25.0 million together with a prepayment premium of $0.5 million plus all accrued and unpaid interest on such prepayments of principal to the Effective Date, and Pharmakon agreed to waive or modify certain covenants in the Loan Agreement.

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

In addition, on July 15, 2022, pursuant to the Loan Agreement, as amended, we made prepayments totaling $25.0 million together with a prepayment premium of $0.5 million plus all accrued and unpaid interest on such prepayments of principal to the Effective Date, and Pharmakon agreed to waive or modify certain covenants in the Loan Agreement.

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

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

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

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

Refund Liability to Customer

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis