What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-03 · 147 added, 298 removed, 125 unchanged (78% of the section changed)

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Business Overview

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

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

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

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

• 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 chronic kidney disease, or CKD, on dialysis, or DD-CKD, or the Hyperphosphatemia Indication, and (2) the treatment of iron deficiency anemia, or IDA, in adult patients with CKD not on dialysis, or NDD-CKD, or the IDA Indication.

Ferric citrate is also approved and marketed in Japan as an oral treatment the improvement of hyperphosphatemia in adult 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).

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

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

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

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 can lead 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.

On March 29, 2022, we received a complete response letter, or CRL, from the U.S.

Food and Drug Administration, or FDA.

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

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

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

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

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

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

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

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

Our former collaboration partner, Otsuka Pharmaceutical Co.

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

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

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

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

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

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

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

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

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

Department of Defense for the study.

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

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

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

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

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

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

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

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

In addition, 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.

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

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.

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 Europe for the treatment of symptomatic anemia due to chronic kidney disease, or CKD, in adult patients on chronic maintenance dialysis.

Vadadustat is also approved in Japan for the treatment of anemia due to CKD in adult patients on dialysis and not on dialysis.

Additionally, vadadustat is approved in Korea as an anemia treatment for patients with CKD on hemodialysis.

Vadadustat is also under regulatory review for the treatment of anemia due to CKD in Australia, 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.

We are seeking regulatory approval in 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 Taiwan, respectively.

In April 2023, the European Commission, or EC, approved the marketing authorization of vadadustat under the trade name Vafseo™ for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis, which is 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.

We are seeking to identify and secure a partner that can effectively facilitate treatment of as many people as would benefit from vadadustat, 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 the FDRR.

In March 2023, we had a productive meeting with the FDA, who indicated that it was continuing internal consultation with experts to complete the review and render a decision.

The FDA has indicated that it has completed internal discussions, and we expect a response to the FDRR within the next thirty days.

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 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 trial 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 incurred net losses in each year since inception.

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

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

Our net losses were $26.2 million and $62.4 million for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

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

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

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

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

In addition to any additional costs not currently contemplated due to the events associated with or resulting from the workforce reduction 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, collaboration revenue, our ability to successfully implement cost avoidance measures and reduce overhead costs and our ability to obtain additional funding.

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.

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:

• 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, in the event our FDRR is accepted by the FDA, pursue our appeal of the CRL for vadadustat with the FDA;

• 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;

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• 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, or the Term Loans, that were made available to us pursuant to the loan agreement that we entered into with funds managed by Pharmakon Advisors LP, in November 2019, which was amended in February 2022, and further amended in July 2022, or as amended, the Loan Agreement;

• continue to repay, and pay any associated pre-payment penalties, if applicable, the senior secured term loans in an aggregate principal amount of $51.0 million as of March 31, 2023, or the Term Loans, that were made available to us pursuant to the loan agreement that we entered into with funds managed by Pharmakon Advisors LP, or Pharmakon, in November 2019, or the Loan Agreement;

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

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

We expect to finance future cash needs through product revenue, public or private equity or debt transactions, 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.

We expect to finance future cash needs through product revenue, potential strategic transactions, public or private equity or debt 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 September 30, 2022, we raised approximately $793.5 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $223.7 million from at-the-market offerings, or ATM offerings, pursuant to prior sales agreements with Cantor Fitzgerald & Co., and $70.0 million from the sale of 7,571,429 shares of common stock to Vifor Pharma.

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

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

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

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

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

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

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

From inception through March 31, 2023, 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 March 31, 2023, through our collaboration agreement with MTPC and our prior collaboration agreements with Otsuka we received approximately $837.1 million in cost-share funding, and are not entitled to receive any additional cost-share funding.

On June 30, 2022, we entered into the Termination 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 the Loan Agreement 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.

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

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

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

Pursuant to the Vifor Second Amended Agreement, Vifor Pharma made an upfront payment to us of $25.0 million in lieu of the previously disclosed milestone payment of $25.0 million that Vifor Pharma 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 will repay to Vifor Pharma over time.

Impacts of COVID-19 Pandemic

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

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

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

Labor shortages and costs have adversely impacted dialysis providers.

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

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

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

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

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

Moreover, our future success 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 any of our key employees leave or are unavailable.

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

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

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

The restrictions on our customer-facing employees' in-person interactions with healthcare providers 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 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 EMA and which is currently marketed under the trade name Vafseo TM by MTPC in Japan), which may result in increased costs and delays, or disruptions to the manufacturing and supply of our products.

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

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

This uncertain 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 II, Item 1A.

Risk Factors below.

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.

Financial Overview

To date, our revenues have been derived from product revenue from commercial sales of Auryxia, collaboration revenues, which include license and milestone payments, royalty and cost-sharing revenue generated through collaboration and license agreements with partners for the development and commercialization of vadadustat, 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 commercial sales of Auryxia, our collaboration with MTPC and any other collaborations into which we may enter, and royalty revenue from Japan Tobacco, Inc., and its subsidiary, Torii Pharmaceutical Co., Ltd., collectively JT and Torii, based on net sales of Riona in Japan.

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

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 have entered or may enter.

We will not recognize any future revenue pursuant to our former collaborations 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.

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 U.S.

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.

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

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

September 30, 2022 is estimated to be six years.

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

As a result of the merger whereby Keryx Biopharmaceuticals, Inc., or Keryx, became a wholly owned subsidiary of ours, and the application of purchase accounting, costs of goods sold also includes both amortization expense and, if applicable, impairment charges associated with the fair value of the developed product rights for Auryxia.

The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of March 31, 2023 is estimated to be six years.

Research and Development Expenses

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• personnel-related expenses, including salaries, benefits, recruiting fees, travel and stock-based compensation expense of our research and development personnel;

• expenses incurred under agreements with CROs and investigative sites that conduct our clinical studies;

• the cost of acquiring, developing and manufacturing clinical study materials through CMOs;

• expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials;

• the cost of acquiring, developing and manufacturing clinical trial materials through CMOs;

• facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies;

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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 studies 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 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.

The duration, costs and timing of clinical studies and development of Auryxia and vadadustat will depend on a variety of factors including, but not limited to, those described in Part II, Item 1A.

The duration, costs and timing of clinical trials and development of Auryxia and vadadustat will depend on a variety of factors including, but not limited to, those described in Part II, Item 1A.

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.

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

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

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.

From inception through March 31, 2023, we have incurred $1.6 billion in research and development expenses.

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

Our direct research and development expenses consist principally of external costs, such as fees paid to clinical trial sites, consultants, central laboratories and CROs in connection with our clinical studies, and drug substance and drug product manufacturing for clinical studies.

In 2020, we completed our global Phase 3 clinical program for vadadustat to which the majority of our research and development costs have been attributable.

Our direct research and development expenses consist principally of external costs, such as fees paid to clinical trial sites, consultants, central laboratories and CROs in connection with our clinical trials, and drug substance and drug product manufacturing for clinical trials.

In 2020, we completed our global Phase 3 clinical program for vadadustat to which the majority of our research and development costs are attributable.

A significant portion of our research and development costs have been external costs, which we track on a program-by-program basis.

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

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

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

2022 2021 2022 2021

(in thousands) (in thousands)

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

Vadadustat external costs $ 6,440 $ 17,153

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Results of Operations

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

Comparison of the Three Months Ended March 31, 2023 and 2022

Three Months Ended Increase

September 30, 2022 September 30, 2021 (Decrease)

March 31, 2023 March 31, 2022 (Decrease)

(in thousands)

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Other expense, net (1,279) (3,928) 2,649

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

Net loss $ (26,217) $ (62,421) $ 36,204

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

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

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

Net product revenue was $34.8 million for the three months ended March 31, 2023, compared to $41.4 million for the three months ended March 31, 2022.

The decrease was primarily due to a reduction in inventory of Auryxia by certain customers as well as a decline in volume, partially offset by a higher net price per tablet.

License, Collaboration and Other Revenue.

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

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

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

License, collaboration and other revenue was $5.3 million for the three months ended March 31, 2023, compared to $20.3 million for the three months ended March 31, 2022.

The decrease was primarily due to a reduction in revenue from the Otsuka collaboration agreement because on June 30, 2022, we and Otsuka entered into the Termination Agreement, which, among other things, terminated the cost sharing arrangement under the Otsuka collaboration

agreement for the United States, or the Otsuka U.S.

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

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

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

Agreement or the Otsuka International Agreement.

Cost of Goods Sold - Product .

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

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

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

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

Cost of Goods Sold - Amortization of Intangibles.

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

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

Research and Development Expenses .

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

The decrease was primarily due to the following:

(in millions)

Vadadustat development expenses $ (0.5)

Headcount, consulting, facilities and other (12.6)

Total net decrease $ (13.1)

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

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

Selling, General and Administrative Expenses .

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

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

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

License Expenses.

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

Restructuring .

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

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

Other Expense, Net .

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

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

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

Loss on Extinguishment of Debt.

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

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

Nine Months Ended Increase

September 30, 2022 September 30, 2021 (Decrease)

(in thousands)

Product revenue, net $ 127,390 $ 100,120 $ 27,270

License, collaboration and other revenue 110,032 $ 53,853 56,179

Total revenues 237,422 153,973 83,449

Cost of goods sold:

Product 60,859 $ 76,012 (15,153)

Amortization of intangibles 27,032 27,032 —

Total cost of goods sold 87,891 103,044 (15,153)

Operating expenses:

Research and development 97,210 118,296 (21,086)

Selling, general and administrative 108,052 129,336 (21,284)

License expense 2,323 2,460 (137)

Restructuring 14,711 — 14,711

Total operating expenses 222,296 250,092 (27,796)

Operating loss (72,765) (199,163) 126,398

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

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

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

Product Revenue, Net .

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

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

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

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

License, Collaboration and Other Revenue.

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

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

Agreement, and the Otsuka International Agreement.

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

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

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

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

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

Additionally, 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 our supply agreement with MTPC.

Cost of Goods Sold - Product .

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

purchase commitments.

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

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

Cost of goods sold of $10.5 million for the three months ended March 31, 2023 consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan and $0.3 million related to excess and obsolescence reserves associated with inventory.

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

Cost of Goods Sold - Amortization of Intangibles.

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

Amortization of intangibles during each of the three months ended March 31, 2023 and 2022 was $9.0 million.

Research and Development Expenses .

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

Research and development expenses were $19.7 million for the three months ended March 31, 2023, compared to $43.8 million for the three months ended March 31, 2022, a decrease of $24.1 million.

The decrease was primarily due to the following:

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Total net decrease $ (24.1)

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

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

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

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 outsourced contract services, and decreased clinical trial costs and development expenses related to vadadustat.

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

Selling, General and Administrative Expenses .

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

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

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

Selling, general and administrative expenses were $25.2 million for the three months ended March 31, 2023, compared to $44.3 million for the three months ended March 31, 2022.

The decrease of $19.1 million was primarily due to decreased headcount related costs as a result of the 2022 reductions in force and lower marketing expenses following receipt of the CRL for vadadustat.

License Expenses.

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

License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.6 million for the three months ended March 31, 2023, compared to $0.7 million for the three months ended March 31, 2022.

Restructuring.

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

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

Restructuring expenses were $0.1 million for the three months ended March 31, 2023.

There were no restructuring expenses for the three months ended March 31, 2022.

Other Expense, Net .

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

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

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

Loss on Extinguishment of Debt.

Other expense, net, was $1.3 million for the three months ended March 31, 2023, compared to $3.9 million for the three months ended March 31, 2022.

The decrease of $2.6 million was primarily due to a decrease in interest expense as a result of principal prepayments totaling $25.0 million made on the Term Loans pursuant to the Second Amendment and Waiver in the year ended December 31, 2022, as well as an additional $24.0 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 non-cash interest expense from our liability for the sale of future royalties due to a decrease in the effective interest rate on the liability for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

Liquidity and Capital Resources

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

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

As of March 31, 2023, we had cash and cash equivalents of approximately $57.0 million.

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

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

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

As of March 31, 2023, 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:

Nine Months Ended

September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

(in thousands)

Net cash provided by (used in):

Net cash (used in) provided by:

Operating activities $ (17,538) $ (21,620)

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Financing activities (15,966) 47,545

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

Net (decrease) increase in cash, cash equivalents, and restricted cash $ (33,504) $ 25,811

Operating Activities .

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

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

Net cash used in operating activities was $17.5 million for the three months ended March 31, 2023 as compared to $21.6 million for the three months ended March 31, 2022.

The decrease in cash used was primarily a result of lower net loss driven by decreased operating expenses, including payroll related expenses, as well as lower payments for inventory and lower accounts receivable.

This was partially offset by decreases in accounts payable and accrued expenses.

Investing Activities .

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

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

No net cash was used in investing activities for the three months ended March 31, 2023.

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

Financing Activities.

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

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

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

Net cash used in financing activities for the three months ended March 31, 2023 primarily consisted of principal payments of debt of $16.0 million.

Net cash provided by financing activities for the three months ended March 31, 2022 was $47.5 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 $7.2 million, and proceeds from the sale of stock under our employee stock purchase plan.

Operating Capital Requirements

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

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 anticipated by us or that additional funding will be available on terms acceptable to us, or at all.

Going Concern

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

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

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

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

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

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.

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 March 31, 2023, 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.

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, for Auryxia in March of 2025, we believe the Centers for Medicare & Medicaid Services, or 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 expected in our operating plan, 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 II, Item 1A.

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

Contractual Obligations

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

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

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 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.

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

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

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

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 each year from 2021 through 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 liability related to the sale of future royalties can be found in Note 6 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Refund Liability to Customer

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

The $40.0 million initial contribution to the Working Capital Fund represents 50% of the amount of purchase orders that the Company has placed with its 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 2022.

We have recorded the Working Capital Fund as a refund liability under ASC 606.

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 Vifor Pharma, which was March 18, 2022.

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

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

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

As of March 31, 2023, other than as disclosed in Note 10 and Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report on Form 10-K.

Critical Accounting Estimates and Significant Judgments

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

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

Refund Liability to Customer

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 condensed consolidated balance sheet as of the date the funds were received from Vifor Pharma, which was March 18, 2022.

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

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

Recent Accounting Pronouncements

For additional discussion of recent accounting pronouncements, please refer to New Accounting Pronouncements – Not Yet Adopted included within Note 2 to our condensed consolidated financial statements in Part I, Item 1.

Financial Statements (unaudited) included in this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2023, there were no material changes to our critical accounting estimates as reported in our 2022 Annual Report on Form 10-K.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis