Akebia Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission, or the SEC, on March 10, 2023, or the 2022 Annual Report on Form 10-K, including the audited consolidated financial statements and related notes therein. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. Business Overview 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. Auryxia 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. Vadadustat 30 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 $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. 31 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. 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 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 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 $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; • maintain, protect and expand our intellectual property portfolio; • 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; and • 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. We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize contract research organizations, or CROs, to carry out our clinical development activities. 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, 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 32 able to pursue development and commercial activities related to Auryxia and vadadustat, if approved, or any additional products and product candidates, including those that may be in-licensed or acquired. Any of these events could significantly harm our business, financial condition and prospects. From inception through March 31, 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. 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 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 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. Financial Overview Revenue 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. 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 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 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. 33 Research and Development Expenses Research and development expenses consist primarily of costs incurred for the development of vadadustat, which include: • 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 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; • costs associated with preclinical, clinical and regulatory activities; and • 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 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 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 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 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. These external costs include fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to acquiring and manufacturing clinical trial materials. Our internal research and development costs are primarily personnel-related costs, depreciation and other indirect costs. We do not track our internal research and development expenses on a program-by-program basis as they are deployed across multiple projects under development. The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three months ended March 31, 2023 and 2022: 34 Three Months Ended March 31, 2023 2022 (in thousands) Vadadustat external costs $ 6,440 $ 17,153 External costs for other programs 2,475 6,353 Total external research and development expenses 8,915 23,506 Headcount, consulting, facilities and other 10,771 20,327 Total research and development expenses $ 19,686 $ 43,833 Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our commercial personnel, including our field sales force and other commercial support personnel, as well as personnel in executive and other administrative or non-research and development functions. Other selling, general and administrative expenses include facility-related costs, fees for directors, accounting and legal services fees, recruiting fees and expenses associated with obtaining and maintaining patents. Results of Operations Comparison of the Three Months Ended March 31, 2023 and 2022 Three Months Ended Increase March 31, 2023 March 31, 2022 (Decrease) (in thousands) Revenues: Product revenue, net $ 34,828 $ 41,448 $ (6,620) License, collaboration and other revenue 5,299 20,251 (14,952) Total revenues 40,127 61,699 (21,572) Cost of goods sold: Product 10,473 22,333 (11,860) Amortization of intangibles 9,011 9,011 — Total cost of goods sold 19,484 31,344 (11,860) Operating expenses: Research and development 19,686 43,833 (24,147) Selling, general and administrative 25,221 44,327 (19,106) License expense 568 688 (120) Restructuring 106 — 106 Total operating expenses 45,581 88,848 (43,267) Operating loss (24,938) (58,493) 33,555 Other expense, net (1,279) (3,928) 2,649 Net loss $ (26,217) $ (62,421) $ 36,204 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 $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 $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 35 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. We will not recognize any future revenue under the Otsuka U.S. Agreement or the Otsuka International 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 $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 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 March 31, 2023 and 2022 was $9.0 million. Research and Development Expenses . 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: (in millions) Vadadustat development expenses $ (10.7) Headcount, consulting, facilities and other (13.4) 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 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 $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 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 $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 $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. 36 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 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. On April 7, 2022, we entered into an Open Market Sale Agreement SM , or the Sales Agreement, with Jefferies LLC, or Jefferies, as agent, for the offer and sale of common stock at current market prices in amounts to be determined from time to time. Also, on April 7, 2022, we filed a prospectus supplement relating to the Sales Agreement, pursuant to which we are able to offer and sell under the Sales Agreement up to $26.0 million of our common stock at current market prices from time to time. From the date of filing of the prospectus supplement through the date of the filing of this Quarterly Report on Form 10-Q, we have not sold any shares of our common stock under this program. 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. Cash Flows The following table sets forth the primary sources and uses of cash for each of the periods set forth below: Three Months Ended March 31, 2023 March 31, 2022 (in thousands) Net cash (used in) provided by: Operating activities $ (17,538) $ (21,620) Investing activities — (114) Financing activities (15,966) 47,545 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (33,504) $ 25,811 Operating Activities . 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 . 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 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. 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. 37 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. 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 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 Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed 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 unaudited condensed 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, refund liabilities to customers, impairment of intangible assets and income taxes. 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. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. 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.