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Item 7. Management’s Discussion and Analysis

2023-03-10 compared with 2022-03-01 · 247 added, 229 removed, 285 unchanged (63% of the section changed)

5 unchanged sentences

Business Overview

We are a biopharmaceutical company with the purpose of bettering the life of each person impacted by kidney disease.

We are a fully integrated biopharmaceutical company committed to addressing patients’ unmet needs.

Since our initial public offering in 2014, we have built a business focused on developing and commercializing innovative therapeutics that we believe serves as a foundation for future growth.

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

We believe that delivering value broadly to the kidney community, as well as others who may benefit from our medicines, will result in delivering value for shareholders.

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

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

At higher altitudes, the body responds to lower oxygen availability with stabilization of hypoxia-inducible factor, or HIF, which stimulates erythropoietin, or EPO, production and leads to red blood cell, or RBC, production and improved oxygen delivery to tissues.

The significance of the HIF pathway was recognized by the 2019 Nobel Prize and the

2016 Albert Lasker Basic Medical Research Award, which honored the three physician-scientists who discovered the HIF pathway and elucidated this primary oxygen sensing mechanism that is essential for survival.

We believe that, based on the HIF-PH inhibitor mechanism of action and the results of our Phase 3 clinical trials, vadadustat has the potential to become the new oral standard of care for the treatment of anemia due to chronic kidney disease, or CKD.

We completed the global Phase 3 clinical development program for vadadustat in September 2020 to support regulatory filings in the United States, Europe, and other countries, which included two separate programs, INNO 2 VATE and PRO 2 TECT.

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

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

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

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

In September of 2020, we announced top-line results from our Phase 3 PRO 2 TECT program that showed vadadustat was non-inferior to darbepoetin alfa with respect to hematological efficacy in treating anemia due to CKD in NDD-CKD adult patients.

While the PRO 2 TECT data showed that vadadustat achieved both the primary and key secondary hematological efficacy endpoints, it did not meet the program's primary cardiovascular safety, or MACE, endpoint.

These cardiovascular outcomes contrast with those reported within the INNO 2 VATE program, which evaluated vadadustat for the treatment of anemia due to CKD in DD-CKD adult patients.

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

We submitted a New Drug Application, or NDA, to the U.S.

Food and Drug Administration, or FDA, for vadadustat in March of 2021 for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients.

Our NDA submission was accepted for filing by the FDA in May of 2021 and the FDA has indicated that they are not currently planning to hold an Advisory Committee meeting to discuss the NDA for vadadustat.

The FDA also assigned the application standard review and a Prescription Drug User Fee Act, or PDUFA, target action date of March 29, 2022.

Our 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.

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

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

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

In addition, MTPC filed a new drug application for vadadustat for the treatment of anemia due to CKD in adult patients in Taiwan in January of 2022.

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

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

With the support of their data monitoring committee, UTHealth decided to expand their study beyond the initial 400 patients, an enrollment target they have now surpassed.

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

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

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

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

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

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

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

Since 2018, Auryxia product revenue has grown at a compounded annual growth rate of 14% due to market share gains and improved net price per pill, while total prescriptions for phosphate binders in the United States have declined 8%.

We believe this growth is due to the benefits of the product perceived by the prescribing nephrologists as communicated by our nephrology-focused commercial and medical organizations.

If we obtain FDA approval of vadadustat, we plan to commercialize vadadustat in the United States with our well-established, nephrology-focused commercial organization, while also leveraging our collaboration with Otsuka and its U.S.

nephrology commercial organization.

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

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

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

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

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

We market Auryxia in the United States with our well-established, nephrology-focused commercial organization.

Our Japanese sublicensee, Japan Tobacco, Inc., or JT, and its subsidiary, Torii Pharmaceutical Co., Ltd., or Torii, commercialize Riona in Japan.

Auryxia is our only product approved for sale in the United States and it generated approximately $142.2 million in revenue from U.S.

product sales during the year ended December 31, 2021.

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.

Praliciguat is in development 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.

Further, our internal innovation efforts include several preclinical opportunities, both in the HIF pathway, leveraging our learnings from the research and development of vadadustat, as well as new areas of focus we are currently exploring.

Our purpose is to better the life of each person impacted by kidney disease, and we have established ourselves as a leader in the kidney community.

We believe our demonstrated ability to deliver value broadly to the kidney community has enabled us to build a sustainable company.

While our current focus centers on people living with kidney disease, we believe our continued commitment to our products and pipeline assets, focusing on all patients who can realize a meaningful benefit from our medicines, will result in delivering value for shareholders.

Our current portfolio includes:

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

(1) the control of serum phosphorus levels in adult patients with dialysis dependent chronic kidney disease, or DD-CKD, or the

Hyperphosphatemia Indication, and (2) the treatment of iron deficiency anemia, or IDA, in adult patients with non-dialysis-dependent chronic kidney disease, or NDD-CKD.

The product is also available in Japan and Taiwan.

• Vafseo™ (vadadustat) , an oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH, inhibitor, is approved in Japan for the treatment of anemia due to chronic kidney disease, or CKD, in adult patients.

Vadadustat is under regulatory review for the treatment of anemia due to CKD in Europe, where it has received a positive opinion from the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, in adult patients on dialysis.

Vadadustat is also under regulatory review for the treatment of anemia due to CKD in Australia, Korea, Taiwan and other countries.

We continue to pursue a path to potentially gain approval for vadadustat in the U.S.

Further, we have several lifecycle management and indication expansion opportunities currently under evaluation or in development for vadadustat.

• HIF-PH inhibitors in preclinical development.

The discovery of hypoxia-inducible factor, or HIF, laid the foundation to explore the central role of oxygen sensing in many diseases.

As we have seen through the development of vadadustat as a treatment for anemia due to CKD, when stabilized, HIF triggers wide-ranging adaptive, protective responses during hypoxic or ischemic conditions.

Our clinical team and research scientists are eager to further develop HIF-PH inhibitors for various indications including acute kidney injury, or AKI, and retinopathy of prematurity, or ROP.

We continue to explore additional commercial and development opportunities to expand our pipeline and portfolio of novel therapeutics through both internal research and external innovation to leverage our fully integrated team.

Today we market Auryxia in the United States with our well-established, nephrology-focused commercial organization.

Auryxia is a non-calcium, non-chewable, orally administered tablet that was approved for marketing by the U.S.

Food and Drug Administration, or FDA, in September 2014 as a phosphate binder for the Hyperphosphatemia Indication and was commercially launched in the United States shortly thereafter.

In November 2017, Auryxia received marketing approval from the FDA for a second indication, the treatment of iron deficiency anemia, and was commercially launched for this indication in the United States shortly thereafter.

Our Japanese sublicensee, Japan Tobacco, Inc., or JT, and its subsidiary, Torii Pharmaceutical Co., Ltd., or Torii, commercialize ferric citrate hydrate as Riona® in Japan.

Averoa SAS, or Averoa, has an exclusive license to develop and commercialize ferric citrate in the European Economic Area, or EEA, Turkey, Switzerland and the United Kingdom.

In 2022, Auryxia product revenue increased approximately 24.5% over 2021 due to the company’s focus on implementing a new contracting strategy in late 2021.

Since 2018, Auryxia product revenue has grown at a compounded annual growth rate of approximately 17% due to market share gains and improved net price per pill, despite a 13% decline in total prescriptions for phosphate binders in the United States since 2018.

We are seeking regulatory approval in the European Union and the United States for vadadustat as an oral treatment of anemia in adult DD-CKD patients.

We and Mitsubishi Tanabe Pharma Corporation, or MTPC, are also seeking regulatory approval for vadadustat as a treatment for anemia in adult DD-CKD and NDD-CKD patients in the United Kingdom, Switzerland and Australia, and Korea and Taiwan, respectively.

Vadadustat is currently pending an European Commission, or EC, approval decision.

On February 23, 2023, the CHMP of the EMA adopted a positive opinion recommending the EC approve Vafseo™ for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis.

We anticipate that the EC will issue a decision on the marketing authorization for Vafseo in May 2023, which would be applicable to all 27 European Union member states and Iceland, Norway and Liechtenstein.

Following the termination of our U.S.

and international collaboration agreements with Otsuka in June 2022, we regained full rights to vadadustat in Europe, Australia, China, Canada, Latin America, the Middle East and Russia.

As we do not have a commercial presence in Europe, we are seeking a partner in Europe and will support the partner’s launch of vadadustat, if approved.

We are seeking to identify and secure a partner that can effectively facilitate treatment of as many people as would benefit from vadadustat, if approved, thus maximizing the value of the asset.

We submitted a New Drug Application, or NDA, to the FDA for vadadustat in March of 2021.

On March 29, 2022, the FDA issued a complete response letter, or CRL, to our NDA for vadadustat.

The FDA concluded that the data in the NDA do not

support a favorable benefit-risk assessment of vadadustat for dialysis and non-dialysis patients.

The FDA expressed safety concerns noting failure to meet non-inferiority in MACE in the non-dialysis patient population, the increased risk of thromboembolic events, driven by vascular access thrombosis in dialysis patients, and the risk of drug-induced liver injury.

We believe there are compelling data supporting a positive benefit-risk profile for the use of vadadustat broadly in patients with CKD, including non-dialysis patients though we have always remained cautious about receiving a broad label for vadadustat that would extend to non-dialysis patients with anemia due to CKD.

As such, we began the process to dispute the FDA ruling, and in October 2022, we submitted a Formal Dispute Resolution Request, or FDRR, with the FDA regarding the CRL, specifically related to DD-CKD adult patients.

The appeal focused on the favorable balance of the benefits and risks of vadadustat for the treatment of adult DD-CKD patients 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.

In February 2023, we received a second interim response from the FDA to our FDRR, which is still under consideration by the FDA at the time of this filing.

Following the termination of our collaboration agreement with Otsuka Pharmaceutical Co.

Ltd., or Otsuka, we own full rights to vadadustat in the U.S., subject to our licensing agreement with Vifor (International) Ltd.

(now a part of CSL Limited), or CSL Vifor.

If we obtain FDA approval of vadadustat for DD-CKD adult patients, we plan to commercialize vadadustat in the United States with CSL Vifor.

Leveraging our learnings from the research and development of vadadustat, and a breadth of scientific expertise on the HIF pathway, we believe there is potential to leverage HIFs to treat other hypoxic conditions and to explore the use of HIFs in acute settings.

We believe this potential applies to vadadustat as well as other preclinical assets we are internally developing.

Regarding broader uses of vadadustat, in July 2020 we partially funded an investigator-sponsored clinical study conducted by The University of Texas Health Science Center at Houston, or UTHealth, in Houston, Texas, evaluating the use of vadadustat as a potential therapy to prevent and treat acute respiratory distress syndrome, or ARDS, in adult patients who have been hospitalized due to COVID-19 and hypoxemia (O2 saturation ≤94%).

The study was a phase 2, randomized, double-blind, placebo-controlled trial that measured the proportion of patients who had scores of 6, 7, or 8 on the National Institute of Allergy and Infectious Disease Ordinal Scale, or NIAID-OS, at Day 7 and Day 14, with Day 14 being the primary endpoint.

While the study missed the primary endpoint, the data, detailed in the Clinical Development Program section, were encouraging.

For reference, subjects receiving vadadustat demonstrated 94% probability for conferring benefit on the NIAID-OS at Day 14, slightly below the primary superiority threshold of >95% probability.

We believe vadadustat has the potential to prevent the worsening of ARDS more broadly since the mechanism underlying the benefits are not specific to COVID-19, and we will further explore vadadustat in an acute care setting.

Operating Overview

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

We have incurred net losses in each year since inception.

Our net losses were $92.6 million, $282.8 million and $383.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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

The amount of our future net losses will depend, in part, on the rate of our future expenditures, and our financial position will depend, in part, on product

revenue, collaboration revenue, and our ability to obtain additional funding.

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

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.

The workforce reduction included net charges totaling approximately $14.5 million, including costs for one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits of $11.3 million and non-cash stock-based compensation expense of $3.2 million.

On November 7, 2022, we implemented a further reduction in workforce by approximately 14% consisting solely of individuals within the commercial organization as a result of our decision to shift to a strategic account management focused model for our commercial efforts.

The workforce reduction included net charges totaling approximately $1.4 million, primarily related to one-time and contractual termination benefits including severance, non-cash stock-based compensation expense, healthcare and related benefits in the fourth quarter of 2022.

During the year ended December 31, 2022, we recognized an aggregate of $15.9 million of restructuring charges in the consolidated statement of operations and comprehensive loss.

See Note 5 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further details of the reductions in workforce.

We expect to continue to incur additional operating expenses, including additional research and development expenses to our pipeline, additional costs related to vadadustat, and research and development and selling, general and administrative expenses

for ongoing development and commercialization of Auryxia, which could lead to operating losses for the foreseeable future.

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

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

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

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

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

• address the issues identified in the CRL for vadadustat that we received from the FDA and 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;

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

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

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

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

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

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

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

• continue to repay, and pay any associated pre-payment penalties, if applicable, the senior secured term loans in an aggregate principal amount of $67.0 million as of December 31, 2022, or the Term Loans, that were made available to us pursuant to the Loan Agreement;

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

• maintain, protect and expand our intellectual property portfolio;

• attract, hire and retain qualified personnel;

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

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

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

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

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

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

2 unchanged sentences

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

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

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

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

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

From inception through December 31, 2021, we raised approximately $792.7 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $222.9 million from at-the-market offerings, or ATM offerings, pursuant to sales agreements with Cantor Fitzgerald & Co., and $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma.

During the year ended December 31, 2021, we raised $88.4 million of net proceeds from ATM offerings.

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

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

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

As of December 31, 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 a Termination and Settlement Agreement, or 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 a loan agreement, or the Loan Agreement, with funds managed by Pharmakon Advisors LP, or Pharmakon, pursuant to which term loans in an aggregate principal amount of $100.0 million were made available to us in two tranches, subject to certain terms and conditions, or the Term Loans.

As of March 31, 2021, we had drawn down the full $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.

The Collateral Agent and the Lenders are collectively referred to as Pharmakon.

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.

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 in Note 6 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

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

Pursuant to the Vifor Second Amended Agreement, CSL Vifor made an upfront payment to us of $25.0 million in lieu of the previously disclosed milestone payment of $25.0 million that CSL Vifor was to pay to us following approval of vadadustat by the FDA.

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

Impacts of COVID-19 Pandemic

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

The 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 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 during 2021 primarily as the CKD patient population that we serve continue to experience both higher 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 CKD patients;

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

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

While most of our office-based operations can be performed remotely, there is no guarantee that we will continue to be as effective while working remotely because our team is dispersed, which has limited valuable in-person employee team interactions, and employees may become sick themselves and be unable to work.

Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches.

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

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

For example, as of January 1, 2022, we have required all of our employees be fully vaccinated, subject to limited medical and religions exemptions in accordance with applicable laws.

At this time, it is not possible to predict with certainty the exact impact that our vaccine requirement will continue to have on us or on our workforce.

The vaccine requirement has resulted, and may continue to result, in employee distraction and could result in litigation and difficulty securing future labor needs.

This could have an adverse effect on our business, results of operations and cash flows.

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

We believe our revenue growth was negatively impacted by the COVID-19 pandemic in 2021 and 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.

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

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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, including with respect to vadadustat, if approved.

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, and will be for vadadustat, if approved, including the potential for further declines or changes in prescription trends and customer orders.

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.

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 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 (if approved in the United States 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 manufacturing and supply of our products and product candidates and have a negative effect on our inventory reserves, which could result in an increase in inventory write-offs due to expiry.

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 and product candidates.

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.

While we are working 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.

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.

For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part I, Item 1A.

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Financial Overview

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

To date, our revenues have been derived from product revenue from commercial sales of Auryxia, collaboration revenues, which include license and milestone payments, royalty and cost-sharing revenue generated through collaboration and license agreements with partners for the development and commercialization of vadadustat, a nonrefundable, non-creditable termination fee pursuant to the terms of the Termination Agreement with Otsuka, and royalty revenue from sales of Riona in Japan.

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

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

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

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

Cost of Goods Sold

Cost of goods sold includes direct costs to manufacture commercial drug substance and drug product for Auryxia, as well as indirect costs, including costs for packaging, shipping, insurance and quality assurance, idle capacity charges, write-offs for inventory that fails to meet specifications or is otherwise no longer suitable for commercial sale, changes in our excess purchase commitment liability, and royalties due to the licensor of Auryxia related to the U.S.

product sales recognized during the period.

and Japan product sales recognized during the period.

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

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• costs associated with preclinical, clinical and regulatory activities;

• costs associated with vadadustat pre-launch inventory build, which remains subject to approval in the United States.

• 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.

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

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

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

We may never succeed in achieving marketing approval for vadadustat.

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Risk Factors.

A change in the outcome of any of these variables with respect to the development of Auryxia and vadadustat could mean a significant change in the costs and timing associated

with that development.

A change in the outcome of any of these variables with respect to the development of Auryxia and vadadustat could mean a significant change in the costs and timing associated with that development.

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

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Amortization of intangibles 36,042 36,042 —

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

Total cost of goods sold 84,796 153,394 (68,598)

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License expense 3,175 3,489 (314)

Restructuring 15,933 — 15,933

Total operating expenses 286,921 325,502 (38,581)

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Other expense, net (12,541) (17,522) 4,981

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

Net loss before income taxes (92,562) (282,840) 190,278

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Net product revenue was $177.1 million for the year ended December 31, 2022, compared to net product revenue of $142.2 million for the year ended December 31, 2021.

The increase was primarily due to an increase in units sold and improved payer mix, partially offset by the negative impact from COVID-19 on our revenues during 2021.

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

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

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

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

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

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

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

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

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

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

See Part I, Item 3.

Legal Proceedings for further information.

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

The increase was primarily due to pricing, improved payor mix, and a 2022 year-end inventory build by a customer that exceeded 2021, partially offset by a decline in volume during 2022.

License, Collaboration and Other Revenue.

License, collaboration and other revenue was $115.5 million for the year ended December 31, 2022, compared to $71.4 million for the year ended December 31, 2021.

We recognized $65.5 million in collaboration revenue for the year ended December 31, 2021 from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S.

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

We recognized $154.3 million in collaboration revenue for the year ended December 31,

2020 from our cost sharing arrangement under the Otsuka U.S.

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

The decrease in collaboration revenue was driven by lower payments recognized under both the Otsuka U.S.

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

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 of the United States, or the Otsuka International Agreement.

During the year ended December 31, 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 Phase 3b clinical trial of vadadustat Otsuka is conducting, in accordance with the current study protocol, at its own cost and expense.

We also recognized $19.1 million in collaboration revenue for the year ended December 31, 2022 from the Otsuka U.S.

Agreement and the Otsuka International Agreement prior to the termination.

We also recognized royalty revenue under the MTPC Agreement, and revenue under our supply agreement with MTPC, or the MTPC Supply Agreement, totaling $18.0 million.

On December 16, 2022, we, MTPC, and Esteve Química, S.A., or Esteve, executed an Assignment of Supply Agreement, or the Assignment Agreement, pursuant to which the supply agreement between us and Esteve, or the Esteve Agreement, was assigned to MTPC.

The Assignment Agreement transferred the rights and obligations of the Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by us and accepted by Esteve.

Therefore, we expect significantly less revenue in the future under the MTPC Supply Agreement.

We recognized $65.5 million in collaboration revenue for the year ended December 31, 2021 from the Otsuka U.S.

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

Cost of Goods Sold - Product .

Cost of goods sold of $117.4 million for the year ended December 31, 2021 primarily consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, $33.4 million in non-cash charges related to our excess purchase commitment liability, $21.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, and $15.6 million primarily related to excess and obsolescence reserves associated with Auryxia as well as inventory reserves associated with a previously disclosed manufacturing quality issue related to Auryxia.

Cost of goods sold of $48.8 million for the year ended December 31, 2022 primarily consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, $28.7 million

in termination fees in connection with the BioVectra Termination Agreement in the fourth quarter of 2022, and $30.2 million primarily related to inventory reserves associated with drug substance that will not be forward processed into drug product.

These costs were offset by a non-cash reduction of our excess purchase commitment liability of $67.6 million driven by the reduction in purchase commitments due to execution of the Termination Agreement with BioVectra.

See Note 15 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further details of the increase to the liability for excess purchase commitments.

Cost of goods sold of $148.9 million for the year ended December 31, 2020 primarily consisted of costs associated with the manufacturing of Auryxia, $68.2 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, $25.1 million in non-cash charges related to an increase in the liability for excess purchase commitments, and $20.1 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further details of the BioVectra termination fees and decrease to the liability for excess purchase commitments.

Cost of Goods Sold - Amortization of Intangibles.

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

Amortization of intangibles during the years ended December 31, 2021 and 2020 was $36.0 million and $31.5 million, respectively.

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

Cost of Goods Sold - Impairment of Intangible Asset.

In the second quarter of 2020, in connection with a routine business review, we reduced our short-term and long-term Auryxia revenue forecast.

This reduction was primarily driven by the compounding impact of the CMS Decision that rescinded Medicare Part D coverage of Auryxia for the IDA Indication, and imposed a prior authorization requirement for Auryxia for the Hyperphosphatemia Indication.

As a result, we recorded an impairment charge of $115.5 million to the Auryxia intangible asset during the year ended December 31, 2020.

There were no such impairment charges during the year ended December 31, 2021.

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 years ended December 31, 2022 and 2021 was $36.0 million.

Research and Development Expenses .

Research and development expenses were $129.1 million for the year ended December 31, 2022, compared to $147.9 million for the year ended December 31, 2021.

The net decrease of $70.6 million was due to the following:

The net decrease of $18.7 million was due to the following changes as compared to the year ended December 31, 2021:

(in millions)

Vadadustat external development expenses $ 9.6

Other external research and development 10.9

Headcount, consulting and facilities (1.1)

Headcount, consulting, facilities and other (28.3)

Total net decrease $ (18.7)

The decrease in the costs related to the development of vadadustat is primarily attributable to a decrease in external costs related to our global Phase 3 program (INNO 2 VATE and PRO 2 TECT), for which we reported top-line data in the second and third quarters of 2020, respectively.

Although we expect our research and development expenses to continue to decrease in the near term as we completed our global Phase 3 clinical development program for vadadustat in 2020, we will continue to incur significant research and development expenses in future periods in support of ongoing or planned studies with respect to Auryxia and vadadustat and development of other potential product candidates.

The decrease in research and development expense was primarily due to decreased headcount related costs as a result of the April 2022 reduction in force, decreased consulting costs, and decreased outsourced contract services.

Also during the year ended December 31, 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 year ended December 31, 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 product candidates.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses were $138.7 million for the year ended December 31, 2022, compared to $174.2 million for the year ended December 31, 2021.

The increase of $20.2 million was primarily due to higher marketing expenses, increased headcount related costs, and one-time legal costs.

In 2022, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia and for support of our potential commercialization of vadadustat to increase modestly from 2021.

The decrease of $35.5 million was primarily due to decreased headcount related costs as a result of both the April 2022 and November 2022 reductions in force, decreased one-time legal costs, and lower marketing expenses following receipt of the CRL for vadadustat.

We expect our selling, general and administrative expenses to continue to decrease as we reduce our expense profile.

License Expenses.

License expense related to royalties due to Panion relating to sales of Riona in Japan were $3.2 million and $3.5 million for the years ended December 31, 2022 and 2021, respectively.

Restructuring .

Restructuring expenses were $15.9 million for the year ended December 31, 2022 due to one-time termination benefits and contractual termination benefits for severance, healthcare, and non-cash stock-based compensation related to the April 2022 and November 2022 reductions in force.

There were no restructuring expenses for the year ended December 31, 2021.

Other Expense, Net .

Other expense, net, was $12.5 million for the year ended December 31, 2022, compared to $17.5 million for the year ended December 31, 2021.

The increase was primarily due to $9.1 million in non-cash interest expense on the liability related to the sale of our right to receive royalties and sales milestones from MTPC as further described in Note 5 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K as well as interest expense associated with our Term Loans.

Other expense, net for the year ended December 31, 2020 was primarily due to interest expense associated with our Term Loans.

The decrease 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 year ended December 31, 2022, as well as an additional $8.0 million of quarterly principal payments made on the Term Loans pursuant to the Loan Agreement with Pharmakon, 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 year ended December 31, 2022.

Loss on Extinguishment of Debt.

During the year ended December 31, 2022, we 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 Years Ended December 31, 2021 and 2020

For discussion of our 2020 results and a comparison with 2019 results please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 that was filed with the SEC on February 25, 2021, or the 2020 Form 10-K.

For discussion of our 2021 results and a comparison with 2020 results please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 that was filed with the SEC on March 1, 2022, or the 2021 Form 10-K.

Liquidity and Capital Resources

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

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 December 31, 2022, we had cash and cash equivalents of approximately $90.5 million.

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

At inception of our collaboration agreements with Otsuka and MTPC, our collaborators committed to an aggregate of approximately $573.0 million or more in cost-share funding, of which we received approximately $272.0 million at the onset of the collaborations, as further described in Note 4 contained in this Annual Report on Form 10-K and the remainder of which we will generally continue to receive on a quarterly prepaid basis, and through license payments.

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

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

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

As of December 31, 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:

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Financing activities 14,598 133,731 231,720

Net increase in cash, cash equivalents and restricted cash $ (79,293) $ 81,328 $ 42,705

Net (decrease) increase in cash, cash equivalents and restricted cash $ (58,670) $ (79,293) $ 81,328

Operating Activities .

Net cash used in operating activities during the year ended December 31, 2021 of $253.0 million was largely driven by payroll-related expenses, rebate payments and payments for inventory.

These payments were partially offset by adjustments for non-cash items, including amortization of intangibles of $36.0 million, increases to the liability for excess purchase commitments of $33.4 million, stock-based compensation expense of $22.7 million, fair value step-up of inventory sold or written off of $21.6 million, write-downs of inventory of $15.6 million, and non-cash interest expense related to the sale of future royalties of $9.1 million.

Net cash used in operating activities during the year ended December 31, 2020 of $110.4 million was largely driven by timing of payments on our Phase 3 development program for vadadustat, payments for inventory and merger-related liabilities.

These payments were partially offset by adjustments for non-cash items, including the intangible asset impairment charge of $115.5 million, the fair value write-up of inventory sold or written off of $68.2 million, amortization of intangibles of $31.5 million, increases to the liability for excess purchase commitments of $25.1 million, stock-based compensation expense of $24.5 million, and write-downs of inventory of $20.1 million primarily associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Net cash used in operating activities during the year ended December 31, 2022 was $73.2 million as compared to $253.0 million for the year ended December 31, 2021.

The decrease in cash used was primarily due to a lower net loss driven by increased revenue as well as decreased operating expenses.

The decrease in cash used was also due to lower accounts receivable and decreased inventory purchases.

This was partially offset by payments made related to the reductions in force as well as decreases in accounts payable and accrued expenses.

Net cash used in operating activities during the year ended December 31, 2021 of $253.0 million was largely driven by net payroll-related expenses, rebate payments and payments for inventory.

Investing Activities .

Net cash used in investing activities during the year ended December 31, 2022 of $0.1 million was comprised of purchases of equipment.

Net cash provided by investing activities during the year ended December 31, 2021 of $39.9 million was comprised of proceeds from the maturities of available for sale securities of $40.0 million, partially offset by immaterial purchases of equipment.

Net cash used in investing activities during the year ended December 31, 2020 of $40.0 million was comprised primarily of purchase of available for sale securities of $99.9 million, partially offset by proceeds from the maturities of available for sale securities of $60.2 million.

Financing Activities.

Net cash provided by financing activities for the year ended December 31, 2021 was $133.7 million and consisted of net proceeds from the sale of future royalties of $44.8 million, net proceeds from the public issuance of common stock in connection with our ATM sales agreement of $88.2 million, and proceeds from the sale of stock under our employee stock purchase plan.

Net cash provided by financing activities for the year ended December 31, 2020 was $231.7 million and consisted of net proceeds from the public issuance of common stock in connection with our ATM sales agreement of $209.4 million, proceeds from the issuance of debt of $20.0 million, and proceeds from the exercise of stock options and from the sale of stock under our employee stock purchase plan.

Net cash provided by financing activities for the year ended December 31, 2022 was $14.6 million and consisted of net proceeds from a refund liability to a customer 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 year ended December 31, 2021 was $133.7 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 ATM sales agreement of $88.2 million, and proceeds from the exercise of stock options and from the sale of stock under our employee stock purchase plan.

A discussion of changes in our cash flow from the year ended December 31, 2020 to the year ended December 31, 2021 can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of the 2021 Form 10-K.

Operating Capital Requirements and Going Concern

We have one product, Auryxia, approved for commercial sale in the United States and one product candidate, vadadustat, subject to FDA approval in the U.S., but have not generated, and may not generate, enough product revenue from the sale of Auryxia or sales of vadadustat, if approved, to realize net profits from product sales.

We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of December 31, 2021, we had an accumulated deficit of $1.5 billion.

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

Operating Capital Requirements

We have one product, Auryxia, approved for commercial sale in the United States.

While we expect to be able to generate positive cash flows from our existing operations, we have not generated, and may not generate, enough product revenue from the sale of Auryxia to realize net profits from product sales.

We currently have exclusive rights under a series of patents and patent applications to commercialize Auryxia in the U.S.

that currently protect us from generic drug competition until March 2025.

Following loss of exclusivity in the U.S., we may not be able realize enough product revenue from sales of Auryxia to realize net profits from product sales after March 2025.

We have incurred losses and cumulative negative cash flows from operations in each year since our inception in February 2007, and as of December 31, 2022, we had an accumulated deficit of $1.6 billion.

Our current operating plan anticipates continued increasing levels of cash flows from operations.

We expect to continue to incur additional research and development expenses related to our pipeline, additional costs related to vadadustat, and research and development and selling, general and administrative expenses for our ongoing development and commercialization of Auryxia.

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

However, the potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones and product revenues are an important source of funding of our cash runway, which are outside of our control.

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

In any event, we will require additional funding to fund our strategy and operating plan beyond the next twelve months, including to pursue development and commercial activities related to Auryxia and vadadustat, if approved, or any additional products and product candidates, including those that may be in-licensed or acquired.

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

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

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

The Collateral Agent and the lenders are collectively referred to as Pharmakon (see Note 18).

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

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

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

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

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

Going Concern

Because the potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones and product revenues are outside of our control, there is uncertainty as to whether or not we will meet our quarterly and annual debt covenants.

The conditions above, including the going concern covenants 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 raising additional funding through the sources detailed above for us to continue as a going concern for a period of twelve months from the date the financial statements are issued.

We have concluded that the likelihood that our plan to obtain sufficient funding from one or more of these sources will be successful, while reasonably possible, is less than probable.

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

Our operating plan includes the effects of certain cost avoidance measures and the reduction of overhead costs that resulted from the amendment or termination of contractual arrangements with certain supply and collaboration partners and the reduction of operating expenses.

During 2022, we implemented certain cost avoidance measures.

For example, during the fourth quarter of 2022, we and BioVectra entered into a Termination Agreement, pursuant to which the parties agreed, among other things, to terminate, effective immediately, any and all existing agreements entered into between the parties in connection with the manufacture and supply, by BioVectra to us, of Auryxia drug substance, which eliminated future contractual commitments with this supply partner.

We, MTPC, and Esteve also executed an Assignment Agreement, pursuant to which the Supply Agreement between us and Esteve was assigned to MTPC.

The Assignment Agreement transferred our rights and obligations under the Supply Agreement to MTPC, specifically including the obligations under certain purchase orders issued by us and accepted by Esteve.

In addition, in April, May and November of 2022, the Board of Directors approved reductions of our workforce by a combined total of approximately 56% consisting of individuals across our company.

These actions reflect our determination to refocus our strategic priorities and drive revenue around our commercial product, Auryxia®, and our development portfolio, and are steps in a cost savings plan to significantly reduce our expense profile in line with being a single commercial product company (see Note 5 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K).

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

We plan to reduce our need for future financing through product sales, expense management, and cost avoidance measures in line with being a single commercial product company.

We believe that the execution of further cost avoidance measures, 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 strategic transactions could potentially further extend our cash runway for a period greater than twelve months.

However, these future decisions and transactions are not contemplated in our operating plan and are outside of our control.

Additionally, with Loss of Exclusivity, or LOE, in March of 2025, we believe the CMS decision to include phosphate binders in the dialysis bundle could potentially lead to higher sales of Auryxia after the LOE date than in other LOE scenarios, and plan to work with payors and providers to continue the use of Auryxia beyond LOE.

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 our product candidates and any additional product or product candidates, including those that may be in-licensed or acquired.

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

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

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

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

If our operating performance deteriorates significantly from the levels achieved in 2022, it could have an effect on our liquidity and our ability to continue as a going concern in the future.

Our future funding requirements, both near- and long-term,

will depend on many factors including, but not limited to, those described under Part I, Item 1A.

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

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In November 2020, we entered into a Sixth Amendment to the Cambridge Lease, or the Sixth Amendment, to extend the term of the Cambridge Lease with respect to the lab space from November 30, 2021 to January 31, 2025.

The Sixth Amendment includes two months of free rent starting in December 2020 and additional monthly lease payments of approximately $48,000 which commenced in December 2021, and is subject to annual rent escalations, which commence in December 2022.

Additionally, as a result of the Merger, we have a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease, which expires on February 28, 2023.

The total monthly lease payments under the base rent are approximately $136,000 and are subject to annual rent escalations.

Additionally, as a result of the Merger, we have a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease.

The total monthly lease payments under the Boston Lease are approximately $136,000 and are subject to annual rent escalations.

On February 24, 2022, we entered into a First Amendment to Lease, or the First Lease Amendment, with CLPF One Marina Park Drive LLC (successor-in-interest to Fallon Cornerstone One MPD LLC), or the Landlord, amending the Boston Lease.

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The First Lease Amendment also includes a Landlord’s allowance for certain leasehold improvements to the Premises in an amount of up to $1,954,680, provided that such allowance must be used prior to August 1, 2024.

See Note 18 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.

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

The sublease is subject and subordinate to the Boston Lease between Keryx and the landlord.

The term of the sublease commenced on October 16, 2019, upon receipt of the required consent from the landlord for the sublease agreement, and expires on February 27, 2023.

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

The term of the sublease commenced on October 16, 2019, upon receipt of the required consent from the landlord for the sublease agreement, and expired on February 27, 2023.

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

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BioPharma Credit PLC subsequently transferred its interest in the Term Loans, solely in its capacity as a lender, to its affiliate, BPCR Limited Partnership.

The Collateral Agent

and the lenders are collectively referred to as Pharmakon.

The Collateral Agent and the lenders are collectively referred to as Pharmakon.

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.

During the twelve months ended December 31, 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 consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

On February 18, 2022, in connection with entering into the Vifor Second Amended Agreement, we, BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, entered into the First Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, dated November 11, 2019, between the parties.

See Note 18 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.

Liability Related to Sale of Future Royalties

On February 25, 2021, we entered into a royalty interest acquisition agreement, or the Royalty Agreement, with HCR, pursuant to which we sold to HCR our right to receive royalties and sales milestones for vadadustat in the MTPC Territory, such payments collectively the Royalty Interest Payments, in each case, payable to us under the MTPC Agreement, subject to an annual maximum “cap” of $13.0 million, or the Annual Cap, and an aggregate maximum “cap” of $150.0 million, or the Aggregate Cap.

After HCR receives Royalty Interest Payments equal to the Annual Cap in a given calendar year, we will receive 85% of the Royalty Interest Payments for the remainder of that year.

After HCR receives Royalty Interest Payments equal to the Aggregate Cap, or we pay the Aggregate Cap to HCR (net of the Royalty Interest Payments already received by HCR), the Royalty Interest Payments will revert back to us, and HCR would have no further right to any Royalty Interest Payments.

We received $44.8 million from HCR (net of certain transaction expenses) under the Royalty Agreement, and we are eligible to receive an additional $5.0 million in 2023 under the Royalty Agreement if specified annual sales milestones are achieved for vadadustat in the MTPC Territory, subject to the satisfaction of certain customary conditions.

We retain the right to receive all potential future regulatory milestones for vadadustat under the MTPC Agreement.

A more detailed description of the Royalty Agreement can be found in Note 6 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Refund Liability to Customer

On February 18, 2022, pursuant to the Vifor Second Amended Agreement, CSL Vifor contributed $40.0 million to the Working Capital Fund, established to partially fund our costs of purchasing vadadustat from our contract manufacturers, which amount of funding will fluctuate, and which funding we are required to repay to CSL Vifor over time.

The $40.0 million initial contribution to the Working Capital Fund represented 50% of the amount of purchase orders that we had placed with our contract manufacturers for the supply of vadadustat for the United States, or the Territory, already delivered as of the effective date of the Vifor Second Amended Agreement, and to be delivered through the end of 2023.

We have recorded the Working Capital Fund as a refund liability under ASC 606, Revenue from Contracts with Customers .

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

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

A more detailed description of the Working Capital Fund can be found in Note 4 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Manufacturing Agreements

As a result of the Merger, our contractual obligations include Keryx’s commercial supply agreements with BioVectra Inc., or BioVectra, and Siegfried Evionnaz SA, or Siegfried, to supply commercial drug substance for Auryxia.

Pursuant to the Manufacture and Supply Agreement with BioVectra and the Product Manufacture and Supply and Facility Construction Agreement with BioVectra, we agreed to purchase minimum quantities of Auryxia drug substance annually at predetermined prices.

On September 4, 2020, we and BioVectra entered into an Amended and Restated Product Manufacture and Supply and Facility Construction Agreement, which provided for reduced minimum quantity commitments and revised the predetermined prices.

The price per kilogram decreases with an increase in quantity above the predetermined purchase quantity tiers.

In addition, the Manufacture and Supply Agreement with BioVectra and the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement with BioVectra, requires us to reimburse BioVectra for certain costs in connection with construction of a new facility for the manufacture and supply of Auryxia drug substance.

These construction costs are recorded in other assets and amortized into drug substance as inventory is released to us from BioVectra.

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

The term of the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement expires on December 31, 2026, after which, it automatically renews for successive one-year terms unless either party gives notice of its intention to terminate within a specified time prior to the end of the then-current term.

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

As of December 31, 2021 , we are required to reimburse BioVectra for certain costs in connection with the construction of the new facility and to purchase minimum quantities of Auryxia drug substance annually for a total cost of approximately $83.6 million through the end of the contract term.

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, we have agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices.

The term of the Siegfried Agreement expires on December 31, 2022, subject to our option to extend the term through December 31, 2023, by providing 12 months' prior written notice to Siegfried.

As of the date of the filing of this Annual Report on Form 10-K, we have notified Siegfried that we have elected not to exercise our option to extend the term of the Siegfried Agreement through December 31, 2023.

In addition, the Siegfried Agreement provides us and Siegfried with certain early termination rights.

As of December 31, 2021, we are required to purchase a minimum quantity of drug substance under the Siegfried Agreement for Auryxia annually at a total cost of approximately $15.6 million through the year ending December 31, 2022.

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

These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast.

The liability related to the amount of purchase commitments that exceed the current forecast was $76.7 million and $55.8 million as of December 31, 2021 and 2020, respectively.

The $20.9 million increase in liability, which was driven by reductions in the short-term and long-term Auryxia revenue sales forecast and related estimates of expiry during the year ended December 31, 2021 partially offset by a decrease due to inventory received that had been previously reserved within the excess purchase commitment liability and a reduction in commitments related to an amendment to the Siegfried Agreement during the year ended December 31, 2021.

The increase in the liability was recorded to cost of goods sold.

As a result of the Merger, our contractual obligations include Keryx’s commercial supply agreement with Siegfried Evionnaz SA, or Siegfried, and previously included a commercial supply agreement with BioVectra Inc., or BioVectra, to supply commercial drug substance for Auryxia.

On December 22, 2022, we entered into a Termination Agreement with BioVectra, pursuant to which we and BioVectra agreed, among other things, to terminate, effective immediately, any and all existing agreements entered into between us in connection with the manufacture and supply, by BioVectra to us, of Auryxia drug substance.

Under the terms of the BioVectra Termination Agreement, we agreed to pay BioVectra a total of $32.5 million consisting of (i) an upfront payment of $17.5 million and (ii) six quarterly payments of $2.5 million commencing in April 2024.

We made the initial payment of $17.5 million in December 2022.

In addition, we and BioVectra have released one another from all existing and future claims and liabilities and agreed to return certain materials and documents.

Furthermore, as it relates to all open purchase orders, BioVectra is relieved from any obligations to manufacture any product or perform services under any such open purchase orders, and we are relieved from any obligations to purchase any product under such open purchase orders.

We are also relieved from any obligations to pay any outstanding purchase orders or invoices related to performance by BioVectra of services and all other obligations under our agreements with BioVectra.

Pursuant to the Siegfried Master Manufacturing Services and Supply Agreement, as amended through December 31, 2022, or the Siegfried Agreement, we have agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices.

The term of the Siegfried Agreement was to expire on December 31, 2022, but was automatically extended into 2023 as a result of Siegfried's updated production schedule for delivery of product originally scheduled for delivery in 2022.

The Siegfried Agreement provides us and Siegfried with certain termination rights.

As of December 31, 2022, we are required to purchase a minimum quantity of drug substance under the Siegfried Agreement for Auryxia annually at a total cost of approximately $8.4 million through the third quarter of 2023.

As of the date of the filing of this Annual Report on Form 10-K, we have amended the Siegfried Agreement pursuant to which, we agreed to extend the term and purchase a minimum quantity of drug substance of Auryxia at a predetermined price as further described in Note 17 to our consolidated financial statements in Part II, Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

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

The Esteve Agreement includes the terms and conditions under which Esteve will manufacture vadadustat drug substance for commercial use.

Pursuant to the Esteve Agreement, we provide rolling forecasts to Esteve on a quarterly basis, or the Esteve Forecast.

The Esteve Forecast reflects our needs for vadadustat drug substance produced by Esteve over a certain number of months, represented as a quantity of vadadustat drug substance per calendar quarter.

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

The Esteve Agreement has an initial term of four years, beginning April 9, 2019 and ending April 9, 2023.

Pursuant to the Esteve Agreement, we have agreed to purchase a certain percentage of the global

demand for vadadustat drug substance from Esteve.

As of December 31, 2021, we have committed to purchase $28.9 million of vadadustat drug substance from Esteve through the fourth quarter of 2022.

The Esteve Agreement included the terms and conditions under which Esteve would manufacture vadadustat drug substance for commercial use.

On December 16, 2022, we, MTPC, and Esteve executed an assignment agreement, or the Assignment Agreement, pursuant to which the Esteve Agreement was assigned to MTPC.

The Assignment Agreement transferred our rights and obligations under the Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by us and accepted by Esteve.

We will have no further obligation to take delivery of, or pay for, product delivered by Esteve under the Esteve Agreement or the transferred purchase orders.

On March 11, 2020, we 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 had an initial term beginning March 11, 2020 and ending June 30, 2023 and automatically renews for successive one-year terms unless either party gives the other party eighteen months' prior written notice.

The current term of the Patheon Agreement ends June 30, 2025.

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

As of December 31, 2021, we had a minimum commitment with Patheon for $4.0 million through the fourth quarter of 2022.

As of December 31, 2022, we had a minimum commitment with Patheon for $3.1 million through the third quarter of 2023.

On April 2, 2020, we 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, we have agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA.

As of December 31, 2021, we have committed to purchase $29.2 million of vadadustat drug substance from WuXi STA through the third quarter of 2022.

As of December 31, 2022, we have committed to purchase $15.3 million of vadadustat drug substance from WuXi STA through the end of 2023.

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

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Other Third Party Contracts

Under our 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 December 31, 2021 were approximately $5.0 million, of which Otsuka reimburses a significant portion back to us.

Substantive performance for the committed work with IQVIA was completed in 2020 and close out activities were performed throughout 2021 and will continue to be performed throughout 2022.

We also contract with various other organizations to conduct research and development activities with remaining contract costs to us of approximately $237.8 million as of December 31, 2021.

We contract with various organizations to conduct research and development activities with remaining contract costs to us of approximately $90.2 million as of December 31, 2022.

The scope of the services under these research and development contracts can be modified and the contracts cancelled by us upon written notice, and therefore not included in the table of contractual obligations and commitments.

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generally accepted accounting principles.

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

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

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported

amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements.

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

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The calculation of the accrual for co-pay assistance is based on actual claims processed during a given period, as well as historical utilization data to estimate the amount we expect to receive associated with product that has been recognized as revenue, but remains in in the distribution channel at the end of each reporting period.

When appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying

and payment patterns.

Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.

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For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

With regard to the Otsuka collaboration agreements, we recognize revenue related to amounts allocated to the identified performance obligation on a proportional performance basis as the underlying services are performed.

With regard to the Otsuka collaboration agreements, we recognized revenue related to amounts allocated to the identified performance obligation on a proportional performance basis as the underlying services are performed.

The preceding estimates and judgments materially affect our recognition of collaboration revenues.

Changes in our estimates of forecasted development costs could impact proportional performance percentages and could have a material effect on collaboration revenue recorded in the period in which we determine that change occurs.

Refund Liability to Customer

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

We recorded an initial discount on the refund liability to the customer and a corresponding deferred gain to the refund liability to customer on the consolidated balance sheet as of the date the funds were received from CSL Vifor, 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.

We value our inventories at the lower-of-cost or net realizable value.

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The liability related to sale of future royalties and the debt amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement.

periodically assess the expected royalty payments.

We will periodically assess the expected royalty payments.

To the extent our estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis.

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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-K

Item 7. Management’s Discussion and Analysis