Akebia Therapeutics, Inc. 10-K/A

Item 8. Financial Statements and Supplementary Data Akebia Therapeutics, Inc. Table of Contents Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 77 Financial Statements Consolidated Balance Sheets 79 Consolidated Statements of Operations and Comprehensive Loss 80 Consolidated Statements of Stockholders’ Equity 81 Consolidated Statements of Cash Flows 82 Notes to Consolidated Financial Statements 83 76 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Akebia Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Akebia Therapeutics, Inc. (the Company) as of December 31, 2022, and 2021, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 10, 2023, except for the effect of the material weakness described in the third paragraph of that report, as to which the date is August 28, 2023, expressed an adverse opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 77 Table of Contents Revenue recognition - Payor Mix Impact on Measuring Variable Consideration, specifically payor rebates Description of the Matter As of December 31, 2022, the Company recorded accrued product revenue allowances of $26.3 million, which includes payor rebates. As discussed in Note 2 to the Company’s consolidated financial statements, the Company recognizes revenue from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. The Company contracts with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates the rebates for payors based upon (i) its contracts with the payors and (ii) information obtained from its customers and other third parties regarding the payor mix. The Company estimates these payor rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Auditing the measurement of the Company’s net product revenues was complex and judgmental due to the significant estimation required in determining the amount of consideration that will be collected net of estimates for payor rebates. In particular, the payor rebate is affected by assumptions in payor behavior such as changes in payor mix, payor collections and current customer contractual requirements. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue recognition process, including controls over the underlying assumptions and inputs used by management to estimate the payor rebates. Specifically, this included controls to assess the completeness and accuracy of the current and historical data used in calculating the estimate. Our audit procedures to test the Company’s recognition of net product revenues and specifically the variable consideration component of payor rebates included, among others, assessing the methodology used to determine the estimate and testing the significant assumptions and the underlying data used by the Company in its analysis. This included testing the reasonableness of management’s estimates to other inputs into their calculations such as contract terms, product in the distribution channel, and actual invoices received. We assessed the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performed analytical procedures to evaluate the completeness of the payor rebate reserves. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2013. Boston, Massachusetts March 10, 2023, except for Note 1, as to which the date is August 28, 2023 78 Table of Contents AKEBIA THERAPEUTICS, INC. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 90,466 $ 149,800 Inventories 21,568 36,628 Accounts receivable, net 40,284 51,581 Prepaid expenses and other current assets 32,864 33,140 Total current assets 185,182 271,149 Property and equipment, net 5,214 6,754 Operating lease assets 29,158 33,852 Goodwill 59,044 59,044 Other intangible asset, net 72,084 108,127 Other assets 5,372 50,421 Total assets $ 356,054 $ 529,347 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 18,021 $ 33,588 Accrued expenses and other current liabilities 75,777 109,014 Short-term deferred revenue 3,738 20,906 Current portion of long-term debt 32,000 97,543 Total current liabilities 129,536 261,051 Deferred revenue, net of current portion 43,296 21,474 Operating lease liabilities, net of current portion 28,961 33,703 Derivative liability 760 1,820 Long-term debt, net 34,078 — Liability related to sale of future royalties, net 57,484 53,079 Refund liability to customer 40,992 — Other non-current liabilities 15,717 84,212 Total liabilities 350,824 455,339 Commitments and contingencies (Note 16) Stockholders' equity: Preferred stock $ 0.00001 par value, 25,000,000 shares authorized at December 31, 2022 and 2021; 0 shares issued and outstanding at December 31, 2022 and 2021 — — Common stock: $ 0.00001 par value; 350,000,000 shares authorized at December 31, 2022 and 2021, respectively; 184,135,714 and 177,000,963 shares issued and outstanding at December 31, 2022 and 2021, respectively 2 1 Additional paid-in capital 1,562,247 1,536,800 Accumulated other comprehensive gain 6 6 Accumulated deficit ( 1,557,025 ) ( 1,462,799 ) Total stockholders' equity 5,230 74,008 Total liabilities and stockholders' equity $ 356,054 $ 529,347 See accompanying notes to consolidated financial statements. 79 Table of Contents AKEBIA THERAPEUTICS, INC. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) Year Ended December 31, 2022 2021 2020 Revenues: Product revenue, net $ 176,949 $ 140,288 $ 128,238 License, collaboration and other revenue 115,535 71,362 166,406 Total revenues 292,484 211,650 294,644 Cost of goods sold: Product 49,526 114,629 149,435 Amortization of intangible asset 36,042 36,042 32,617 Impairment of intangible asset — — 114,425 Total cost of goods sold 85,568 150,671 296,477 Operating expenses: Research and development 129,986 147,852 218,485 Selling, general and administrative 138,601 174,140 154,099 License expense 3,175 3,489 3,409 Restructuring 15,933 — — Total operating expenses 287,695 325,481 375,993 Operating loss ( 80,779 ) ( 264,502 ) ( 377,826 ) Other income (expense): Interest income (expense) ( 15,687 ) ( 19,936 ) ( 8,871 ) Other income (expense) 3,146 2,414 1,856 Loss on extinguishment of debt ( 906 ) — — Net loss before income taxes ( 94,226 ) ( 282,024 ) ( 384,841 ) Benefit from income taxes — — — Net loss $ ( 94,226 ) $ ( 282,024 ) $ ( 384,841 ) Net loss per share - basic and diluted $ ( 0.52 ) $ ( 1.70 ) $ ( 2.78 ) Weighted-average number of common shares - basic and diluted 182,782,680 165,949,695 138,463,152 Comprehensive loss: Net loss $ ( 94,226 ) $ ( 282,024 ) $ ( 384,841 ) Other comprehensive (loss) gain - unrealized (loss) gain on securities — ( 7 ) 13 Total comprehensive loss $ ( 94,226 ) $ ( 282,031 ) $ ( 384,828 ) See accompanying notes to consolidated financial statements. 80 Table of Contents Akebia Therapeutics, Inc. Consolidated Statements of Stockholders’ Equity (in thousands, except share and per share data) Common Stock Additional Paid-In Capital Unrealized Gain/Loss Accumulated Deficit Total Stockholders' Equity Number of Shares $ 0.00001 Par Value Balance at December 31, 2019 121,674,568 $ 1 $ 1,188,810 $ — $ ( 795,934 ) $ 392,877 Issuance of common stock, net of issuance costs 24,133,348 — 209,519 — — 209,519 Proceeds from sale of stock under employee stock purchase plan 235,658 — 1,100 — — 1,100 Exercise of options 166,633 — 1,226 — — 1,226 Stock-based compensation expense — — 24,460 — — 24,460 Restricted stock unit vesting 1,863,878 — — — — — Unrealized gain — — — 13 — 13 Net loss — — — — ( 384,841 ) ( 384,841 ) Balance at December 31, 2020 148,074,085 $ 1 $ 1,425,115 $ 13 $ ( 1,180,775 ) $ 244,354 Issuance of common stock, net of issuance costs 26,352,343 — 88,204 — — 88,204 Proceeds from sale of stock under employee stock purchase plan 307,193 — 746 — — 746 Stock-based compensation expense — — 22,735 — — 22,735 Restricted stock unit vesting 2,267,342 — — — — — Unrealized loss — — — ( 7 ) — ( 7 ) Net loss — — — — ( 282,024 ) ( 282,024 ) Balance at December 31, 2021 177,000,963 $ 1 $ 1,536,800 $ 6 $ ( 1,462,799 ) $ 74,008 Issuance of common stock, net of issuance costs 4,404,600 1 7,121 — — 7,122 Proceeds from sale of stock under employee stock purchase plan 335,146 — 410 — — 410 Stock-based compensation expense — — 17,849 — — 17,849 Restricted stock unit vesting 2,252,565 — — — — — Exercise of options 142,440 — 67 — — 67 Net loss — — — — ( 94,226 ) ( 94,226 ) Balance at December 31, 2022 184,135,714 $ 2 $ 1,562,247 $ 6 $ ( 1,557,025 ) $ 5,230 See accompanying notes to consolidated financial statements. 81 Table of Contents Akebia Therapeutics, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2022 2021 2020 Operating activities: Net loss $ ( 94,226 ) $ ( 282,024 ) $ ( 384,841 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,654 1,927 2,075 Amortization of intangible asset 36,043 36,043 32,617 Intangible asset impairment charge — — 114,425 Non-cash interest expense related to sale of future royalties 6,182 9,117 — Non-cash royalty revenue related to sale of future royalties ( 1,777 ) ( 821 ) — Amortization of premium/discount on investments — ( 15 ) ( 47 ) Non-cash collaboration revenue ( 9,550 ) — — Non-cash research and development expense 8,768 — — Non-cash interest expense 2,121 1,165 1,534 Non-cash operating lease expense ( 2,417 ) ( 1,842 ) ( 2,037 ) Non-cash loss on extinguishment of debt 406 — — Fair value step-up of inventory sold or written off — 21,575 68,240 Write-down of inventories 30,242 15,049 20,641 Change in excess inventory purchase commitments ( 65,946 ) 30,337 25,114 Stock-based compensation 17,849 22,735 24,460 Change in fair value of derivative liability ( 1,060 ) ( 600 ) 286 Changes in operating assets and liabilities: Accounts receivable 11,297 ( 24,027 ) 11,669 Inventories 19,087 ( 24,947 ) 6,163 Prepaid expenses and other current assets 1,058 ( 18,658 ) ( 8,119 ) Operating lease assets — ( 13,888 ) — Other long-term assets ( 5,623 ) 5,674 ( 2,779 ) Accounts payable 1,501 ( 11,735 ) 3,678 Accrued expenses and other current liabilities ( 38,005 ) ( 22,080 ) 6,259 Operating lease liabilities 2,311 15,398 1,411 Deferred revenue 4,654 1,821 ( 32,391 ) Other non-current liabilities 2,277 ( 13,169 ) 1,254 Net cash used in operating activities ( 73,154 ) ( 252,965 ) ( 110,388 ) Investing activities: Purchase of property and equipment ( 114 ) ( 59 ) ( 317 ) Purchase of available for sale securities — — ( 99,932 ) Proceeds from the maturities of available for sale securities — 40,000 60,245 Net cash provided by (used in) investing activities ( 114 ) 39,941 ( 40,004 ) Financing activities: Proceeds from sale of future royalties, net — 44,783 — Proceeds from refund liabilities to customers 40,000 — — Proceeds from the issuance of common stock, net of issuance costs 7,121 88,202 209,419 Proceeds from the sale of stock under employee stock purchase plan 410 746 1,100 Proceeds from the exercise of stock options 67 — 1,226 Proceeds from the issuance of debt, net — — 19,975 Payments on debt ( 33,000 ) — — Net cash provided by financing activities 14,598 133,731 231,720 Increase (decrease) in cash, cash equivalents, and restricted cash ( 58,670 ) ( 79,293 ) 81,328 Cash, cash equivalents, and restricted cash at beginning of the period 151,839 231,132 149,804 Cash, cash equivalents, and restricted cash at end of the period $ 93,169 $ 151,839 $ 231,132 Non-cash financing activities Unpaid offering costs $ — $ 2 $ 100 Cash paid for: Interest 6,755 9,632 7,843 See accompanying notes to consolidated financial statements. 82 Table of Contents Akebia Therapeutics, Inc. Notes to Consolidated Financial Statements 1. Revisions of Previously Issued Financial Statements In the course of preparing the consolidated financial statements for the three and six months ended June 30, 2023, Akebia Therapeutics, Inc., referred to as Akebia or the Company, identified certain accounting errors relating to the recording and reporting of reserves for returns of the Company’s product, Auryxia® (ferric citrate) at the time the Company acquired Keryx Biopharmaceuticals, Inc. ("Keryx") on December 12, 2018 and when calculating the product return reserves for subsequent annual and quarterly periods through March 31, 2023 (collectively, the "Product Return Reserve Errors"). This resulted in errors in the Company's consolidated financial statements previously filed by the Company with the SEC for each of the fiscal years ended December 31, 2022, 2021 and 2020. Specifically, the Company utilized an incorrect methodology to calculate, record and report the Auryxia product return reserves at the time the Company acquired Keryx on December 12, 2018, which resulted in errors in the calculation of and understatement of goodwill of $ 2.6 million in each of the subsequent annual periods. The Company continued to utilize the incorrect methodology to calculate, record and report the product return reserves in the consolidated financial statements it issued with respect to its fiscal years ended December 31, 2022, 2021 and 2020, which resulted in the product return reserves and other product revenue allowances being understated by $ 8.2 million, $ 7.9 million and $ 6.0 million as of December 31, 2022, 2021 and 2020, respectively. A breakdown of the understatement of the product return reserves between current and long-term in the consolidated balance sheet are as follows: December 31, (in thousands) 2020 2021 2022 Included in accrued expenses and other current liabilities: Product return reserves and other product revenue allowances $ 1,956 $ 4,557 $ 5,051 Included in other long-term liabilities: Product return reserves 4,048 3,360 3,132 Total understatement of product return reserves and other product revenue allowances $ 6,004 $ 7,917 $ 8,183 Further, as a result of the Product Return Reserve Errors, revenue was overstated by $ 0.1 million, $ 1.9 million and $ 0.6 million, and accounts receivable was understated by $ 1.1 million, $ 0.7 million and $ 0.7 million as of and for the years ended December 31, 2022, 2021 and 2020, respectively. The changes did not impact cash or ending cash balances in the Company’s consolidated balance sheets in the periods presented in this report or in previously issued annual and quarterly financial statements. In addition to the Product Return Reserve Errors, the Company has corrected other immaterial misstatements in the revised consolidated financial statements for the years ended December 31, 2022, 2021 and 2020 and related quarterly periods, including an understatement of $ 1.4 million to goodwill in each of the years ended December 31, 2022, 2021 and 2020 related to an excess purchase commitment recorded in connection with the Keryx acquisition. The Company assessed the materiality of the impact of the Product Return Reserve Errors both quantitatively and qualitatively and determined the impact to be immaterial to the consolidated financial statements for the years ended December 31, 2022, 2021 and 2020 as well as the quarterly interim periods. However, the Company concluded that the effect of correcting the Product Return Reserve Errors in the quarter ended June 30, 2023 would materially misstate the Company’s unaudited consolidated financial statements for the three and six months ended June 30, 2023 and, accordingly, determined that it was necessary to revise the consolidated financial statements it previously issued with respect to the fiscal years ended December 31, 2022, 2021 and 2020. The remainder of the Notes to the Company's consolidated financial statements have been updated and revised, as applicable, to reflect the impact of the corrections described in this Note 1. The following tables reflect the impact of the revision for the Product Return Reserve Errors as well as other immaterial corrections on the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2022, 2021 and 2020: 83 Table of Contents FISCAL YEAR ENDED DECEMBER 31, 2022 (in thousands, except per share data) December 31, 2022 Consolidated Balance Sheet As Previously Reported Adjustment As Revised Inventories $ 21,762 $ ( 194 ) $ 21,568 Accounts receivable, net 39,180 1,104 40,284 Prepaid expenses and other current assets 33,541 ( 677 ) 32,864 Total current assets 184,949 233 185,182 Goodwill 55,053 3,991 59,044 Total assets $ 351,830 $ 4,224 $ 356,054 Accrued expenses and other current liabilities $ 70,997 $ 4,780 $ 75,777 Total current liabilities 124,756 4,780 129,536 Other long-term liabilities 12,161 3,556 15,717 Total liabilities 342,488 8,336 350,824 Accumulated deficit ( 1,552,913 ) ( 4,112 ) ( 1,557,025 ) Total stockholder' equity 9,342 ( 4,112 ) 5,230 Total liabilities and stockholders' equity $ 351,830 $ 4,224 $ 356,054 Year Ended December 31, 2022 Consolidated Statements of Operations and Comprehensive Loss As Previously Reported Adjustment As Revised Product revenue, net $ 177,067 $ ( 118 ) $ 176,949 Cost of goods sold, product 48,754 772 49,526 Research and development 129,114 872 129,986 Selling, general and administrative 138,699 ( 98 ) 138,601 Operating loss ( 79,115 ) ( 1,664 ) ( 80,779 ) Net loss $ ( 92,562 ) ( 1,664 ) ( 94,226 ) Comprehensive loss $ ( 92,562 ) ( 1,664 ) ( 94,226 ) Earnings per share - basic and diluted $( 0.51 ) $ 0.01 $( 0.52 ) December 31, 2022 Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit $ ( 1,552,913 ) $ ( 4,112 ) $ ( 1,557,025 ) Net loss $ ( 92,562 ) $ ( 1,664 ) $ ( 94,226 ) 84 Table of Contents Year Ended December 31, 2022 Consolidated Statement of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 92,562 ) $ ( 1,664 ) $ ( 94,226 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in excess inventory purchase commitments ( 67,618 ) 1,672 ( 65,946 ) Changes in operating assets and liabilities: Accounts receivable 11,695 ( 398 ) 11,297 Inventories 19,793 ( 706 ) 19,087 Prepaid expenses and other current assets 381 677 1,058 Accrued expenses and other current liabilities ( 38,227 ) 222 ( 38,005 ) Other non-current liabilities 2,080 197 2,277 Net cash used in operating activities $ ( 73,154 ) $ — $ ( 73,154 ) FISCAL YEAR ENDED DECEMBER 31, 2021 (in thousands, except per share data) December 31, 2021 Consolidated Balance Sheet As Previously Reported Adjustment As Revised Inventories $ 38,195 $ ( 1,567 ) $ 36,628 Accounts receivable, net 50,875 706 51,581 Total current assets 272,010 ( 861 ) 271,149 Goodwill 55,053 3,991 59,044 Other long-term assets, net 49,754 667 50,421 Total assets $ 525,550 $ 3,797 $ 529,347 Accrued expenses and other current liabilities $ 104,456 $ 4,558 $ 109,014 Total current liabilities 256,493 4,558 261,051 Other long-term liabilities 82,525 1,687 84,212 Total liabilities 449,094 6,245 455,339 Accumulated deficit ( 1,460,351 ) ( 2,448 ) ( 1,462,799 ) Total stockholder' equity 76,456 ( 2,448 ) 74,008 Total liabilities and stockholders' equity $ 525,550 $ 3,797 $ 529,347 For the Year Ended December 31, 2021 Consolidated Statements of Operations and Comprehensive Loss As Previously Reported Adjustment As Revised Product revenue, net $ 142,216 $ ( 1,928 ) $ 140,288 Cost of goods sold, product 117,352 ( 2,723 ) 114,629 Selling, general and administrative 174,161 ( 21 ) 174,140 Operating loss ( 265,318 ) 816 ( 264,502 ) Net loss $ ( 282,840 ) $ 816 $ ( 282,024 ) Comprehensive loss $ ( 282,847 ) $ 816 $ ( 282,031 ) Earnings per share - basic and diluted $( 1.70 ) $ — $( 1.70 ) 85 Table of Contents December 31, 2021 Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit $ ( 1,460,351 ) $ ( 2,448 ) $ ( 1,462,799 ) Net loss $ ( 282,840 ) $ 816 $ ( 282,024 ) For the Year Ended December 31, 2021 Consolidated Statement of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 282,840 ) $ 816 $ ( 282,024 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in excess inventory purchase commitments 33,391 ( 3,054 ) 30,337 Write-down of inventories 15,618 ( 569 ) 15,049 Changes in operating assets and liabilities: Accounts receivable ( 24,022 ) ( 5 ) ( 24,027 ) Inventories ( 25,847 ) 900 ( 24,947 ) Accrued expenses and other current liabilities ( 24,680 ) 2,600 ( 22,080 ) Other non-current liabilities ( 12,481 ) ( 688 ) ( 13,169 ) Net cash used in operating activities $ ( 252,965 ) $ — $ ( 252,965 ) FISCAL YEAR ENDED DECEMBER 31, 2020 (in thousands, except per share data) For the Year Ended December 31, 2020 Consolidated Statements of Operations and Comprehensive Loss As Previously Reported Adjustment As Revised Product revenue, net $ 128,901 $ ( 663 ) $ 128,238 Cost of goods sold, product 148,866 569 149,435 Cost of goods sold, amortization of intangible asset 31,515 1,102 32,617 Cost of goods sold, impairment of intangible asset 115,527 ( 1,102 ) 114,425 Operating loss ( 376,442 ) ( 1,384 ) ( 377,826 ) Net loss $ ( 383,457 ) $ ( 1,384 ) $ ( 384,841 ) Comprehensive loss $ ( 383,444 ) $ ( 1,384 ) $ ( 384,828 ) Earnings per share - basic and diluted $( 2.77 ) $( 0.01 ) $( 2.78 ) December 31, 2020 Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit $ ( 1,177,511 ) $ ( 3,264 ) $ ( 1,180,775 ) Net loss $ ( 383,457 ) $ ( 1,384 ) $ ( 384,841 ) 86 Table of Contents For the Year Ended December 31, 2020 Consolidated Statement of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 383,457 ) $ ( 1,384 ) $ ( 384,841 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of intangible asset 31,515 1,102 32,617 Intangible asset impairment charge 115,527 ( 1,102 ) 114,425 Write-down of inventories 20,072 569 20,641 Changes in operating assets and liabilities: Accounts receivable 12,011 ( 342 ) 11,669 Accrued expenses and other current liabilities 6,356 ( 97 ) 6,259 Other non-current liabilities — 1,254 1,254 Net cash used in operating activities $ ( 110,388 ) $ — $ ( 110,388 ) December 31, 2019 Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit ( 794,054 ) ( 1,880 ) ( 795,934 ) The following tables reflect the impact of this revision on the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022: QUARTER ENDED SEPTEMBER 30, 2022 ( dollars in thousands, except per share amounts ) September 30, 2022 Unaudited Condensed Consolidated Balance Sheet As Previously Reported Adjustment As Revised Inventories $ 40,039 $ 5,203 $ 45,242 Accounts receivable, net 23,094 175 23,269 Prepaid expenses and other current assets 29,618 ( 678 ) 28,940 Total current assets 237,512 4,700 242,212 Goodwill 55,053 3,991 59,044 Other long-term assets, net 26,275 ( 334 ) 25,941 Total assets $ 435,894 $ 8,357 $ 444,251 Accrued expenses and other current liabilities $ 87,364 $ 5,164 $ 92,528 Total current liabilities 187,965 5,164 193,129 Other non-current liabilities 74,313 8,787 83,100 Total liabilities 422,041 13,951 435,992 Accumulated deficit ( 1,545,361 ) ( 5,594 ) ( 1,550,955 ) Total liabilities and stockholders' equity $ 435,894 $ 8,357 $ 444,251 87 Table of Contents Three Months Ended September 30, 2022 Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income As Previously Reported Adjustment As Revised Product revenue, net $ 42,239 $ ( 250 ) $ 41,989 Cost of goods sold, product 28,936 334 29,270 Research and development 27,350 678 28,028 Selling, general and administrative 30,918 969 31,887 Operating loss ( 48,174 ) ( 2,230 ) ( 50,404 ) Net loss $ ( 51,865 ) $ ( 2,230 ) $ ( 54,095 ) Comprehensive loss $ (51,865) $ (2,230) $ (54,095) Earnings per share - basic and diluted $( 0.28 ) $( 0.01 ) $( 0.29 ) Nine Months Ended September 30, 2022 Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income As Previously Reported Adjustment As Revised Product revenue, net $ 127,390 $ ( 720 ) $ 126,670 Cost of goods sold, product 60,859 1,106 61,965 Research and development 97,210 678 97,888 Selling, general and administrative 108,052 641 108,693 Operating loss ( 72,765 ) ( 3,146 ) ( 75,911 ) Net loss $ ( 85,010 ) $ ( 3,146 ) $ ( 88,156 ) Comprehensive loss $ (85,010) $ (3,146) $ (88,156) Earnings per share - basic and diluted $( 0.47 ) $( 0.01 ) $( 0.48 ) September 30, 2022 Unaudited Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit $ ( 1,545,361 ) $ ( 5,594 ) $ ( 1,550,955 ) Net loss $ ( 51,865 ) $ ( 2,230 ) $ ( 54,095 ) Nine Months Ended September 30, 2022 Unaudited Condensed Consolidated Statement of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 85,010 ) $ ( 3,146 ) $ ( 88,156 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in excess inventory purchase commitments 12,422 1,673 14,095 Changes in operating assets and liabilities: Accounts receivable 27,781 531 28,312 Inventory 1,405 ( 6,770 ) ( 5,365 ) Prepaid expenses and other current assets 9,131 667 9,798 Other long-term assets 14,817 6,214 21,031 Accrued expenses and other current liabilities ( 22,364 ) 831 ( 21,533 ) Net cash used in operating activities $ ( 18,475 ) $ — $ ( 18,475 ) 88 Table of Contents The following tables reflect the impact of this revision on the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2022: QUARTER ENDED JUNE 30, 2022 ( dollars in thousands, except per share amounts ) June 30, 2022 Unaudited Condensed Consolidated Balance Sheet As Previously Reported Adjustment As Revised Inventories $ 36,272 $ 3,954 $ 40,226 Accounts receivable, net 81,869 133 82,002 Total current assets 304,163 4,087 308,250 Goodwill 55,053 3,991 59,044 Total assets $ 521,804 $ 8,078 $ 529,882 Accrued expenses and other current liabilities $ 91,284 $ 3,721 $ 95,005 Total current liabilities 233,680 3,721 237,401 Other non-current liabilities 66,889 7,721 74,610 Total liabilities 459,504 11,442 470,946 Accumulated deficit $ ( 1,493,496 ) $ ( 3,363 ) $ ( 1,496,859 ) Total liabilities and stockholders' equity $ 521,804 $ 8,078 $ 529,882 Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income Three Months Ended June 30, 2022 As Previously Reported Adjustment As Revised Product revenue, net $ 43,703 $ ( 394 ) $ 43,309 Selling, general and administrative 32,807 ( 567 ) 32,240 Operating income 33,902 173 34,075 Net income $ 29,276 $ 173 $ 29,449 Comprehensive Income $ 29,276 $ 173 $ 29,449 Earnings per share - basic $ 0.16 $ — $ 0.16 Earnings per share - diluted $ 0.15 $ — $ 0.15 Six Months Ended June 30, 2022 Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income As Previously Reported Adjustment As Revised Product revenue, net $ 85,151 $ ( 470 ) $ 84,681 Cost of goods sold, product 31,923 771 32,694 Selling, general and administrative 77,134 ( 328 ) 76,806 Operating loss ( 24,591 ) ( 913 ) ( 25,504 ) Net loss $ ( 33,145 ) $ ( 913 ) $ ( 34,058 ) Comprehensive loss $ (33,145) $ (913) $ (34,058) Net loss per share - basic and diluted $( 0.18 ) $( 0.01 ) $( 0.19 ) June 30, 2022 Unaudited Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit $ ( 1,493,496 ) $ ( 3,363 ) $ ( 1,496,859 ) Net income $ 29,276 $ 173 $ 29,449 89 Table of Contents Six Months Ended June 30, 2022 Unaudited Condensed Consolidated Statement of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 33,145 ) $ ( 913 ) $ ( 34,058 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in excess inventory purchase commitments ( 773 ) 5,627 4,854 Changes in operating assets and liabilities: Accounts receivable ( 30,994 ) 573 ( 30,421 ) Inventory 1,159 ( 5,521 ) ( 4,362 ) Other long-term assets 9,347 665 10,012 Accrued expenses and other current liabilities ( 18,625 ) ( 839 ) ( 19,464 ) Other non-current liabilities ( 9,030 ) 408 ( 8,622 ) Net cash used in operating activities $ ( 52,280 ) $ — $ ( 52,280 ) The following tables reflect the impact of this revision on the Company’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022: QUARTER ENDED MARCH 31, 2022 ( dollars in thousands, except per share amounts ) March 31, 2022 Unaudited Condensed Consolidated Balance Sheet As Previously Reported Adjustment As Revised Inventories $ 39,422 $ 1,676 $ 41,098 Accounts receivable, net 64,582 $ 776 65,358 Total current assets 302,687 2,452 305,139 Goodwill 55,053 3,991 59,044 Total assets $ 535,356 $ 6,443 $ 541,799 Accrued expenses and other current liabilities $ 109,660 $ 4,583 $ 114,243 Total current liabilities 253,914 4,583 258,497 Other non-current liabilities 77,743 5,398 83,141 Total liabilities 509,240 9,981 519,221 Accumulated deficit ( 1,522,772 ) ( 3,536 ) ( 1,526,308 ) Total liabilities and stockholders' equity $ 535,356 $ 6,443 $ 541,799 Three Months Ended March 31, 2022 Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income As Previously Reported Adjustment As Revised Product revenue, net $ 41,448 $ ( 76 ) $ 41,372 Cost of goods sold, product 22,333 772 23,105 Selling, general and administrative 44,327 239 44,566 Operating loss ( 58,493 ) ( 1,088 ) ( 59,581 ) Net loss ( 62,421 ) ( 1,088 ) ( 63,509 ) Comprehensive loss (62,421) (1,088) (63,509) Earnings per share - basic and diluted $ ( 0.35 ) $ — $ ( 0.35 ) 90 Table of Contents March 31, 2022 Unaudited Condensed Consolidated Statement of Stockholders' (Deficit) Equity As Previously Reported Adjustment As Revised Accumulated deficit $ ( 1,522,772 ) $ ( 3,536 ) $ ( 1,526,308 ) Net loss $ ( 62,421 ) $ ( 1,088 ) $ ( 63,509 ) Three Months Ended March 31, 2022 Unaudited Condensed Consolidated Statement of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 62,421 ) $ ( 1,088 ) $ ( 63,509 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in excess inventory purchase commitments ( 773 ) 773 — Changes in operating assets and liabilities: Accounts receivable ( 13,707 ) ( 71 ) ( 13,778 ) Inventory ( 5,247 ) ( 3,243 ) ( 8,490 ) Other long-term assets 3,297 669 3,966 Accrued expenses and other current liabilities 4,426 2,960 7,386 Other non-current liabilities ( 3,191 ) ( 3,191 ) Net cash used in operating activities $ ( 21,620 ) $ — $ ( 21,620 ) 2. Nature of Organization and Operations The Company was incorporated in the State of Delaware in 2007. Akebia is a fully integrated biopharmaceutical company with the purpose of bettering the lives of people impacted by kidney disease. The Company has one commercial product, Auryxia® (ferric citrate), which is approved by the U.S. Food and Drug Administration, or FDA, and marketed for two indications in the United States: the control of serum phosphorus levels in adult patients with chronic kidney disease, or CKD, on dialysis, or DD-CKD, and the treatment of iron deficiency anemia, or IDA, in adult patients with CKD not on dialysis, or NDD-CKD. Ferric citrate is also approved and marketed in Japan as an oral treatment for IDA in adult patients for the improvement of hyperphosphatemia in such patients with DD-CKD and NDD-CKD under the trade name Riona (ferric citrate hydrate). Vadadustat, the Company’s lead investigational product candidate, is an investigational oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH, inhibitor designed to mimic the physiologic effect of altitude on oxygen availability. On March 29, 2022, the Company received a complete response letter, or CRL, from the FDA. The CRL provided that the FDA had completed its review of the Company's new drug application, or NDA, for vadadustat for the treatment of anemia due to CKD in adult patients and had determined that it could not approve the NDA in its present form. In October 2022, the Company submitted a Formal Dispute Resolution Request, or FDRR, with the FDA. The FDRR focused on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult DD-CKD patients in light of safety concerns expressed by the FDA in the CRL for dialysis patients related to the rate of adjudicated thromboembolic events driven by vascular access thrombosis for vadadustat compared to the active comparator and the risk of drug-induced liver injury. In February 2023, we received a second interim response from the FDA to our FDRR. On May 12, 2022, the Company received notice from its former collaboration partner, Otsuka Pharmaceutical Co. Ltd., or Otsuka, that Otsuka had elected to terminate the Collaboration and License Agreement dated December 18, 2016, or the Otsuka U.S. Agreement, and the Collaboration and License Agreement dated April 25, 2017, or the Otsuka International Agreement. On June 30, 2022, the Company and Otsuka entered into a Termination and Settlement Agreement, or the Termination Agreement, pursuant to which, among other things, the Company and Otsuka agreed to terminate the Otsuka U.S. Agreement and the Otsuka International Agreement as of June 30, 2022 (see Note 5 for further details). In October 2021, Otsuka submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in adult patients with DD-CKD and NDD-CKD to the European Medicines Agency, or EMA. In connection with the Termination Agreement, Otsuka transferred the MAA for vadadustat with the EMA to the Company. Vadadustat is approved in Japan as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD patients under the trade name VafseoTM, and marketed and sold in Japan by Mitsubishi Tanabe Pharma Corporation, or MTPC. In addition, the Company continues to explore additional development opportunities to expand its pipeline and portfolio of novel therapeutics. 91 Table of Contents Since inception, the Company has devoted most of its resources to research and development, including its preclinical and clinical development activities, commercializing Auryxia, and providing general and administrative support for these operations. The Company began recording revenue from the U.S. sales of Auryxia and revenue from sublicensing rights to Auryxia in Japan from the Company’s Japanese partners, Japan Tobacco, Inc. and its subsidiary Torii Pharmaceutical Co., Ltd., collectively JT and Torii, in December 2018. Additionally, following regulatory approval of vadadustat in Japan, the Company began recognizing royalty revenues from MTPC from the sale of Vafseo in August 2020. In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or HCR, or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 7 for additional information). The Company has not generated a profit to date, and may never generate profits, from product sales. Vadadustat and the Company’s other potential product candidates are subject to long development cycles, and the Company may be unsuccessful in its efforts to develop, obtain marketing approval for or market vadadustat and its other potential product candidates. If the Company does not successfully commercialize Auryxia, vadadustat, if approved, or any other potential product candidate, it may be unable to achieve profitability. Going Concern The Company’s management completed its going concern assessment in accordance with Accounting Standards Codification, or ASC, 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or ASC 205-40. Pursuant to the requirements of ASC 205-40, the Company’s management must evaluate whether there are conditions or events considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. The Company’s operating plan during 2022 included the planned completion of several operating changes that the Company implemented over the course of the year. These assumptions pertained to cost avoidance measures and the reduction of overhead costs that would result from the planned amendment of contractual arrangements with certain supply and collaboration partners, and the reduction of operating expenses, which were outside of the Company’s control. Over the course of 2022, and completing in the fourth quarter, the Company executed on certain of these cost avoidance measures and reduction of overhead costs from the amendment or termination of contractual arrangements with certain supply partners as well as the reduction of future operating expenses, which is consistent with the Company’s plan to fund operations with existing cash resources and cash from operations. Examples of these reductions include the amendment, assignment and termination of certain supply agreements for both vadadustat and Auryxia. For example, on December 22, 2022, the Company and BioVectra Inc., or BioVectra, entered into a Termination Agreement, or the BioVectra Termination Agreement, pursuant to which the parties agreed, among other things, to terminate, effective immediately, any and all existing agreements entered into between the parties in connection with the manufacture and supply, by BioVectra to the Company, of Auryxia drug substance. Under the terms of the BioVectra Termination Agreement, the Company agreed to pay BioVectra a total of $ 32.5 million consisting of (i) an upfront payment of $ 17.5 million and (ii) six quarterly payments of $ 2.5 million commencing in April 2024, totaling $ 15.0 million. Pursuant to the BioVectra Termination Agreement, each of the Company and BioVectra have released one another from all existing and future claims and liabilities and the return of certain materials and documents. Furthermore, as it relates to all open purchase orders, BioVectra is relieved from any obligations to manufacture any product or perform services under any such open purchase orders, and the Company is relieved from any obligations to purchase any product under such open purchase orders . The Company is also relieved from any obligations to pay any outstanding invoices related to performance by BioVectra of services and all other obligations under the agreements. Additionally, on December 16, 2022, the Company, Mitsubishi Tanabe Pharma Corporation, or MTPC, and Esteve Química, S.A., or Esteve, executed the Assignment Agreement, pursuant to which the Supply Agreement between the Company and Esteve was assigned to MTPC. The Assignment Agreement transferred the rights and obligations of the Supply Agreement to MTPC, specifically including the obligations under certain purchase orders issued by the Company and accepted by Esteve. As such, the transferred purchase orders will continue to have a binding effect on MTPC to take delivery of the product from Esteve in accordance with the terms of the Supply Agreement. The Company will have no further obligation to take delivery of or pay for product delivered by Esteve under the transferred purchase orders. In relation to cost avoidance measures, in November 2022, the Board of Directors approved a reduction of the Company’s workforce by approximately 14 % consisting solely of individuals within the commercial organization as a result of the Company’s decision to shift to a strategic account management focused model for its commercial efforts. This shift is due to multiple factors, including the maturity of Auryxia®, the continued impact of the COVID-19 pandemic on dialysis centers and the phosphate binder market and that, if the Company is successful in its appeal of the complete response letter for vadadustat with the U.S. Food and Drug Administration, the Company’s commercial focus for vadadustat will be limited to the dialysis patient population for the foreseeable future. 92 Table of Contents As of December 31, 2022, the Company had cash and cash equivalents of approximately $ 90.5 million. Based on its current operating plan, the Company believes that its cash resources will be sufficient to allow the Company to fund its current operating plan through at least the next twelve months from the filing of the Company’s 2022 Annual Report on Form 10-K on March 10, 2023. If the Company’s operating performance deteriorates significantly from the levels achieved in 2022, it could have an effect on the Company’s liquidity and its ability to continue as a going concern in the future. The Company expects to finance future cash needs through product revenue, potential strategic transactions, public or private equity or debt transactions, operating expense management, or a combination of these approaches. Assuming the Company is successful in executing its operating plan, the Company will require additional funding to fund its strategic growth beyond Auryxia or to pursue later stage development and commercial activities for its 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 the Company, or that its cash resources will fund our operating plan for the period anticipated by the Company, or that additional funding will be available on terms acceptable to the Company, or at all. 3. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB. New Accounting Pronouncements – Recently Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures. Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment, which is the business of developing and commercializing novel therapeutics for people with kidney disease. Derivative Financial Instruments The Company accounts for warrants and other derivative financial instruments as either equity or liabilities in accordance with ASC Topic 815, Derivatives and Hedging, or ASC 815, based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made. Warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. The warrant, or the Warrant, to purchase shares of the Company's common stock issued by the Company in connection with the Janssen Pharmaceutica NV Research and License Agreement, or the Janssen Agreement, expired on February 9, 2022. The derivative liability recorded in connection with the Company’s Loan Agreement with Pharmakon is classified as a liability in the Company’s consolidated balance sheet (see Note 12). 93 Table of Contents Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: prepaid and accrued research and development expense, operating lease assets and liabilities, derivative liabilities, refund and product return liabilities to customers, other non-current liabilities, the excess purchase commitment liability, stock-based compensation expense, product and collaboration revenues including various rebates and reserves related to product sales, non-cash interest expense on the liability related to sale of future royalties, inventories, income taxes, intangible assets and goodwill. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents consist of all cash on hand, deposits and funds invested in available for sale securities with original maturities of three months or less at the time of purchase. Cash equivalents are reported at fair value. At December 31, 2022, the Company’s cash is primarily in money market funds. The Company may maintain balances with its banks in excess of federally insured limits. Restricted cash represents amounts required for security deposits under the Company’s office and lab space lease agreements. Restricted cash is included in “prepaid expenses and other current assets” and “other assets” in the consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that sum to the total of the amounts reported in the consolidated statement of cash flows (in thousands): December 31, 2022 December 31, 2021 December 31, 2020 Cash and cash equivalents $ 90,466 $ 149,800 $ 228,698 Prepaid expenses and other current assets — — 395 Other assets 2,703 2,039 2,039 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 93,169 $ 151,839 $ 231,132 Accounts Receivable The Company’s accounts receivable represent amounts due to the Company from product sales (see Note 4) and from its collaboration agreement with MTPC (see Note 5). Reimbursable costs that have not been invoiced as of the balance sheet date are recorded as unbilled accounts receivable. Accounts receivable arising from product sales primarily represent amounts due from wholesale distributors as well as certain specialty pharmacy providers, or collectively, Customers. The Company deducts trade allowances for prompt payment, among other certain discounts or chargebacks, from its accounts receivable based on its experience that the Company’s Customers will earn these discounts and fees. The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices not specifically reviewed as well as historical payment patterns and existing economic factors. The Company believes that credit risks associated with its customers and collaboration partners are not significant. The Company did not have a material allowance for doubtful accounts as of December 31, 2022 and 2021. Concentrations of Credit Risk and Off-Balance Sheet Risk Cash, cash equivalents and accounts receivable are the only financial instruments that potentially subject the Company to concentrations of credit risk. The Company maintains its cash and cash equivalents with high quality, accredited financial institutions and, accordingly, such funds are subject to minimal credit risk. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company 94 Table of Contents believes minimizes the exposure to concentration of credit risk. The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Accounts receivable represent amounts due from the Company’s customers and collaboration partners. As part of its credit management policy, the Company performs ongoing credit evaluations of its Customers and generally does not require collateral from any customer. The Company also monitors economic conditions of its collaboration partners to identify facts or circumstances that may indicate that any of its accounts receivable are at risk of collection. Gross revenues and accounts receivable from each of the Company’s Customers or collaboration partners who individually accounted for 10% or more of total gross revenues and/or 10% or more of total gross accounts receivable consisted of the following: Percent of Total Gross Revenues Years Ended December 31, 2022 2021 2020 Fresenius Medical Care Rx 34 % 33 % 29 % Otsuka Pharmaceutical Co. Ltd. 20 % 14 % 29 % AmerisourceBergen Drug Corporation 15 % 16 % 12 % McKesson Corporation — % 13 % 11 % Cardinal Health, Inc. — % 11 % — % Percent of Gross Accounts Receivable As of December 31, 2022 2021 Fresenius Medical Care Rx 44 % 16 % AmerisourceBergen Drug Corporation 16 % 15 % Cardinal Health, Inc. 13 % 10 % McKesson Corporation 10 % — % Otsuka Pharmaceutical Co. Ltd. — % 22 % MTPC — % 20 % Property and Equipment Property and equipment is stated at cost, less accumulated depreciation. Assets under capital lease are included in property and equipment. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, generally three years to seven years . Such costs are periodically reviewed for recoverability when impairment indicators are present. Such indicators include, among other factors, unused capacity, market value declines and technological obsolescence. Recorded values of asset groups of equipment that are not expected to be recovered through undiscounted future net cash flows are written down to current fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale). The following is the summary of property and equipment and related accumulated depreciation as of December 31, 2022 and 2021. 95 Table of Contents Useful Life December 31, 2022 December 31, 2021 (in thousands) Computer equipment and software 3 $ 1,010 $ 1,010 Furniture and fixtures 5 7 2,086 2,086 Equipment 7 2,750 2,750 Leasehold improvements Shorter of the useful life or remaining lease term 8,687 8,573 14,533 14,419 Less accumulated depreciation ( 9,319 ) ( 7,665 ) Net property and equipment $ 5,214 $ 6,754 Depreciation expense was approximately $ 1.7 million, $ 1.9 million and $ 2.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires entities to recognize right-of-use assets and lease liabilities for leases with lease terms of more than 12 months on their balance sheets and provide enhanced disclosures. In 2018, the FASB issued additional ASUs related to Topic 842, or ASC 842, that clarified various aspects of the new lease guidance, including how to record certain transition adjustments, as well as other improvements and practical expedients. The Company made an accounting policy election not to recognize leases with an initial term of 12 months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of operations. The Company also made the accounting policy election not to separate the non-lease components from the lease components for its building leases and, rather, account for each non-lease component and lease component as a single component. The Company determines if an arrangement is a lease at inception. An arrangement is determined to contain a lease if the contract conveys the right to control the use of an identified property, plant, or equipment for a period of time in exchange for consideration. If the Company can benefit from the various underlying assets of a lease on their own or together with other resources that are readily available, or if the various underlying assets are neither highly dependent on nor highly interrelated with other underlying assets in the arrangement, they are considered to be a separate lease component. In the event multiple underlying assets are identified, the lease consideration is allocated to the various components based on each of the component’s relative fair value. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the leasing arrangement. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when readily determinable and uses an estimate of its incremental borrowing rate when the implicit rate is not readily determinable based upon the available information at the commencement date of lease inception. The incremental borrowing rate is determined using a credit rating scoring model to estimate the Company’s credit rating, adjusted for collateralization. The calculation of the operating lease assets includes any lease payments made and excludes any lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company’s operating leases are reflected in prepaid expenses and other current assets, operating lease assets, accrued expenses and other current liabilities and operating lease liabilities, net of current portion in its consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Inventories The Company values its inventories at the lower-of-cost or net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The 96 Table of Contents Company classifies its inventory costs as long-term, in other assets in its consolidated balance sheets, when it expects to utilize the inventory beyond their normal operating cycle. Prior to the regulatory approval of a product candidate, the Company incurs expenses for the manufacture of material that could potentially be available to support the commercial launch of its products upon approval. Until the first reporting period when regulatory approval has been received or is otherwise considered probable and the future economic benefit is expected to be realized, the Company records all such costs as research and development expense. Inventory used in clinical trials is also expensed as research and development expense, when selected for such use. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in a clinical manufacturing campaign. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of product sales in the consolidated statements of operations and comprehensive loss. The determination of whether inventory costs will be realizable requires the use of estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required. Additionally, the Company’s product is subject to strict quality control and monitoring that it performs throughout the manufacturing process. In the event that certain batches or units of product do not meet quality specifications, the Company will record a charge to cost of product sales, to write-down any unmarketable inventory to its estimated net realizable value. In all cases, product inventory is carried at the lower of cost or its estimated net realizable value. Debt The Company performs an assessment of all embedded features of a debt instrument to determine if (1) such features should be bifurcated and separately accounted for, and (2) if bifurcation requirements are met, whether such features should be classified and accounted for as equity or liability instruments. If the embedded feature meets the requirements to be bifurcated and accounted for as a liability, the fair value of the embedded feature is measured initially, included as a liability on the consolidated balance sheet, and re-measured to fair value at each reporting period. Any changes in fair value are recorded in the consolidated statement of operations. The Company monitors, on an ongoing basis, whether events or circumstances could give rise to a change in the classification of embedded features. Liability Related to Sale of Future Royalties The Company treats the liability related to sale of future royalties (see Note 7) as a debt financing, amortized under the effective interest rate method over the estimated life of the related expected royalty stream. The liability related to sale of future royalties and the debt amortization are based on the Company’s current estimates of future royalties expected to be paid over the life of the arrangement. The Company will periodically assess the expected royalty payments. To the extent the Company’s estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis. Non-cash royalty revenue is reflected as royalty revenue within license, collaboration and other revenue, and non-cash amortization of debt is reflected as interest expense in the consolidated statements of operations and comprehensive loss. Refund Liability to Customer The Company treats the refund liability to customer as a zero-coupon debt financing, which is recorded at net present value. The Company recorded an initial discount on the refund liability to the customer and a corresponding deferred gain to the refund liability to customer on the consolidated balance sheet as of the date the funds were received from CSL Vifor, which was March 18, 2022. The discount on the note payable is being amortized to interest expense using the effective interest method over the expected term of the refund liability. The deferred gain is being amortized to interest income on a straight-line basis over the expected term of the refund liability. Restructuring Restructuring charges principally consist of one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits as well as non-cash share-based compensation expense. The Company records restructuring charges based on whether the termination benefits are provided under an on-going benefit arrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements, such as those documented by employment agreements, in accordance with Accounting Standards Codification 712, or ASC 712, Nonretirement Postemployment Benefits. 97 Table of Contents Under ASC 712, liabilities for postemployment benefits are recorded at the time the obligations are probable of being incurred and can be reasonably estimated. The Company accounts for one-time employment benefit arrangements in accordance with ASC 420 Exit or Disposal Cost Obligations. When applicable, the Company records such costs into operating expense. Excess Purchase Commitment Liability The Company identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include future firm purchase commitments. These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast and as such, the Company recorded a liability in purchase accounting. The Company re-evaluates the excess purchase commitments each reporting period to assess whether any adjustments to the excess purchase commitment liability are necessary. This evaluation includes reviewing the contractual minimums, expiration and utilization assumptions, and sales forecasts. Inventory receipts that have been previously identified as excess are recorded as a reduction to the excess purchase commitment liability. Revenue Recognition The Company generates revenues primarily from sales of Auryxia, see Note 4, from its collaboration with MTPC and its prior collaboration agreements with Otsuka, see Note 5. The Company recognizes revenue in accordance with ASC 606, which applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company does not include a financing component to its estimated transaction price at contract inception unless it estimates that certain performance obligations will not be satisfied within one year. Additionally, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. Product Revenue, Net The Company sells Auryxia in the United States, or U.S., primarily to wholesale distributors as well as certain specialty pharmacy providers, collectively, Customers. These Customers resell the Company’s product to health care providers and patients. In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s product. The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less. Reserves for Variable Consideration Revenue from product sales is recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, product returns, chargebacks, rebates, co-pay assistance and other allowances offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products. These reserves are based on the amounts earned or estimated amounts expected to be claimed on the related sales and are classified as reductions of accounts receivable (if the 98 Table of Contents amount will be credited to the Customer, for example chargebacks) or as a current liability (if the amount is payable to a Customer or a party other than a Customer, for example rebates, product returns and co-pay assistance). When appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Trade Discounts and Allowances: The Company generally provides Customers with discounts that include incentive fees that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company compensates (through trade discounts and allowances) its Customers for sales order management, data, and distribution services. However, the Company has determined such services received to date are not distinct from the Company’s sale of products to the Customer and, therefore, these payments have been recorded as a reduction of revenue within the consolidated statement of operations and comprehensive loss through December 31, 2022. The Company records a corresponding reduction to accounts receivable (if the trade discount and/or allowance will be credited to the Customer) or an increase to accrued expenses and other current liabilities (if the trade discount and/or allowance is payable to a Customer) on the consolidated balance sheets. Product Returns: Consistent with industry practice, the Company generally offers Customers a limited right of return which allows for the product to be returned when the product expiry is within an allowable window, when the quantity delivered is different than quantity ordered, the product is damaged in transit prior to receipt by the customer, or is subject to a recall. This right of return generally lapses once the product is provided to a patient. The Company estimates the amount of its product sales that may be returned for credit by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized and the establishment of a long-term liability which is included in other non-current liabilities in the consolidated balance sheets. Current estimates of product returns on prior year sales, net of product returns received, are included in accrued expenses and other current liabilities in the consolidated balance sheet. The Company currently estimates product return reserve using a percentage of gross revenue based on historical return rates, and look to the amount of estimated inventory in the distribution channel, available industry data and our own historical sales and return information. Provider Chargebacks and Discounts : Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by Customers, and the Company generally issues credits for such amounts within a few weeks of the Customer’s resale of the product. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel at each reporting period end that the Company expects will be sold to qualified healthcare providers, and chargebacks that Customers have claimed but for which the Company has not yet issued a credit. Commercial and Medicare Part D Rebates: The Company contracts with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates the rebates for commercial and Medicare Part D payors based upon (i) its contracts with the payors and (ii) information obtained from its Customers and other third parties regarding the payor mix for Auryxia. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Other Government Rebates: The Company is subject to discount obligations under state Medicaid programs and other government programs. The Company estimates its Medicaid and other government programs rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability 99 Table of Contents under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period and are included in accrued expenses and other current assets on the consolidated balance sheet. Other Incentives: Other incentives that the Company offers include voluntary patient assistance programs such as the Company’s co-pay assistance program, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on actual claims processed during a given period, as well as historical utilization data to estimate the amount the Company expects to receive associated with product that has been recognized as revenue, but remains in in the distribution channel at the end of each reporting period and are included in accrued expenses and other current assets on the consolidated balance sheet. Collaboration Revenues The Company enters into out-license and collaboration agreements which are within the scope of ASC 606, under which it licenses certain rights to its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products. Each of these payments may result in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company implements the five-step model noted above. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine whether the individual promises should be accounted for as separate performance obligations or as a combined performance obligation, and to determine the stand-alone selling price for each performance obligation identified in the contract. A deliverable represents a separate performance obligation if both of the following criteria are met: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success. With regard to the MTPC and former Otsuka collaboration agreements, the Company recognizes revenue related to amounts allocated to the identified performance obligation on a proportional performance basis as the underlying services are performed. Licenses of Intellectual Property If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an out-license and collaboration arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Milestone Payments At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to assess the milestone as probable of being achieved. There is considerable judgment involved in determining whether a milestone is probable of being reached at each specific reporting period. Milestone payments that are not within the control of the Company or the customer, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenues as, or when, the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. 100 Table of Contents Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment. Manufacturing Supply Services Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the licensee exercises these options, any additional payments are recorded in license, collaboration and other revenues when the licensee obtains control of the goods, which is upon delivery. Royalties The Company will recognize sales-based royalties, including milestone payments based on the level of sales, at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company receives royalty payments from JT and Torii based on net sales of Riona and MTPC based on net sales of Vafseo in Japan. Collaborative Arrangements The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808). Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements. The Company considers the guidance in ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions , in determining the appropriate treatment for the transactions between the Company and its collaborative partners and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Therefore, the Company recognized its allocation of the shared costs incurred with respect to the jointly conducted medical affairs and commercialization and non-promotional activities under the former Otsuka U.S. Agreement, as defined below in Note 5, as a component of the related expense in the period incurred. To the extent product revenue is generated from the collaboration, the Company recognizes its share of the net sales on a gross basis if the Company is deemed to be the principal in the transactions with customers, or on a net basis if the Company is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 606. Intangible Asset The Company maintains a definite-lived intangible asset related to developed product rights for Auryxia. Intangible assets are initially recorded at fair value and stated net of accumulated amortization and impairments. The Company amortizes its intangible assets that have finite lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized. Amortization for the Company’s intangible asset is recorded over its remaining estimated useful life, which as of December 31, 2022 is estimated to be six years . The Company reviews its intangible asset subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If an impairment indicator exists, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of the intangible asset group to its carrying value on the consolidated balance sheet. If the carrying value of the intangible asset group exceeds the undiscounted cash flows used in the recoverability test, the Company will write the carrying value of the intangible asset group down to the fair value in the period identified. The Company calculates the fair value of the intangible asset group as the present value of estimated future cash flows expected to be generated from the intangible asset group using a risk-adjusted discount rate. In determining estimated future cash flows associated with its intangible asset group, the Company uses market participant assumptions pursuant to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). During the second quarter of 2020, the Company identified indicators of impairment related to the developed product rights for Auryxia and recorded an impairment charge of $ 114.4 million (see Note 10). Goodwill 101 Table of Contents The Company allocates any excess purchase price over the fair value of the net tangible and intangible asset acquired in a business combination to goodwill. Goodwill is evaluated for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The Company compares the fair value of its reporting unit to its carrying value. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of its reporting unit, the Company would record an impairment loss equal to the difference. As described above, the Company operates in one operating segment which the Company considers to be the only reporting unit. Fair Value of Financial Instruments The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC 820 establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments, and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below: • Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. • Level 2 – Valuations based on quoted prices for similar assets or liabilities in markets that are not active, or for which all significant inputs are observable, either directly or indirectly. • Level 3 – Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Items measured at fair value on a recurring basis include derivative liabilities (see Note 8). The carrying amounts of prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term maturities. Items measured at fair value on a nonrecurring basis include property and equipment, intangible asset and goodwill. The Company remeasures the fair value of these assets upon the occurrence of certain events. There were no impairments to assets measured using Level 3 inputs during the years ended December 31, 2022 and 2021. The Company’s other financial instruments mainly consists of debt (see Note 12). The carrying amount for the Company’s Loan Agreement with Pharmakon approximates fair value because the interest rate is variable and reflects current market rates. Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in providing research and development activities, including salaries and benefits, facilities costs, overhead costs, contract research and development services, and other outside costs. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. External research and development expenses associated with the Company’s programs include clinical trial site costs, research compounds and clinical manufacturing costs, costs incurred for consultants and other outside services, such as data management and statistical analysis support, and materials and supplies used in support of the clinical and preclinical programs. Internal costs of the Company’s clinical program include salaries, benefits, stock-based compensation, and an allocation of the Company’s facility costs. When third-party service providers’ billing terms do not coincide with the Company’s period-end, the 102 Table of Contents Company is required to make estimates of its obligations to those third parties, including clinical trial and pharmaceutical development costs, contractual services costs and supply costs, incurred in a given accounting period and record accruals at the end of the period. The Company bases its estimates on its knowledge of the research and development programs, services performed for the period, past history for related activities and the expected duration of the third-party service contract, where applicable. Advertising Expenses The costs of advertising are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. For the years ended December 31, 2022, 2021 and 2020, advertising expenses totaled $ 6.7 million, $ 8.2 million and $ 5.0 million, respectively, all related to Auryxia. Income Taxes Income taxes are recorded in accordance with FASB Topic 740, Income Taxes, or ASC 740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. All deferred taxes as of December 31, 2022 and 2021 are classified as noncurrent within the income tax provision (see Note 14). The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances. As of December 31, 2022 and 2021, the Company does no t have any significant uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Stock-Based Compensation The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees and non-employees, including grants of stock options, restricted stock, restricted stock units, or RSUs, performance-based restricted stock units, or PSUs, and modifications to existing stock awards, to be recognized in the statements of operations and comprehensive loss based on their fair values. The Company’s stock-based awards are comprised of stock options, RSUs and PSUs. The Company estimates the fair value of options granted using the Black-Scholes option pricing model. The Company uses the market price at the time of grant to determine the fair value of restricted stock awards and performance-based restricted stock awards. The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Prior to 2017, due to the lack of company-specific historical and implied volatility data for trading the Company’s stock in the public market, the Company had based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility was calculated based on a period of time commensurate with the expected term assumption. The computation of expected volatility was based on the historical volatility of a representative group of companies with similar characteristics to the Company, including stage of product development and life science industry focus. During 2017, the Company began to estimate its volatility by using a blend of its stock price history for the length of time it has market data for its stock and the historical volatility of similar public companies for the expected term of each grant. The Company is a commercial-stage biopharmaceutical company and the representative group of companies has certain similar characteristics to the Company. The Company believes the group selected has sufficient similar economic and industry characteristics and includes companies that are most representative of the Company. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to non-employees, the Company utilizes the contractual term of the arrangement as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock, which is similar to the Company’s peer group. 103 Table of Contents The Company’s stock-based awards are subject to either service- or performance-based vesting conditions. Compensation expense related to awards to employees and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term, and is adjusted for pre-vesting forfeitures in the period in which the forfeitures occur. Compensation expense related to awards to employees and non-employees with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable. For awards with performance conditions in which the award does not vest unless the performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that achievement of the performance condition is probable. If the Company concludes that vesting is probable, it recognizes expense from the date it reaches this conclusion through the estimated vesting date. Net Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, preferred stock, stock options, warrants, restricted stock and RSUs are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented. Diluted net income per share is calculated by dividing the net income by the weighted-average common shares outstanding for the period, including any dilutive effect from outstanding options, warrants, restricted stock and RSUs using the treasury stock method. 4. Product Revenue, Net To date, the Company’s only source of product revenue has been from the U.S. sales of Auryxia. Total net product revenue was $ 176.9 million, $ 140.3 million, and $ 128.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. The following table summarizes activity in each of the product revenue allowance and reserve categories for the years ended December 31, 2020, 2021 and 2022 (in thousands): Chargebacks and Discounts Rebates, Fees and other Deductions Product Returns Total Balance at December 31, 2019 $ 634 $ 31,404 $ 7,498 $ 39,536 Provisions related to sales in current year 10,613 150,376 9,672 170,661 Adjustments related to prior year sales — 377 ( 867 ) $ ( 490 ) Credits/payments made ( 10,495 ) ( 140,489 ) ( 6,691 ) $ ( 157,675 ) Balance at December 31, 2020 752 41,668 9,612 52,032 Current provisions related to sales in current year 11,579 132,016 6,499 150,094 Adjustments related to prior year sales ( 1 ) ( 1,790 ) — ( 1,791 ) Credits/payments made ( 11,282 ) ( 144,794 ) ( 6,047 ) ( 162,123 ) Balance at December 31, 2021 $ 1,048 $ 27,100 $ 10,064 $ 38,212 Current provisions related to sales in current year 11,411 90,264 5,828 107,503 Adjustments related to prior year sales ( 9 ) 401 — 392 Credits/payments made ( 11,191 ) ( 87,722 ) ( 4,969 ) ( 103,882 ) Balance at December 31, 2022 $ 1,259 $ 30,043 $ 10,923 $ 42,225 Chargebacks, discounts and estimated product returns are recorded as a direct reduction of revenue on the consolidated statement of operations and comprehensive income (loss). Chargebacks are recorded as a reduction to accounts receivable on the consolidated balance sheets. Rebates, discounts, fees and other deductions as well as distribution-related fees and other sales-related deductions are recorded as a reduction in revenue on the consolidated statement of operations with a corresponding increase to accrued liabilities or accounts payable on the consolidated balance sheets. Estimated product returns for current product sales are recorded as other long-term liabilities in the unaudited condensed consolidated balance sheet. 104 Table of Contents Accounts receivable, net related to product sales was approximately $ 37.3 million and $ 25.3 million as of December 31, 2022 and 2021, respectively. 5. License, Collaboration and Other Significant Agreements During the years ended December 31, 2022, 2021 and 2020, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of December 31, 2022: For the Year Ended December 31, 2022 2021 2020 License, Collaboration and Other Revenue: (in thousands) MTPC Agreement $ 17,968 $ 12,438 $ 15,405 Otsuka U.S. Agreement 86,773 36,588 93,446 Otsuka International Agreement 5,503 16,449 45,451 Total Proportional Performance Revenue $ 110,244 $ 65,475 $ 154,302 JT and Torii 5,291 5,814 5,681 MTPC Other Revenue — 73 6,423 Total License, Collaboration and Other Revenue $ 115,535 $ 71,362 $ 166,406 December 31, 2022 Short-Term Long-Term Total Deferred Revenue: (in thousands) MTPC $ 3,738 $ — $ 3,738 Vifor Agreement — 43,296 43,296 Total $ 3,738 $ 43,296 $ 47,034 The following table presents changes in the Company’s contract assets and liabilities during the years ended December 31, 2022 and 2021 (in thousands): Balance at Beginning of Period Additions Deductions Balance at End of Period Twelve Months Ended December 31, 2022 Contract assets: Accounts receivable (1) $ 19,094 $ 94,515 $ ( 111,708 ) $ 1,901 Prepaid expenses and other current assets $ 4,309 $ 9,550 $ ( 13,078 ) $ 781 Contract liabilities: Deferred revenue $ 42,380 $ 70,044 $ ( 65,390 ) $ 47,034 Accounts payable $ 3,171 $ — $ ( 3,171 ) $ — Twelve Months Ended December 31, 2021 Contract assets: Accounts receivable (1) $ 3,045 $ 64,676 $ ( 48,627 ) $ 19,094 Prepaid expenses and other current assets $ 1,722 $ 2,592 $ ( 5 ) $ 4,309 Contract liabilities: Deferred revenue $ 40,559 $ 83,491 $ ( 81,670 ) $ 42,380 Accounts payable $ 7,227 $ 3,171 $ ( 7,227 ) $ 3,171 Accrued expenses and other current liabilities $ 10,000 $ — $ ( 10,000 ) $ — (1) Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement as of December 31, 2022 and 2021. Also excludes accounts receivable related to amounts due to the Company from product sales which are included in the accompanying consolidated balance sheets as of December 31, 2022 and 2021. 105 Table of Contents During the years ended December 31, 2022, 2021 and 2020, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands): For the Year Ended December 31, Revenue Recognized in the Period from: 2022 2021 2020 Amounts included in deferred revenue at the beginning of the period $ 29,574 $ 23,364 $ 36,032 Performance obligations satisfied in previous periods $ — $ 81 $ 25,964 Mitsubishi Tanabe Pharma Corporation Collaboration Agreement Summary of Agreement On December 11, 2015, the Company and MTPC entered into a collaboration agreement, or the MTPC Agreement, providing MTPC with exclusive development and commercialization rights to vadadustat in Japan and certain other Asian countries, collectively, the MTPC Territory, which was amended effective as of December 2, 2022. In addition, the Company supplies vadadustat to MTPC for both clinical and commercial use in the MTPC Territory. The Company and MTPC agreed that, instead of including Japanese patients in the Company’s global Phase 3 program for vadadustat, MTPC would be the sponsor of a Phase 3 program for vadadustat in Japan. MTPC was responsible for the costs of the Phase 3 program in Japan and other studies required in Japan, and made no funding payments for the global Phase 3 program for vadadustat. In June 2020, vadadustat was approved in Japan for the treatment of anemia due to CKD, which triggered a $ 15.0 million regulatory milestone payment to the Company that was received in the third quarter of 2020. In August 2020, MTPC launched vadadustat commercially in Japan under the trade name Vafseo TM as a treatment of anemia due to CKD for adult patients on dialysis and not on dialysis. MTPC filed a new drug application for vadadustat for the treatment of anemia due to CKD in adult patients in Taiwan in January 2022 and in Korea in March 2022. The Company and MTPC have established a joint steering committee pursuant to the MTPC Agreement to oversee development and commercialization of vadadustat in the MTPC Territory, including approval of any development or commercialization plans. Unless earlier terminated, the MTPC Agreement will continue in effect on a country-by-country basis until the later of the following: expiration of the last-to-expire patent covering vadadustat in such country in the MTPC Territory; expiration of marketing or regulatory exclusivity in such country in the MTPC Territory; or ten years after the first commercial sale of vadadustat in such country in the MTPC Territory. MTPC may terminate the MTPC Agreement upon twelve months ’ notice at any time after the second anniversary of the effective date of the MTPC Agreement. Either party may terminate the MTPC Agreement upon the material breach of the other party that is not cured within a specified time period or upon the insolvency of the other party. MTPC is required to make certain milestone payments to the Company aggregating up to approximately $ 225.0 million upon the achievement of specified development, regulatory and commercial events. More specifically, the Company received $ 10.0 million in development milestone payments and is eligible to receive up to $ 40.0 million in regulatory milestone payments, of which the Company received $ 10.0 million in relation to the Japanese NDA, or JNDA, filing in the third quarter of 2019 and earned an additional $ 15.0 million following regulatory approval of vadadustat in Japan in the second quarter of 2020, which the Company received in the third quarter of 2020, and up to $ 175.0 million in commercial milestone payments associated with aggregate sales of all products. In consideration for the exclusive license and other rights contained in the MTPC Agreement, MTPC also made a $ 20.0 million upfront payment as well as a payment of $ 20.5 million for Phase 2 studies in Japanese patients completed by the Company and reimbursed by MTPC. The Company is also entitled to receive tiered royalty payments ranging from 13 % to 20 % on annual net sales of vadadustat in the MTPC Territory. Royalty payments are subject to certain reductions, including upon the introduction of competitive products in certain instances. Royalties are due on a country-by-country basis from the date of first commercial sale of a licensed product in a country until the last to occur of: (i) the expiration of the last to expire valid claim within the intellectual property covering the licensed product, (ii) the expiration of marketing or regulatory exclusivity in such country, or (iii) the tenth anniversary of the first commercial sale of such licensed product in such country. Due to the uncertainty of drug development and commercialization and the high historical failure rates associated therewith, although the Company has received $ 10.0 million in development milestones and $ 25.0 million in regulatory milestones, no additional milestone may ever be received from MTPC. The Company recognizes any revenue from MTPC royalties in the period in which the sales occur. In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 7). 106 Table of Contents Revenue Recognition The Company evaluated the elements of the MTPC Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, MTPC, is a customer. The Company’s arrangement with MTPC contains the following material promises under the contract at inception: (i) license under certain of the Company’s intellectual property to develop and commercialize vadadustat in the MTPC Territory (the License Deliverable), (ii) clinical supply of vadadustat (the Clinical Supply Deliverable), (iii) knowledge transfer, (iv) Phase 2 dosing study research services (the Research Deliverable), and (v) rights to future know-how. The Company identified two performance obligations in connection with its material promises under the MTPC Agreement as follows: (i) License, Research and Clinical Supply Performance Obligation and (ii) Rights to Future Know-How Performance Obligation. Factors considered in making the assessment of which material promises will be accounted for as separate performance obligations included, among other things, the capabilities of the collaboration partner, whether any other vendor sells the item separately, whether the good or service is highly interdependent or highly interrelated to the other elements in the arrangement, and whether there are other vendors that can provide the items. Additionally, the MTPC Agreement does not include a general right of return. The Company allocates the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. The Company developed a best estimate of the standalone selling price for the Rights to Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement and determined it is immaterial. As such, the Company did not develop a best estimate of standalone selling price for the License, Research and Clinical Supply Performance Obligation and allocated the entire transaction price to this performance obligation. The deliverables associated with the License, Research and Clinical Supply Performance Obligation were satisfied as of June 30, 2018. The transaction price at inception was comprised of: (i) the up-front payment, (ii) the estimated cost for the Phase 2 studies, (iii) a non-substantive milestone associated with the first patient enrolled in the NDD-CKD Phase 3 study, and (iv) the cost of all clinical supply provided to MTPC for the Phase 3 studies. No other development and no regulatory milestones were included in the transaction price at inception, as all other milestone amounts were fully constrained. Subsequent to inception, the transaction price also included certain development and regulatory milestones, as described below. As part of its evaluation of the constraint, the Company considers numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to MTPC and therefore have also been excluded from the transaction price. The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company determined that the remaining consideration that may be payable to the Company subsequent to MTPC's commercial launch of Vafseo TM, in the third quarter of 2020 is quarterly royalties on net sales, sales milestones, and certain regulatory milestones. As of December 31, 2022, the transaction price was comprised of: (i) the up-front payment of $ 20.0 million, (ii) the cost for the Phase 2 studies of $ 20.5 million, (iii) the cost of all clinical supply provided to MTPC for the Phase 3 studies, (iv) $ 10.0 million in development milestones received, (v) $ 25.0 million in regulatory milestones received, comprised of $ 10.0 million relating to the JNDA filing and $ 15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $ 3.0 million in royalties from net sales of Vafseo. As of December 31, 2022, all development milestones and $ 25.0 million in regulatory milestones have been achieved. No other regulatory milestones have been assessed as probable of being achieved and as a result have been fully constrained. Revenue for the License, Research and Clinical Supply Performance Obligation for the MTPC Agreement is being recognized using a proportional performance method, for which all deliverables have been completed. Accordingly, the Company recognized the $ 15.0 million regulatory milestone relating to regulatory approval of vadadustat in Japan as revenue during the year ended December 31, 2020 and the $ 10.0 million regulatory milestone for the filing of the JNDA as revenue during the year ended December 31, 2019, as the regulatory milestones were both deemed probable of being achieved and the required performance obligations had been satisfied as of December 31, 2020 and 2019, respectively. The Company recognized $ 1.8 million, $ 0.8 million, and $ 0.4 million of revenue for royalties from the net sales of Vafseo during the years ended December 31, 2022, 2021, and 2020, respectively. As noted above, in February 2021, the Company entered into the Royalty Agreement, whereby the Company sold its right to receive these royalties and sales milestones under the MTPC Agreement, subject to certain caps and other conditions (see Note 7). The revenue is classified as collaboration revenue in the accompanying consolidated statements of operations and comprehensive loss. As of December 31, 2022, there is $ 0.6 million in accounts receivable, no deferred revenue, and no contract assets. There were no asset or liability balances related to the MTPC Agreement classified as long-term in the consolidated balance sheet as of December 31, 2022. 107 Table of Contents Supply of Drug Product to MTPC In March 2020, in connection with the MTPC Agreement, the Company and MTPC executed an amendment to the MTPC Agreement pursuant to which the Company agreed to supply MTPC with certain vadadustat process validation drug product for commercial use, and MTPC agreed to reimburse the Company for certain manufacturing-related expenses. In connection with this arrangement, the Company invoiced the upfront payment of $ 10.4 million, which it received during the three months ended June 30, 2020. The Company does not recognize revenue under this arrangement until risk of loss on the drug product passes to MTPC and delivery has occurred and MTPC has accepted the product. During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 0 million , $ 0 million , and $ 6.2 million, respectively, in revenue for drug product that was delivered during the applicable period. As of December 31, 2022, the Company recorded no accounts receivable, no deferred revenue, no other current liabilities and no other non-current liabilities for drug product that is subject to return by MTPC. On July 15, 2020, the Company and its collaboration partner MTPC entered into a supply agreement, or the MTPC Supply Agreement, which was amended effective as of December 5, 2022. The MTPC Supply Agreement includes the terms and conditions under which the Company supplies vadadustat drug product to MTPC for commercial use in Japan and certain other Asian countries, as contemplated by the MTPC Agreement. Pursuant to the MTPC Supply Agreement, MTPC provides a rolling forecast, or the MTPC Forecast, to the Company on a quarterly basis. The MTPC Forecast reflects MTPC’s needs for vadadustat drug product over a certain number of months, represented as a quantity of vadadustat drug product per calendar quarter. MTPC makes an up-front payment for a certain percentage of each batch of vadadustat drug product ordered. The term of the MTPC Supply Agreement extends throughout the term of the MTPC Agreement, and the termination provisions of the MTPC Agreement govern termination of the MTPC Supply Agreement. On December 16, 2022, the Company, 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 the Company and Esteve (see Note 16), 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 the Company and accepted by Esteve. As such, the transferred purchase orders will continue to have a binding effect on MTPC to take delivery of the product from Esteve in accordance with the terms of the Esteve Agreement. The Company will have no further obligation to take delivery of or pay for product delivered by Esteve under the transferred purchase orders. During the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 16.2 million, $ 11.6 million, and 0 million , respectively, of revenue under the MTPC Supply Agreement. As of December 31, 2022, the Company recorded $ 2.1 million in accounts receivable and $ 3.7 million in deferred revenues. U.S. Collaboration and License Agreement with Otsuka Pharmaceutical Co. Ltd. Summary of Agreement On December 18, 2016, the Company entered into a collaboration and license agreement with Otsuka, or the Otsuka U.S. Agreement. The collaboration was focused on the development and commercialization of vadadustat in the United States. Under the terms of the Otsuka U.S. Agreement, the Company was responsible for leading the development of vadadustat, for which it submitted an NDA to the FDA in March 2021, and for which it received the CRL in March 2022. On May 12, 2022, the Company received notice from Otsuka that Otsuka had elected to terminate the Otsuka U.S. Agreement and the Otsuka International Agreement. On June 30, 2022, the Company and Otsuka entered into the Termination Agreement, pursuant to which, among other things, the Company and Otsuka agreed to terminate the Otsuka U.S. Agreement and the Otsuka International Agreement as of June 30, 2022. Under the terms of the Otsuka U.S. Agreement, the Company granted to Otsuka a co-exclusive, non-sublicensable license under certain intellectual property controlled by the Company solely to perform medical affairs activities and to conduct non-promotional and commercialization activities related to vadadustat in accordance with the associated plans. The co-exclusive license related to activities that would be jointly conducted by the Company and Otsuka pursuant to the terms of the Otsuka U.S. Agreement. Additionally, the parties agreed not to promote, market or sell any competing product in the territory covered by the Otsuka U.S. Agreement. Revenue Recognition The Company evaluated the elements of the Otsuka U.S. Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, Otsuka, was a customer. The Company identified three performance obligations in 108 Table of Contents connection with its obligations under the Otsuka U.S. Agreement as follows: (i) License and Development Services Combined (License Performance Obligation); (ii) Rights to Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation). The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. The Company developed a best estimate of standalone selling price for the Committee Performance Obligation after considering the nature of the services to be performed and estimates of the associated effort and rates applicable to such services that would be expected to be realized under similar contracts. The Company developed a best estimate of standalone selling price for the Future IP Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed would be developed during the term of the arrangement. The Company did not develop a best estimate of standalone selling price for the License Performance Obligation due to the following: (i) the best estimates of standalone selling price associated with the Future IP Performance Obligation was determined to be immaterial and (ii) the period of performance and pattern of recognition for the License Performance Obligation and the Committee Performance Obligation was determined to be similar. The Company re-evaluated the transaction price in each reporting period and as uncertain events were resolved or other changes in circumstances occurred. The Company determined that under ASC 606, the contract was modified in the second quarter of 2019, when the Company elected to require Otsuka to increase the aggregate percentage of current global development costs it funds under the Otsuka U.S. Agreement and the Otsuka International Agreement from 52.5 % to 80 %, or the Otsuka Funding Option, and the Company became eligible to receive the amount from the Otsuka Funding Option. In connection with the modification, the Company adjusted the transaction price to include the amount from the Otsuka Funding Option as additional variable consideration. The Company constrained the variable consideration to an amount for which a significant revenue reversal is not probable. Pursuant to the Otsuka U.S. Agreement, the Company received: (i) the up-front payment of $ 125.0 million, (ii) the cost share payment with respect to amounts incurred by the Company through December 31, 2016 of $ 33.8 million, and (iii) the net cost share consideration received with respect to amounts incurred by the Company under the global development plan of approximately $ 319.2 million with respect to amounts incurred by the Company subsequent to December 31, 2016. Pursuant to the Termination Agreement, in July 2022, the Company received a nonrefundable and non-creditable payment of $ 55.0 million in consideration for the covenants and agreements set forth in the Termination Agreement, including the settlement and release of all disputes and claims as provided therein. The Company determined that the Termination Agreement met the definition of a contract modification and was accounted for as a cumulative catch-up adjustment at the time of modification under ASC 606. During the year ended December 31, 2022, the Company recognized $ 92.3 million of collaboration revenue from the Otsuka U.S. Agreement and the Otsuka International Agreement combined in its consolidated statement of operations and comprehensive loss. The collaboration revenue for the year ended December 31, 2022 is primarily comprised of the $ 55.0 million payment received pursuant to the Termination Agreement, $ 15.5 million related to previously deferred revenue as of the date of termination and $ 9.6 million of non-cash consideration related to Otsuka's obligations to complete certain agreed upon clinical activities related to the Phase 3b clinical trial of vadadustat Otsuka is conducting. During the years ended December 31, 2021 and 2020, the Company recognized collaboration revenue totaling approximately $ 36.6 million and $ 93.4 million, respectively, with respect to the Otsuka U.S. Agreement. The Company determined that the medical affairs, commercialization and non-promotional activities elements of the Otsuka U.S. Agreement represented joint operating activities in which both parties were active participants and of which both parties were exposed to significant risks and rewards that were dependent on the success of the activities. Accordingly, the Company accounted for the joint medical affairs, commercialization and non-promotional activities in accordance with ASC No. 808, Collaborative Arrangements (ASC 808). Additionally, the Company determined that in the context of the medical affairs, commercialization and non-promotional activities, Otsuka did not represent a customer as contemplated by ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions . As a result, the activities conducted pursuant to the medical affairs, commercialization and non-promotional activities plans were accounted for as a component of the related expense in the period incurred. During the years ended December 31, 2022, 2021 and 2020, the Company incurred approximately $ 7.6 million, $ 17.5 million and $ 5.1 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S. Agreement of which approximately $ 3.8 million, $ 8.6 million and $ 2.2 million were reimbursable by Otsuka and recorded as a reduction to research and development expense during each of the years ended December 31, 2022, 2021 and 2020, respectively. During the year ended December 31, 2022, Otsuka incurred no costs related to the cost-sharing provisions of the Otsuka U.S. Agreement. During the years ended December 31, 2021 and 2020, Otsuka incurred $ 0.9 million and $ 2.1 million, respectively, of costs related to the cost-sharing provisions of the Otsuka U.S. Agreement, of which approximately $ 0.4 million and $ 1.1 million were reimbursable by the Company and recorded as an increase to research and development expense during the years ended December 31, 2021 and 2020, respectively. 109 Table of Contents International Collaboration and License Agreement with Otsuka Pharmaceutical Co. Ltd. Summary of Agreement On April 25, 2017, the Company entered into a collaboration and license agreement with Otsuka, or the Otsuka International Agreement. The collaboration was focused on the development and commercialization of vadadustat in Europe, Russia, China, Canada, Australia, the Middle East and certain other territories, collectively, the Otsuka International Territory. Under the terms of the Otsuka International Agreement, the Company granted to Otsuka an exclusive, sublicensable license under certain intellectual property controlled by the Company to develop and commercialize vadadustat and products containing or comprising vadadustat in the Otsuka International Territory. Additionally, under the terms of this agreement, the Company was responsible for leading the development of vadadustat. Otsuka had the sole responsibility, at its own cost, for the commercialization of vadadustat in the Otsuka International Territory, subject to the approval by the relevant regulatory authorities. Revenue Recognition The Company has accounted for the Otsuka International Agreement separately from the collaboration arrangement with Otsuka with respect to the U.S. due to the lack of interrelationship and interdependence of the elements and payment terms within each of the contracts as they related to the respective territories. Accordingly, the Company applied the guidance in ASC 606 solely in reference to the terms and conditions of the Otsuka International Agreement, while the Otsuka U.S. Agreement continued to be accounted for as a discrete agreement in its own right. The Company evaluated the Otsuka International Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, Otsuka, was a customer. The Company identified three performance obligations in connection with its obligations under the Otsuka International Agreement as follows: (i) License and Development Services Combined (License Performance Obligation); (ii) Rights to Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation). The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. The Company developed a best estimate of standalone selling price for the Committee Performance Obligation after considering the nature of the services to be performed and estimates of the associated effort and rates applicable to such services that would be expected to be realized under similar contracts. The Company developed a best estimate of standalone selling price for the Future IP Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement. The Company did not develop a best estimate of standalone selling price for the License Performance Obligation due to the following: (i) the best estimates of standalone selling price associated with the Future IP Performance Obligation was determined to be immaterial and (ii) the period of performance and pattern of recognition for the License Performance Obligation and the Committee Performance Obligation was determined to be similar. The Company re-evaluated the transaction price in each reporting period and as uncertain events were resolved or other changes in circumstances occurred. Pursuant to the Otsuka International Agreement, the Company received: (i) the up-front payment of $ 73.0 million, (ii) the cost share payment with respect to amounts incurred by the Company during the quarter ended March 31, 2017 of $ 0.2 million, and (iii) the net cost share consideration received with respect to amounts incurred by the Company subsequent to March 31, 2017 of $ 216.7 million. As discussed above, the Otsuka International Agreement was terminated on June 30, 2022 pursuant to the Termination Agreement. Refer to earlier in this Note 5 for further details of the recognition of this Termination Agreement in the Company's consolidated statement of operations and comprehensive loss. During the years ended December 31, 2021 and 2020, the Company recognized revenue totaling approximately $ 16.4 million and $ 45.5 million, respectively, with respect to the Otsuka International Agreement. The revenue is classified as collaboration revenue in the accompanying consolidated statements of operations. As of December 31, 2021, there was approximately $ 0.9 million in contract liabilities (included in accounts payable) and $ 1.3 million in prepaid expenses and other current assets in the consolidated balance sheet. Janssen Pharmaceutica NV Research and License Agreement Summary of Agreement On February 9, 2017, the Company entered into a Research and License Agreement, the Janssen Agreement, with Janssen Pharmaceutica NV, or Janssen, a subsidiary of Johnson & Johnson, pursuant to which Janssen granted the Company an exclusive license under certain intellectual property rights to develop and commercialize worldwide certain HIF prolyl hydroxylase targeted compounds. 110 Table of Contents Under the terms of the Janssen Agreement, the Company made an upfront payment of $ 1.0 million in cash to Janssen and issued a warrant to purchase 509,611 shares of the Company’s common stock, which expired on February 9, 2022. On August 1, 2022, the Company notified Janssen that it was exercising its right to terminate the Janssen Agreement in its entirety, and Janssen agreed to the termination which became effective on August 2, 2022. Cyclerion Therapeutics License Agreement Summary of Agreement On June 4, 2021, the Company entered into a License Agreement, the Cyclerion Agreement, with Cyclerion Therapeutics Inc., or Cyclerion, pursuant to which Cyclerion granted the Company an exclusive global license under certain intellectual property rights to research, develop and commercialize praliciguat, an investigational oral soluble guanylate cyclase stimulator. Under the terms of the Cyclerion Agreement, the Company made an upfront payment of $ 3.0 million in cash to Cyclerion, which was paid during the second quarter of 2021. Substantially all of the fair value of the assets acquired in conjunction with the Cyclerion Agreement was concentrated in the acquired license. As a result, the Company accounted for this transaction as an asset acquisition under ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business . The upfront payment was charged to expense at acquisition, as it relates to a development stage compound with no alternative future use. In addition, Cyclerion is eligible to receive up to an aggregate of $ 222.0 million from the Company in specified development and regulatory milestone payments on a product-by-product basis. Cyclerion will also be eligible to receive specified commercial milestones as well as tiered royalties ranging from a low-single-digit to mid-double-digit percentage of net sales, on a product-by-product basis, and subject to reduction upon expiration of patent rights or the launch of a generic product in the territory. The Company recorded the upfront payment in the amount of $ 3.0 million to research and development expense in June 2021. Unless earlier terminated, the Cyclerion Agreement will expire on a product-by-product and country-by-country basis upon the expiration of the last royalty term, which ends upon the longest of (i) the expiration of the patents licensed under the Cyclerion Agreement, (ii) the expiration of regulatory exclusivity for such product, and (iii) 10 years from first commercial sale of such product. The Company may terminate the Cyclerion Agreement in its entirety or only with respect to a particular licensed compound or product upon 180 days' prior written notice to Cyclerion. The parties also have customary termination rights, subject to a cure period, in the event of the other party’s material breach of the Cyclerion Agreement or in the event of certain additional circumstances. CSL Vifor License Agreement Summary of Agreement On May 12, 2017, the Company entered into a License Agreement, or the Vifor Agreement, with Vifor (International) Ltd. (now a part of CSL Limited), or CSL Vifor, pursuant to which the Company granted CSL Vifor an exclusive license to sell vadadustat solely to Fresenius Kidney Care Group LLC, an affiliate of Fresenius Medical Care North America, or FMCNA, in the United States. On April 8, 2019, the Company and CSL Vifor entered into an Amended and Restated License Agreement, or the Vifor First Amended Agreement, which amended and restated in full the Vifor Agreement. On February 18, 2022, the Company and CSL Vifor entered into a Second Amended and Restated License Agreement, or the Vifor Second Amended Agreement, which amends and restates the Vifor First Amended Agreement. Pursuant to the Vifor Second Amended Agreement, the Company granted CSL Vifor an exclusive license to sell vadadustat to FMCNA and its affiliates, including Fresenius Kidney Care Group LLC, to certain third party dialysis organizations approved by the Company, to independent dialysis organizations that are members of certain group purchasing organizations, and to certain non-retail specialty pharmacies, or collectively, the Supply Group, in the United States, or the Territory. Pursuant to the Vifor Second Amended Agreement, CSL Vifor agreed that it would not sell or otherwise supply vadadustat until the FDA has granted regulatory approval for vadadustat for the treatment of anemia due to CKD in adult patients with DD-CKD in the Territory and until CSL Vifor has entered a supply agreement with the applicable member of the Supply Group. Similar to the Vifor First Amended Agreement, the Vifor Second Amended Agreement is structured as a profit share arrangement between the Company and CSL Vifor in which the Company will receive approximately 66 % of the profit, net of certain pre-specified costs. Under the Vifor Second Amended Agreement, in February 2022, CSL Vifor made an upfront payment to the Company of $ 25.0 million in lieu of the previously disclosed milestone payment of $ 25.0 million that CSL 111 Table of Contents Vifor was to pay the Company following approval of vadadustat by the FDA, as established under the Vifor First Amended Agreement. Unless earlier terminated, the Vifor Second Amended Agreement will expire upon the later of the expiration of all patents that claim or cover vadadustat or expiration of marketing or regulatory exclusivity for vadadustat in the Territory. CSL Vifor may terminate the Vifor Second Amended Agreement in its entirety upon 30 months' prior written notice after the first anniversary of the receipt of regulatory approval, if approved, from the FDA for vadadustat for dialysis-dependent CKD patients. The Company may terminate the Vifor Second Amended Agreement in its entirety for convenience, following the earlier of a certain period of time elapsing or following certain specified regulatory events, and upon six months ’ prior written notice. If the Company so terminates for convenience, subject to specified exceptions, the Company will pay a termination fee to CSL Vifor. In addition, either party may, subject to a cure period, terminate the Vifor Second Amended Agreement in the event of the other party’s uncured material breach or bankruptcy. Investment Agreement In connection with the Vifor Agreement, in May 2017, the Company and CSL Vifor entered into an investment agreement, or the First Investment Agreement, pursuant to which the Company sold an aggregate of 3,571,429 shares of the Company’s common stock, or the 2017 Shares, to CSL Vifor at a price per share of $ 14.00 for a total of $ 50.0 million. The amount representing the premium over the closing stock price of $ 12.69 on the date of the transaction, totaling $ 4.7 million, was determined by the Company to represent consideration related to the Vifor Agreement. CSL Vifor agreed to a lock-up restriction such that it agreed not to sell the 2017 Shares for a period of time following the effective date of the First Investment Agreement as well as a customary standstill agreement. The lock-up restriction in place as part of the First Investment Agreement has since expired. In addition, the First Investment Agreement contains voting agreements made by CSL Vifor with respect to the 2017 Shares. The 2017 Shares have not been registered pursuant to the Securities Act of 1933, as amended, or the Securities Act, and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder. In connection with entering into the Vifor Second Amended Agreement, on February 18, 2022, the Company and CSL Vifor entered into an investment agreement, or the Second Investment Agreement, pursuant to which the Company sold an aggregate of 4,000,000 shares of its common stock, or the 2022 Shares, to CSL Vifor for a total of $ 20.0 million on February 22, 2022. The amount representing the premium over the grant date fair value on the date of the transaction, $ 13.6 million, was determined by the Company to represent the consideration related to the Vifor Second Amended Agreement. CSL Vifor has agreed to a lock-up restriction to not sell or otherwise dispose of the 2022 Shares for a period of time following the effective date of the Second Investment Agreement as well as a customary standstill agreement. In addition, the Second Investment Agreement contains voting agreements made by CSL Vifor with respect to the 2022 Shares. The 2022 Shares have not been registered pursuant to the Securities Act and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder, as the transaction did not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act. Revenue Recognition The Company evaluated the elements of the Vifor Second Amended Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, CSL Vifor, is a customer. The Company’s arrangement with CSL Vifor contains one material promise under the contract at inception, which is the non-sublicensable, non-transferrable license under certain of the Company’s intellectual property to (i) sell vadadustat solely to the Supply Group, (ii) sell vadadustat to Designated Wholesalers solely for resale to members of the Supply Group, (iii) conduct medical affairs with respect to vadadustat in the Territory in the field during the term of the Vifor Second Amended Agreement and (iv) use the Akebia Trademark solely in connection with the sale of vadadustat (the License Deliverable). The Company has identified one performance obligation in connection with its obligations under the Vifor Second Amended Agreement, which is the License Deliverable, or License Performance Obligation. The transaction price at inception was comprised of: (i) the up-front payment of $ 25.0 million, (ii) the premium paid by CSL Vifor on the First Investment Agreement of $ 4.7 million, and (iii) the premium paid by CSL Vifor on the Second Investment Agreement of $ 13.6 million. Pursuant to the terms of the Vifor Second Amended Agreement, these payments from CSL Vifor are non-refundable and non-creditable against any other amount due to the Company. Also pursuant to the Vifor Second Amended Agreement, if the Centers for Medicare & Medicaid Services, or CMS, determines that vadadustat is excluded from the Transitional Drug Add-on Payment Adjustment, or TDAPA, the Company can terminate the Vifor Second Amended Agreement and will be required to repay the up-front payment and the premiums paid by CSL Vifor in the First Investment Agreement and Second Investment Agreement, respectively. The Company considered whether the transaction price was constrained as required per the guidance in ASC 112 Table of Contents 606-10-32-11. As part of its evaluation of the constraint, the Company considered numerous factors, including the CRL received from the FDA for vadadustat, the uncertainty associated with a potential future approval of vadadustat by the FDA, and if approval of vadadustat is received in the future, whether vadadustat would be included in certain reimbursement bundles by CMS, which are all outside of the Company’s control. CSL Vifor also agreed that it will not sell or otherwise supply vadadustat until the FDA has granted regulatory approval for vadadustat in the DD-CKD Indication. The Company constrains the variable consideration to an amount for which a significant revenue reversal is not probable. Therefore, the Company determined that the entire transaction price at inception was constrained under ASC 606, and the Company has recorded the transaction price to deferred revenue as of December 31, 2022. Refund Liability to Customer Pursuant to the Vifor Second Amended Agreement, CSL Vifor contributed $ 40.0 million to a working capital fund established to partially fund the Company’s costs of purchasing vadadustat from its contract manufacturers, or the Working Capital Fund, which amount of funding will fluctuate, and which funding the Company is required to repay to CSL Vifor over time. The $ 40 million initial contribution to the Working Capital Fund represented 50 % of the amount of purchase orders that the Company had placed with its contract manufacturers for the supply of vadadustat for the Territory already delivered as of the effective date of the Vifor Second Amended Agreement, and to be delivered through the end of 2023. The amount of the Working Capital Fund will be reviewed at specified intervals and is adjusted based on a number of factors including outstanding supply commitments for vadadustat for the Territory and agreed upon vadadustat inventory levels held by the Company for the Territory. Upon termination or expiration of the Vifor Second Amended Agreement for any reason other than convenience by CSL Vifor (including following receipt of the CRL for vadadustat), the Company will be required to refund the outstanding balance of the Working Capital Fund on the date of termination or expiration. The Company has recorded the Working Capital Fund as a refund liability under ASC 606. The Company has determined that the refund liability itself does not represent an obligation to transfer goods or services to CSL Vifor in the future. The Company has therefore determined that this refund liability is not a contract liability under ASC 606. The Company accounted for the refund liability as a debt arrangement with zero coupon interest. The Company imputed interest on the refund liability to the customer at a rate of 15.0 % per annum, which was determined based on certain factors, including the Company's credit rating, comparable securities yield, and the expected repayment period of the Working Capital Fund. The Company recorded an initial discount on the refund liability to the customer and a corresponding deferred gain to the refund liability to customer on the consolidated balance sheet as of the date the funds were received from CSL Vifor, which was March 18, 2022. The discount on the note payable is being amortized to interest expense using the effective interest method over the expected term of the refund liability. The deferred gain is being amortized to interest income on a straight-line basis over the expected term of the refund liability. The amortization of the discount was $ 3.4 million for the year ended December 31, 2022. The amortization of the deferred gain was $ 2.4 million for the year ended December 31, 2022. The $ 41.0 million total refund liability is classified as a long-term refund liability based on management's estimate of potential amounts that could be refundable exceeding a one-year period. Priority Review Voucher Letter Agreement On February 14, 2020, the Company entered into a letter agreement, or the Letter Agreement, with CSL Vifor relating to CSL Vifor’s agreement with a third party to purchase a Priority Review Voucher, or the PRV, issued by the FDA, subject to satisfaction of customary closing conditions, or the PRV Purchase. Pursuant to the Letter Agreement, Akebia paid CSL Vifor $ 10.0 million in connection with the closing of the PRV Purchase. The $ 10.0 million payment to CSL Vifor was recorded to research and development expense in the consolidated statement of operations and as an operating cash outflow in the unaudited consolidated statement of cash flows during 2020. In March 2021, the Company submitted an NDA for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients. The Company's NDA submission did not include a PRV. On August 21, 2021, the Company and CSL Vifor executed an amendment to the Letter Agreement whereby the parties agreed that CSL Vifor would sell the PRV to a third party, and the Company and CSL Vifor would share the proceeds from the sale based on certain terms. In the fourth quarter of 2021, CSL Vifor sold the PRV to a third party, and CSL Vifor paid the Company $ 8.6 million in proceeds from the sale, which was recorded as contra research and development expense. These proceeds were subsequently paid to Otsuka as reimbursement for their contribution to the purchase of the PRV, as required under a separate letter agreement executed with Otsuka. License Agreement with Panion & BF Biotech, Inc. The Company had a license agreement, which was amended from time to time, with Panion & BF Biotech, Inc., or Panion, under which Keryx, the Company’s wholly owned subsidiary, was the contracting party, or the Panion License Agreement, 113 Table of Contents pursuant to which Keryx in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, or the Licensor Territory, for the development and commercialization of ferric citrate. On April 17, 2019, the Company and Panion entered into a second amended and restated license agreement, or the Panion Amended License Agreement, which amends and restates in full the Panion License Agreement. The Panion Amended License Agreement provides Keryx with an exclusive license under Panion-owned know-how and patents covering the rights to sublicense, develop, make, use, sell, offer for sale, import and export ferric citrate worldwide, excluding the Licensor Territory. The Panion Amended License Agreement also provides Panion with an exclusive license under Keryx-owned patents covering the rights to sublicense (with the Company’s written consent), develop, make, use, sell, offer for sale, import and export ferric citrate in certain countries in the Licensor Territory. Under the Panion Amended License Agreement, Panion is eligible to receive from the Company or any sublicensee royalty payments based on a mid-single digit percentage of sales of ferric citrate in the Company’s licensed territories. The Company is eligible to receive from Panion or any sublicensee royalty payments based on a mid-single digit percentage of net sales of ferric citrate in Panion’s licensed territories. The Panion Amended License Agreement terminates upon the expiration of each of the Company’s and Panion’s obligations to pay royalties thereunder. In addition, the Company may terminate the Panion Amended License Agreement (i) in its entirety or (ii) with respect to one or more countries in the Company’s licensed territory, in either case upon 90 days’ notice. The Company and Panion also each have the right to terminate the Panion Amended License Agreement upon the occurrence of a material breach of the Panion Amended License Agreement by the other party, subject to certain cure provisions, or certain insolvency events. The Panion Amended License Agreement also provides that, on a country-by-country basis, until the second anniversary of the expiration of the obligation of the Company or Panion, as applicable, to pay royalties in a country in which such party has ferric citrate for sale on the date of such expiration, neither the other party nor its affiliates will, directly or indirectly, sell, distribute or otherwise commercialize or supply or cause to supply ferric citrate to a third party for sale or distribution in such country. The Panion Amended License Agreement includes customary terms relating to, among others, indemnification, confidentiality, remedies, and representations and warranties. In addition, the Panion Amended License Agreement provides that each of the Company and Panion has the right, but not the obligation, to conduct litigation against any infringer of certain patent rights under the Panion Amended License Agreement in certain territories. During the years ended December 31, 2022, 2021 and 2020, the Company incurred approximately $ 13.8 million, $ 11.8 million and $ 11.2 million, respectively, in royalty payments due to Panion relating to the Company’s sales of Auryxia in the United States and JT and Torii’s net sales of Riona in Japan. Sublicense Agreement with Japan Tobacco, Inc. and its subsidiary, Torii Pharmaceutical Co., Ltd. Summary of Agreement The Company has an Amended and Restated Sublicense Agreement, which was amended in June 2013, with JT and Torii, or the JT and Torii Sublicense Agreement, under which Keryx, the Company’s wholly owned subsidiary, remains the contracting party. Under the JT and Torii Sublicense Agreement, JT and Torii obtained the exclusive sublicense rights for the development and commercialization of ferric citrate hydrate in Japan. JT and Torii are responsible for the future development and commercialization costs in Japan. In January 2014, JT and Torii received manufacturing and marketing approval of ferric citrate from the Japanese Ministry of Health, Labour and Welfare. Ferric citrate hydrate, which launched in May 2014 and is being marketed in Japan by Torii under the brand name Riona, is indicated as an oral treatment for the improvement of hyperphosphatemia in patients with CKD, including NDD-CKD and DD-CKD. In July 2019, JT and Torii, reported positive top-line results from a pivotal Phase 3 comparative study evaluating Riona for the treatment of IDA in adult patients in Japan, which was approved in March 2021. In May 2020, JT and Torii filed an application for approval of IDA as an additional indication for Riona in Japan. The Company is eligible to receive royalty payments based on a tiered low double-digit percentage of net sales of Riona in Japan inclusive of amounts that the Company must pay to Panion on JT and Torii's net sales of Riona under the Panion License Agreement subject to certain reductions upon expiration or termination of the Amended and Restated License Agreement between Keryx and Panion, pursuant to which Keryx in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, for the development and commercialization of ferric citrate. The Company is entitled to receive up to an additional $ 55.0 million upon the achievement of certain annual net sales milestones. The sublicense under the JT and Torii Sublicense Agreement terminates upon the expiration of all underlying patent rights. Also, JT and Torii may terminate the JT and Torii Sublicense Agreement with or without cause upon at least six months ' prior written notice to the Company. Additionally, either party may terminate the JT and Torii Sublicense Agreement for cause upon 114 Table of Contents 60 days’ prior written notice after the breach of any uncured material provision of the JT and Torii Sublicense Agreement, or after certain insolvency events . Revenue Recognition The Company evaluated the elements of the JT and Torii Sublicense Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, JT and Torii, is a customer. The Company’s arrangement with JT and Torii contains the following material promises under the contract at inception: (i) exclusive license to develop and commercialize ferric citrate hydrate in Japan (the License Deliverable), (ii) supply of ferric citrate hydrate until JT and Torii could secure their own source (the Supply Deliverable), (iii) knowledge transfer, and (iv) rights to future know-how. The Company identified two performance obligations in connection with its obligations under the JT and Torii Sublicense Agreement: (i) License and Supply Performance Obligation and (ii) Rights to Future Know-How Performance Obligation . The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. The Company developed a best estimate of the standalone selling price for the Rights to Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement and determined it immaterial. As such, the Company did not develop a best estimate of standalone selling price for the License and Supply Performance Obligation and allocated the entire transaction price to this performance obligation. Additionally, as of the consummation of the Merger, the services associated with the License and Supply Performance Obligation were completed and JT and Torii had secured their own source to manufacture ferric citrate hydrate. As such, any initial license fees as well as any development-based milestones and manufacturing fee revenue were received and recognized prior to the Merger. The Company determined that the remaining consideration that may be payable to the Company under the terms of the sublicense agreement are either quarterly royalties on net sales or payments due upon the achievement of sales-based milestones. In accordance with ASC 606, the Company recognizes sales-based royalties and milestone payments based on the level of sales, when the related sales occur as these amounts have been determined to relate predominantly to the license granted to JT and Torii and therefore are recognized at the later of when the performance obligation is satisfied, or the related sales occur. During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 5.3 million, $ 5.8 million and $ 5.7 million, respectively, in license revenue related to royalties earned on net sales of Riona in Japan. The Company records the associated mid-single digit percentage of net sales royalty expense due to Panion, the licensor of Riona, in the same period as the royalty revenue from JT and Torii is recorded. License Agreement with Averoa SAS Summary of Agreement On December 22, 2022, the Company and Averoa SAS, or Averoa, entered into a license agreement, or the Averoa License Agreement, pursuant to which the Company granted to Averoa an exclusive license to develop and commercialize ferric citrate, or the Licensed Product, in the European Economic Area, Turkey, Switzerland and the United Kingdom, or the Territory. Under the Averoa License Agreement, the Company is entitled to receive tiered, escalating royalties ranging from a mid-single digit percentage to a low double-digit percentage of Averoa's annual net sales in the Territory, including certain minimum royalty amounts in certain years, and subject to reduction in certain circumstances. The royalties will expire on a country-by-country basis upon the last to occur of (a) 10 years following the date of first commercial sale of the Licensed Product in such country; (b) expiration of the last valid claim of Company patent rights and joint patent rights in such country; and (c) the date of expiration of the data, regulatory, or marketing exclusivity period conferred by the applicable regulatory authority in such country with respect to the Licensed Product. The Company and Averoa will establish a joint steering committee to oversee the development, manufacturing and commercialization of the Licensed Product in the Territory. The Averoa License Agreement expires on the date of expiration of all royalty obligations due thereunder with respect to the Licensed Product on a country-by-country basis in the Territory, unless earlier terminated in accordance with the agreement. Either party may, subject to a cure period, terminate the Averoa License Agreement in the event of the other party’s uncured material breach. Averoa has the right to terminate the Averoa License Agreement for convenience upon 12 months’ prior written notice delivered on or after the date that is 12 months after the effective date. In addition, Averoa has the right to terminate the Averoa License Agreement upon 30 days’ notice if the EMA rejects Averoa’s marketing authorization application for the Licensed Product, and the parties in good faith agree that submitting a new marketing authorization application to the 115 Table of Contents EMA will not result in approval. The Averoa License Agreement includes customary terms relating to, among others, indemnification, confidentiality, remedies, and representations and warranties. The Averoa License Agreement provides that the Company and Averoa will enter into a supply agreement pursuant to which the Company will supply the Licensed Product to Averoa for commercial use in the Territory. The Company will have the right to terminate the supply agreement upon 24 months' notice, which may be provided on or after January 1, 2024. The Company did not receive any consideration under this agreement as of December 31, 2022. 6. Restructuring and Other Charges, Net On April 4, 2022, the Board of Directors of the Company approved a reduction of the Company’s workforce by approximately 42 % across all areas of the Company ( 47 % inclusive of the closing of the majority of open positions) following the receipt of the CRL from the FDA to the Company’s NDA for vadadustat for the treatment of anemia due to CKD in adult patients. On May 5, 2022, the Company implemented a further reduction in workforce consisting of several members of management. These actions reflected the Company’s determination to refocus its strategic priorities around its commercial product, Auryxia ® , and its development portfolio, and are steps in a cost savings plan to significantly reduce the Company’s expense profile. The workforce reductions were completed as of December 31, 2022, and the Company has incurred all related charges. During the year ended December 31, 2022, the Company recognized $ 14.5 million of restructuring charges in the consolidated statement of operations. These charges included $ 11.3 million of one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits and $ 3.2 million of non-cash share-based compensation expense. The charges were recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits or ASC 420, Exit or Disposal Cost Obligations, depending on the employee . On November 7, 2022, the Board of Directors approved a reduction of the Company’s workforce by approximately 14 % consisting solely of individuals within the commercial organization as a result of the Company’s decision to shift to a strategic account management focused model for its commercial efforts. This shift in approach supports the Company’s strategic pillars to drive Auryxia revenue while also continuing to decrease operating costs. The workforce reduction was completed as of December 31, 2022, and the Company has incurred all related charges. During the year ended December 31, 2022, the Company recognized $ 1.4 million of restructuring charges in the consolidated statement of operations. These charges included one-time termination benefits and contractual termination benefits for severance, healthcare, and related benefits and non-cash share-based compensation expense. The charges were recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits or ASC 420, Exit or Disposal Cost Obligations, depending on the employee . Details of the restructuring liability activity for the Company's workforce reductions for the period ended December 31, 2022 as recorded in accrued expenses and other current liabilities and other non-current liabilities in the consolidated balance sheet in this Annual Report on Form 10-K/A are as follows: December 31, 2022 (in thousands) Balance at December 31, 2021 $ — Restructuring charges 15,933 Stock-based compensation expense ( 3,197 ) Severance payments and adjustments ( 8,977 ) Balance at December 31, 2022 $ 3,758 7. Liability Related to Sale of Future Royalties On February 25, 2021, the Company entered into the Royalty Agreement with HealthCare Royalty Partners IV, L.P., or HCR, pursuant to which the Company sold to HCR its right to receive royalties and sales milestones for vadadustat in Japan and certain other Asian countries, such countries, collectively, the MTPC Territory, and such payments collectively the Royalty Interest Payments, in each case, payable to the Company 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 116 Table of Contents receives Royalty Interest Payments equal to the Annual Cap in a given calendar year, the Company 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 the Company pays the Aggregate Cap to HCR (net of the Royalty Interest Payments already received by HCR), the Royalty Interest Payments will revert back to the Company, and HCR would have no further right to any Royalty Interest Payments. The Company received $ 44.8 million from HCR (net of certain transaction expenses) under the Royalty Agreement, and the Company is 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. The sales milestone for vadadustat in the MTPC Territory was not achieved for 2022 or 2021. The Company retains the right to receive all potential future regulatory milestones for vadadustat under the MTPC Agreement. The Royalty Agreement will terminate on the earlier of the date on which HCR has received (i) the last Royalty Interest Payment or (ii) payment by the Company of an amount equal to the Aggregate Cap minus the aggregate amount of all Royalty Interest Payments actually received by HCR. Although the Company sold its right to receive royalties and sales milestones for vadadustat in the MTPC Territory as described above, as a result of its ongoing involvement in the cash flows related to these royalties, the Company will continue to account for these royalties as revenue. The Company recognized the proceeds received from HCR as a liability that is being amortized using the effective interest method over the life of the arrangement. At the transaction date, the Company recorded the net proceeds of $ 44.8 million as a liability. In order to determine the amortization of the liability, the Company is required to estimate the total amount of future net royalty payments to be made to HCR over the term of the Royalty Agreement. The total threshold of net royalties to be paid, less the net proceeds received, will be recorded as interest expense over the life of the liability. The Company imputes interest on the unamortized portion of the liability using the effective interest method. The annual effective interest rate as of December 31, 2022 was 0 % which is reflected as interest expense in the consolidated statements of operations and comprehensive loss. Over the course of the Royalty Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in forecasted royalty revenue. There are a number of factors that could materially affect the amount and timing of royalty payments from MTPC, none of which are within the Company's control. On a quarterly basis, the Company reassesses the effective interest rate and adjusts the rate prospectively as needed. The following table shows the activity within the liability account for the year ended December 31, 2022: (in thousands) Liability related to sale of future royalties, net — beginning balance $ 53,079 MTPC royalties payable ( 1,777 ) Non-cash interest expense recognized 6,182 Liability related to sale of future royalties, net — ending balance $ 57,484 The Royalty Agreement requires the Company to take certain actions, including actions with respect to the Royalty Interest Payments, the MTPC Agreement, the MTPC Supply Agreement, and the Company's intellectual property. The Royalty Agreement also contains certain representations and warranties, covenants, indemnification obligations, events of default and other provisions that are customary for a royalty monetization transaction of this nature. In addition, the Company granted HCR a precautionary security interest in connection with the Royalty Interest Payments. 8. Fair Value of Financial Instruments The Company utilizes a portfolio management company for the valuation of the majority of its investments. This company is an independent, third-party vendor recognized to be an industry leader with access to market information that obtains or computes fair market values from quoted market prices, pricing for similar securities, recently executed transactions, cash flow models with yield curves and other pricing models. For valuations obtained from the pricing service, the Company performs due diligence to understand how the valuation was calculated or derived, focusing on the valuation technique used and the nature of the inputs. Based on the fair value hierarchy, the Company classifies its cash equivalents and available for sale securities within Level 1 or Level 2. This is because the Company values its cash equivalents and available for sale securities using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Assets measured or disclosed at fair value on a recurring basis as of December 31, 2022 and 2021 are summarized below: 117 Table of Contents Fair Value Measurements Using Level 1 Level 2 Level 3 Total (in thousands) December 31, 2022 Assets: Money market $ 52,442 — — $ 52,442 $ 52,442 $ — $ — $ 52,442 Liabilities: Derivative liability — — $ 760 $ 760 $ — $ — $ 760 $ 760 Fair Value Measurements Using Level 1 Level 2 Level 3 Total (in thousands) December 31, 2021 Assets: Money market $ 42,918 — — $ 42,918 $ 42,918 $ — $ — $ 42,918 Liabilities: Derivative liability — — $ 1,820 $ 1,820 $ — $ — $ 1,820 $ 1,820 The Company’s Loan Agreement with Pharmakon (see Note 12) contains certain provisions that change the underlying cash flows of the debt instrument, including a potential extension to the interest-only period dependent on both (i) no event of default having occurred and continuing and (ii) the Company achieving certain regulatory and revenue conditions. One of the regulatory conditions was approval of vadadustat by August 2022, however, in March 2022, the Company received the CRL from the FDA stating that the FDA had determined that it could not approve the NDA for vadadustat in its present form. Therefore, the Company is no longer eligible for the interest-only extension period and this no longer changes the underlying cash flows of the debt instrument. The Company also assessed the acceleration of the obligations under the Loan Agreement under certain events of default. In addition, under certain circumstances, a default interest rate will apply on all outstanding obligations during the occurrence and continuance of an event of default. In accordance with ASC 815, the Company concluded that these features are not clearly and closely related to the host instrument, and represent a single compound derivative that is required to be re-measured at fair value on a quarterly basis. The potential events of default include maintaining, on an annual basis, a minimum liquidity threshold which started in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia which started in the fourth quarter of 2020. The Company recorded a derivative liability related to the Company’s Loan Agreement with Pharmakon of $ 0.8 million and $ 1.8 million as of December 31, 2022 and 2021, respectively. The Company classified the derivative liability as a non-current liability on the balance sheet at December 31, 2022 and 2021. The estimated fair value of the derivative liability on both December 31, 2022 and 2021 was determined using a scenario-based approach and discounted cash flow model that includes principal and interest payments under various scenarios involving clinical development success for vadadustat and various cash flow assumptions. The Company used a 0 % probability of clinical development success due to receipt of the CRL from the FDA for vadadustat. Should the Company’s assessment of the probabilities around these scenarios change, including for changes in market conditions, there could be a change to the fair value of the derivative liability. The following table provides a roll-forward of the fair value of the derivative liability (in thousands): Balance at December 31, 2021 $ 1,820 Change in fair value of derivative liability, recorded as other income ( 1,060 ) Balance at December 31, 2022 $ 760 118 Table of Contents The Company had no other assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2022 and 2021. 9. Inventories The components of inventories are summarized as follows (in thousands): December 31, 2022 December 31, 2021 Raw materials $ 610 $ 1,763 Work-in-process 7,892 62,635 Finished goods 13,676 14,661 Total inventories $ 22,178 $ 79,059 Long-term inventory, which primarily consists of raw materials and work-in-process, is included in other assets in the Company’s consolidated balance sheets. The following is a reconciliation of inventory reported in the consolidated balance sheet (in thousands): Balance Sheet Classification: December 31, 2022 December 31, 2021 Inventories $ 21,568 $ 36,628 Other assets 610 42,431 Total inventories $ 22,178 $ 79,059 Inventory amounts written down as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold totaled $ 30.2 million, $ 15.0 million, and $ 20.6 million during the years ended December 31, 2022, 2021, and 2020, respectively. The increase in inventory amounts written down for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily due to higher write-downs to inventory reserves related to Auryxia drug substance that will not be forward processed into drug product. In addition, there were $ 0 million , $ 8.7 million, and $ 11.4 million in related step-up charges during the years ended December 31, 2022, 2021, and 2020, respectively. If future sales of Auryxia are lower than expected, the Company may be required to write-down the value of such inventories. Inventory write-downs and losses on purchase commitments are recorded as a component of cost of sales in the consolidated statement of operations. 10. Intangible Asset and Goodwill Intangible Asset The following table presents the Company’s intangible asset (in thousands): December 31, 2022 Gross Carrying Value Accumulated Amortization Total Acquired intangible asset: Developed product rights for Auryxia $ 214,705 $ ( 142,621 ) $ 72,084 Total $ 214,705 $ ( 142,621 ) $ 72,084 December 31, 2021 Gross Carrying Value Accumulated Amortization Total Acquired intangible asset: Developed product rights for Auryxia $ 214,705 $ ( 106,578 ) $ 108,127 Total $ 214,705 $ ( 106,578 ) $ 108,127 119 Table of Contents The Company amortizes its definite-lived intangible asset using the straight-line method, which is considered the best estimate of economic benefit, over its estimated useful life of six years . The Company recorded $ 36.0 million in amortization expense during the years ended December 31, 2022 and 2021, and $ 32.6 million in amortization expense during the year ended December 31, 2020 related to the developed product rights for Auryxia. Estimated future amortization expense for the intangible asset as of December 31, 2022 is as follows (in thousands): Year ending December 31, Amortization Expense 2023 $ 36,042 2024 36,042 Total $ 72,084 Auryxia Intangible Asset Impairment In the second quarter of 2020, in connection with a routine business review, the Company reduced its short-term and long-term Auryxia revenue forecast. This reduction was primarily driven by the compounding impact of the September 2018 CMS decision that rescinded Medicare Part D coverage of Auryxia for the IDA Indication and the related imposition by CMS of a prior authorization requirement for Auryxia for the Hyperphosphatemia Indication. As a result, the Company determined indicators of impairment existed for the developed product rights for Auryxia and performed an undiscounted cash flow analysis pursuant to ASC 360-10, Impairment or Disposal of Long-lived Assets , to determine if the cash flows expected to be generated by the Auryxia asset group over the estimated remaining useful life of the primary assets were sufficient to recover the carrying value of the Auryxia asset group. Based on this analysis, the undiscounted cash flows were not sufficient to recover the carrying value of the Auryxia asset group. As a result, the Company was required to perform Step 3 of the impairment test to determine the fair value of the Auryxia asset group. To estimate the fair value, the Company performed a business enterprise valuation for the Auryxia asset group using the income approach, which is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate. Key estimates and assumptions used in the valuations included projected revenues and expenses related to the asset, estimated contributory asset charges, and a risk-adjusted discount rate of 9.5 % to calculate the present value of the future expected cash inflows. The Company believes its assumptions are consistent with the plans and estimates that a market participant would use to manage the business. The discount rates used are intended to reflect the risks inherent in future cash flow projections and were based on an estimate of the weighted average cost of capital, or WACC, of market participants relative to the Auryxia asset group. As a result of this analysis, the fair value of the Auryxia asset group was below its carrying value, and the Company recorded an impairment charge of $ 114.4 million during the three months ended June 30, 2020 and made a corresponding adjustment to the estimated useful life of the developed product rights for Auryxia from nine years to seven years . The impairment charge has been entirely allocated to the Company’s only intangible asset, the developed product rights for Auryxia, as all other long-lived assets had fair values that were either equal to or greater than their carrying value. Per ASC 360-10, the carrying amount of a long-lived asset of the group would not be reduced below its fair value. The Company believes its assumptions used to determine the fair value of the Auryxia asset group are reasonable. In the event the estimates and assumptions used in the valuation of the Auryxia asset group, including the forecasted projections, change in the future, additional impairment charges could be recorded in the future. In the fourth quarter of 2020, as part of the Company's routine forecasting process, the Company reassessed and prospectively adjusted the estimated useful life of the developed product rights for Auryxia from seven years to six years . This was not deemed an impairment indicator as of December 31, 2020. Goodwill Goodwill was $ 59.0 million as of December 31, 2022 and 2021. The Company operates in one operating segment which the Company considers to be the only reporting unit. Goodwill is evaluated for impairment at the reporting unit level on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that an impairment may exist. Events that could indicate impairment and trigger an impairment assessment include, but are not limited to, an adverse change in current economic or market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action by a regulator. During the year ended December 31, 2022, the Company evaluated business factors, including the receipt of the CRL from the FDA for vadadustat, the Company's market capitalization as impacted by a recent decline in the Company's stock price, the impact of the Otsuka Termination Agreement on the Company's future cash flows, and the impact of the BioVectra Termination 120 Table of Contents Agreement to the Company's excess purchase commitment liability to determine if there were events or changes in circumstance to indicate that the fair value of the reporting unit was less than its carrying value. The Company performed a qualitative impairment assessment of the Company's goodwill balance as the year ended December 31, 2022. The Company determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying value and, therefore, did not perform a further quantitative impairment test. The Company's qualitative assessments were based on the Company's estimates and assumptions, a number of which are dependent on external factors and actual results may differ materially from these estimates. In addition, the future occurrence of events including, but not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions and an adverse action or assessment by a regulator could indicate potential impairment and trigger an impairment assessment of goodwill, which could result in an impairment of goodwill. As a result of the significance of goodwill, the Company's results of operations and financial position in a future period could be negatively impacted should an impairment test be triggered that results in an impairment of goodwill. There were no impairments of goodwill during the years ended December 31, 2021 and 2020. 11. Accrued Expenses Accrued expenses are as follows: December 31, 2022 December 31, 2021 (in thousands) Product revenue allowances $ 26,268 $ 24,478 Product return reserves, current portion 7,789 6,704 Accrued clinical trial expenses 5,755 14,036 Amounts due to collaboration partners — 22,654 Accrued payroll and related expenses 11,481 15,863 Lease liabilities 4,744 4,802 Royalties 3,804 3,472 Professional fees 1,886 1,899 Accrued commercial manufacturing 4,310 3,843 Accrued restructuring 2,751 — Accrued other 6,989 11,263 Total accrued expenses $ 75,777 $ 109,014 12. Debt Term Loans On November 11, 2019, the Company, 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 the Company 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. Each of the Tranche A Funding Date and the Tranche B Funding Date, a Funding Date. Proceeds from the Term Loans may be used for general corporate purposes. The Company and Keryx entered into a Guaranty and Security Agreement with the Collateral Agent, or the Guaranty and Security Agreement, on the Tranche A Funding Date. Pursuant to the Guaranty and Security Agreement, the Company’s obligations under the Term Loans are unconditionally guaranteed by Keryx, or the Guarantee. Additionally, the obligations of the Company and Keryx under the Term Loans and the 121 Table of Contents Guarantee are secured by a first priority lien on certain assets of the Company and Keryx, including Auryxia and certain related assets, cash, and certain equity interests held by the Company and Keryx, collectively the Collateral. The Term Loans bear interest at a floating rate per annum equal to the three-month LIBOR rate plus 7.50 %, subject to a 2.00 % LIBOR floor and a 3.35 % LIBOR cap, payable quarterly in arrears. The Term Loans will mature on the fifth anniversary of the Tranche A Funding Date, or the Maturity Date. The Company will repay the principal under the Term Loans in equal quarterly payments starting on the 33 rd-month anniversary of the applicable Funding Date, or the Amortization Schedule. If certain conditions were met, it would have had the option to repay the principal in equal quarterly payments starting on the 48 th-month anniversary of the applicable Funding Date. One of these conditions was approval of vadadustat; however, the Company received the CRL from the FDA in March 2022 stating that the FDA had determined that it could not approve the NDA in its present form. Therefore, the Company is no longer eligible for this option to delay repayment of the principal under the Loan Agreement. During the year ended December 31, 2022, the Company made its first quarterly principal payment under the Term Loans of $ 8.0 million. Under certain circumstances, unless certain liquidity conditions are met, the Maturity Date may decrease by up to one year , and the Amortization Schedule may correspondingly commence up to one year earlier. On the Tranche A Funding Date, the Company paid to Pharmakon a facility fee equal to 2.00 % of the aggregate principal amount of the Term Loans, or $ 2.0 million, in addition to other expenses incurred by Pharmakon and reimbursed by the Company, or Lender Expenses. The Tranche A draw was $ 77.3 million, net of facility fee, Lender Expenses and issuance costs. The Tranche B draw was $ 20.0 million, net of immaterial Lender Expenses and issuance costs. The Loan Agreement permits voluntary prepayment at any time in whole or in part, subject to a prepayment premium. The prepayment premium would be 2.00 % of the principal amount being prepaid prior to the third anniversary of the applicable Funding Date, 1.00 % on or after the third anniversary, but prior to the fourth anniversary, of the applicable Funding Date, and 0.50 % on or after the fourth anniversary of the applicable Funding Date but prior to the Maturity Date, and a make-whole premium on or prior to the second anniversary of the applicable Funding Date in an amount equal to foregone interest through the second anniversary of the applicable Funding Date. A change of control triggers a mandatory prepayment of the Term Loans. The Loan Agreement contains customary representations, warranties, events of default and covenants of the Company and its subsidiaries, including maintaining, on an annual basis, a minimum liquidity threshold which started in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia which started in the fourth quarter of 2020. On February 18, 2022, the Loan Agreement was amended pursuant to a First Amendment and Waiver, or the First Amendment and Waiver, which waived the provision under the Loan Agreement that required the Company to not be subject to any qualification as a going concern within the Company's 2021 Annual Report on Form 10-K. Pursuant to the First Amendment and Waiver, the Company’s filings of Form 10-Q for fiscal quarters ending June 30, 2022 and September 30, 2022, and its future Annual Reports on Form 10-K, must not be subject to any qualification as to going concern, which requirement as to the Company's filings on Form 10-Q was waived in the Second Amendment and Waiver. If the Company does not satisfy the covenant as to going concern, in any of these filings, the Company will be in default under the Loan Agreement. If an event of default occurs and is continuing under the Loan Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement. Under certain circumstances, a default interest rate will apply on all outstanding obligations during the occurrence and continuance of an event of default. As of December 31, 2022, the Company determined that no events of default had occurred. On July 15, 2022, or the Effective Date, the Company and Pharmakon entered into the Second Amendment and Waiver, or the Second Amendment and Waiver, which amended and waived certain provisions of the Loan Agreement, as amended by the First Amendment and Waiver. Pursuant to the Second Amendment and Waiver, on the Effective Date, the Company made a $ 5.0 million prepayment of the principal of the Tranche A loan, or the Second Amendment Effective Date Tranche A Prepayment, and a $ 20.0 million prepayment of principal of the Tranche B loan, or the Second Amendment Effective Date Tranche B Prepayment, in each case, together with any and all accrued and unpaid interest on such prepayments of principal to the Effective Date. In connection therewith, the Company also paid $ 0.5 million in prepayment premiums under the Loan Agreement. During the year ended December 31, 2022, the Company recorded a debt extinguishment loss of $ 0.9 million. Subject to the payment in full of the Second Amendment Effective Date Tranche A Prepayment and the Second Amendment Effective Date Tranche B Prepayment, Pharmakon agreed to, among other things, (1) increase the amount of the working capital facility established in connection with the Company’s Second Amended and Restated License Agreement with CSL Vifor, which facility is part of the definition of Permitted Indebtedness (as such term is defined in the Loan Agreement) under the Loan Agreement, that the Company is permitted to repay to CSL Vifor without causing an acceleration of the liabilities under the Loan Agreement, (2) waive the requirement that the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ending June 30, 2022 and September 30, 2022 not be subject to any qualification as to going concern, and (3) waive certain amounts payable under the Loan 122 Table of Contents Agreement in connection with the Second Amendment Effective Date Tranche B Prepayment. Future principal payments pursuant to the contractual terms of the Loan Agreement, as amended, as of December 31, 2022 are as follows (in thousands): Years ending December 31, Principal Payments 2023 $ 32,000 2024 35,000 Total before unamortized discount and issuance costs 67,000 Less: unamortized discount and issuance costs ( 922 ) Total term loans $ 66,078 The Company assessed the terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion feature. As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features. The terms and features assessed include a potential extension to the interest-only period dependent on both no event of default having occurred and continuing and on the Company achieving certain regulatory and revenue conditions. The Company also assessed the acceleration of the obligations under the Loan Agreement under an event of default. In addition, under certain circumstances, a default interest rate will apply on all outstanding obligations during the occurrence and continuance of an event of default. In accordance with ASC 815, the Company concluded that these features are not clearly and closely related to the host instrument, and represent a single compound derivative that is required to be re-measured at fair value on a quarterly basis. The fair value of the derivative liability related to the Company’s Loan Agreement was $ 0.8 million and $ 1.8 million as of December 31, 2022 and 2021, respectively. The Company classified the derivative liability as a non-current liability on the balance sheet at December 31, 2022. The Company recognized approximately $ 9.5 million, $ 10.9 million, and $ 8.9 million of interest expense related to the Loan Agreement during the years ended December 31, 2022, 2021, and 2020, respectively. 13. Stockholders’ Equity Authorized and Outstanding Capital Stock On June 5, 2020, the Company filed a Certificate of Amendment to its Ninth Amended and Restated Certificate of Incorporation, or its Charter, to increase the number of authorized shares of common stock from 175,000,000 to 350,000,000 . As of December 31, 2022, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $ 0.00001 per share, of which 184,135,714 and 177,000,963 shares were issued and outstanding at December 31, 2022 and 2021, respectively; and 25,000,000 shares of undesignated preferred stock, par value $ 0.00001 per share, of which no shares were issued and outstanding at December 31, 2022 and 2021. At-the-Market Facility On March 12, 2020, the Company filed a prospectus supplement relating to the Company's sales agreement with Cantor Fitzgerald & Co., or the Prior Sales Agreement, pursuant to which it was able to offer and sell up to $ 65.0 million of its common stock at current market prices from time to time. Through December 31, 2020, the Company sold 3,509,381 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 10.6 million. During the three months ended March 31, 2021, the Company sold 5,224,278 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 15.9 million. On February 25, 2021, the Company filed a prospectus relating to the sales agreement with its new shelf registration statement (which replaced the prior shelf registration statement), pursuant to which it was able to offer and sell up to $ 100.0 million of its common stock at current market prices from time to time. Through December 31, 2021, the Company sold 21,128,065 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 72.4 million. On March 1, 2022, the Company filed a prospectus relating to the Prior Sales Agreement, pursuant to which it was authorized to offer and sell up to $ 25.3 million of its common stock at current market prices from time to time. On March 16, 2022, the Company terminated the Prior Sales Agreement. During the three months ended March 31, 2022, the Company sold 404,600 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 0.8 million. On April 7, 2022, the Company 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 123 Table of Contents time. Also, on April 7, 2022, the Company filed a prospectus supplement relating to the Sales Agreement, pursuant to which it is able to offer and sell under the Sales Agreement up to $ 26.0 million of its 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 the Company's Annual Report on Form 10-K filed on March 10, 2023, the Company has not sold any shares of its common stock under this program. Equity Plans The Company maintains one stock incentive plan, the 2014 Incentive Plan, or the 2014 Plan, as well as the 2014 Employee Stock Purchase Plan, or the 2014 ESPP. The 2014 Plan replaced the Company’s Amended and Restated 2008 Equity Incentive Plan, or the 2008 Plan, however, options or other awards granted under the 2008 Plan prior to the adoption of the 2014 Plan that have not been settled or forfeited remain outstanding and effective. On June 6, 2019, the Company’s stockholders approved the Amended and Restated 2014 Employee Stock Purchase Plan, or the ESPP. In May 2016, the Company’s Board of Directors approved an inducement award program that was separate from the Company’s equity plans and which, consistent with Nasdaq Listing Rule 5635(c)(4), did not require stockholder approval, or the Inducement Award Program. During the year ended December 31, 2022, the Company granted 435,000 options to purchase shares of the Company’s common stock to new hires under the Inducement Award Program, of which 258,000 options to purchase shares of the Company's common stock remained outstanding at December 31, 2022. The 2014 Plan allows for the granting of stock options, stock appreciation rights, or SARs, restricted stock, unrestricted stock, restricted stock units, or RSUs, performance awards and other awards convertible into or otherwise based on shares of the Company’s common stock. Dividend equivalents may also be provided in connection with an award under the 2014 Plan. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2014 Plan. The Company initially reserved 1,785,000 shares of its common stock for the issuance of awards under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the 2014 Plan will automatically increase annually on January 1 of each calendar year, by an amount equal to three percent ( 3 %) of the number of the Company's shares outstanding on a fully diluted basis as of the close of business on the immediately preceding December 31, or the 2014 Plan Evergreen Provision. The Company’s Board of Directors may act prior to January 1 of any year to provide that there will be no automatic increase in the number of Akebia Shares available for grant under the 2014 Plan for that year (or that the increase will be less than the amount that would otherwise have automatically been made). On December 12, 2018, in connection with the consummation of the Merger, the Company assumed outstanding and unexercised options to purchase Keryx's stock, as adjusted by the Exchange Multiplier pursuant to the terms of the Merger Agreement, under the following Keryx equity plans, or the Keryx Equity Plans: the Keryx 1999 Share Option Plan, the Keryx 2004 Long-Term Incentive Plan, the Keryx 2007 Incentive Plan, the Keryx Amended and Restated 2013 Incentive Plan, and the Keryx 2018 Equity Incentive Plan, or the Keryx 2018 Plan. In addition, the number of Keryx shares available for issuance under the Keryx 2018 Plan, as adjusted by the Exchange Multiplier pursuant to the terms of the Merger Agreement, may be used for awards granted by the Company under its 2014 Plan, or the Assumed Shares, provided that the Company uses the Assumed Shares for individuals who were not employees or directors of the Company prior to the consummation of the Merger. During the year ended December 31, 2022, the Company granted 3,233,500 options to purchase Akebia Shares to employees under the 2014 Plan, 435,000 options to purchase Akebia Shares to employees under the Inducement Award Program, 5,219,908 Akebia RSUs to employees under the 2014 Plan, 800,000 performance stock units, or PSUs, to employees under the 2014 Plan, 140,700 options to purchase Akebia Shares to directors under the 2014 Plan, and 95,900 RSUs to directors under the 2014 Plan. The ESPP provides for the issuance of shares of the Company’s common stock to participating employees at a discount to their fair market value. The maximum aggregate number of shares at December 31, 2022 of the Company’s common stock available for future issuance under the ESPP is 4,837,995 . Under the ESPP, each offering period is six months , at the end of which employees may purchase shares of the Company’s common stock through payroll deductions made over the term of the offering. The per-share purchase price at the end of each offering period is equal to the lesser of eighty-five percent ( 85 %) of the closing price of the Company’s common stock at the beginning or end of the offering period. Shares Reserved for Future Issuance The Company has reserved for future issuance the following number of shares of common stock: 124 Table of Contents December 31, 2022 December 31, 2021 Common stock options, RSUs and PSUs outstanding (1) 17,407,227 16,065,218 Shares available for issuance under Akebia equity plans (2) 5,498,984 4,675,734 Warrant to purchase common stock — 509,611 Shares available for issuance under the ESPP 4,837,995 5,173,141 Total 27,744,206 26,423,704 (1) Includes awards granted under the 2014 Plan and the Inducement Award Program and awards issued in connection with the Merger. (2) On January 1, 2023, January 1, 2022 and January 1, 2021, the shares reserved for future grants under the 2014 Plan increased by 6,046,288 , 5,807,270 and 4,880,775 shares, respectively, pursuant to the 2014 Plan Evergreen Provision. Stock-Based Compensation Stock Options Service-Based Stock Options On February 28, 2022, as part of the Company’s annual grant of equity, the Company issued 2,833,500 stock options to employees. In addition, the Company issues stock options to directors, new hires and occasionally to other employees not in connection with the annual grant process. Options granted by the Company generally vest over periods of between 12 and 48 months, subject, in each case, to the individual’s continued service through the applicable vesting date. Options generally vest either 100 % on the first anniversary of the grant date or in installments of (i) 25 % at the one year anniversary and (ii) 12 equal quarterly installments beginning after the one year anniversary of the grant date, subject to the individual’s continuous service with the Company. Options generally expire ten years after the date of grant. The Company recorded approximately $ 6.8 million, $ 8.9 million and $ 8.5 million of stock-based compensation expense related to stock options granted during the years ended December 31, 2022, 2021 and 2020, respectively. The assumptions used in the Black-Scholes pricing model to estimate the grant date fair value of options granted under the 2014 Plan are as follows: Year ended December 31, 2022 2021 2020 Risk-free interest rate 1.69 % - 4.17 % 0.66 % - 1.37 % 0.32 % - 1.38 % Dividend yield — % — % — % Volatility 79.77 % - 91.57 % 77.81 % - 81.79 % 69.56 % - 75.91 % Expected term (years) 5.51 - 6.25 5.51 - 6.25 5.51 - 6.25 The following table summarizes the Company’s stock option activity, excluding performance-based options, for the year ended December 31, 2022: Shares Weighted-Average Exercise Price Weighted-Average Contractual Life (in years) Aggregate Intrinsic Value Outstanding, December 31, 2021 11,398,215 $ 7.60 $ 267,830 Granted 3,809,200 $ 1.81 Exercised ( 142,440 ) $ 0.47 $ 44,905 Forfeited ( 3,331,840 ) $ 6.43 $ 3,813 Expired/cancelled ( 407,045 ) $ 9.52 Outstanding, December 31, 2022 11,326,090 $ 6.01 7.26 $ 112,709 Options exercisable, December 31, 2022 6,239,437 $ 8.37 6.08 $ 1,904 Vested and expected to vest, December 31, 2022 11,326,090 $ 6.01 The weighted-average grant date fair values of options granted in the years ended December 31, 2022, 2021, and 2020 were $ 1.27 , $ 2.29 , and $ 5.63 per share, respectively. There was an immaterial intrinsic value of options exercised during the year ended December 31, 2022 as the value of the options exercised in 2022 was immaterial. There was no intrinsic value of options 125 Table of Contents exercised during the year ended December 31, 2021, as there were no options exercised in 2021. The total intrinsic value of options exercised during the year ended December 31, 2020 was $ 0.4 million. The fair value of options that vested during the years ended December 31, 2022, 2021, and 2020 were $ 8.4 million, $ 10.6 million, and $ 6.8 million, respectively. As of December 31, 2022, there was approximately $ 8.1 million of unrecognized compensation cost related to stock options outstanding under the Company’s 2014 Plan or made pursuant to the Inducement Award Program, which is expected to be recognized over a weighted average period of 2.04 years. Performance-Based Stock Options The Company also grants performance-based stock options to employees under the 2014 Plan. The performance-based stock options granted by the Company generally vest in connection with the achievement of specified commercial, regulatory, and corporate milestones. The expense recognized for these awards is based on the grant date fair value of the Company's common stock multiplied by the number of options granted and recognized over time based on the probability of meeting such commercial, regulatory and corporate milestones. The Company issued 400,000 and 99,558 performance-based options during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had 400,000 performance-based options outstanding compared to 99,558 performance-based options outstanding at December 31, 2021. The following table summarizes the Company’s performance-based option activity for the year ended December 31, 2022: Shares Weighted-Average Exercise Price Weighted-Average Contractual Life (in years) Aggregate Intrinsic Value Outstanding, December 31, 2021 99,558 $ 2.74 $ — Granted 400,000 $ 0.41 $ 1,120 Exercised — $ — $ — Forfeited/cancelled ( 99,558 ) $ 2.74 Outstanding, December 31, 2022 400,000 $ 0.41 9.4 $ 66,800 The Company did not record any stock-based compensation expense related to performance-based options during 2022, 2021 and 2020. There were no performance-based options that vested during fiscal year 2022, 2021 or 2020. As of December 31, 2022, there were no unrecognized compensation costs related to performance-based stock options under the Company’s 2014 Plan. Restricted Stock Units Service-Based Restricted Stock Units On February 28, 2022, as part of the Company’s annual grant of equity, the Company issued 2,899,008 RSUs to employees. In addition, the Company also occasionally issues RSUs not in connection with the annual grant process to employees. Generally, RSUs granted by the Company vest in one of the following ways: (i) 100 % of each RSU grant vests on the first anniversary of the grant date, (ii) one third of each RSU grant vests on the first, second and third anniversaries of the grant date, (iii) 50 % of each RSU grant vests on the first anniversary and 25 % of each RSU grant vests every six months after the one year anniversary of the grant date, or (iv) one third of each RSU grant vests on the first anniversary of the grant date and the remaining two-thirds vests in eight substantially equal quarterly installments beginning after the one year anniversary, subject, in each case, to the individual’s continued service through the applicable vesting date. The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized on a straight-line basis over the vesting period. The Company recorded approximately $ 7.6 million, $ 12.9 million and $ 14.6 million of stock-based compensation expense related to employee RSUs in 2022, 2021 and 2020, respectively. Performance-Based Restricted Stock Units During the year ended December 31, 2022, the Company issued 400,000 performance-based restricted stock units, or PSUs, to the Company’s executives. The PSUs granted by the Company vest in connection with the achievement of specified commercial, regulatory, and corporate milestones. The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted and recognized over time based on the probability of meeting such commercial, regulatory, and corporate milestones. The Company recorded approximately $ 0.1 million, $ 0.3 million and $ 0.5 million of stock-based compensation expense related to employee PSUs in 2022, 2021 and 2020, respectively. The following table summarizes the Company’s RSU and PSU activity for the year ended December 31, 2022: 126 Table of Contents Shares Weighted- Average Grant Date Fair Value Unvested balance, December 31, 2021 4,554,343 $ 5.17 Granted 5,715,808 $ 1.30 Vested ( 2,252,565 ) $ 5.01 Forfeited ( 2,349,551 ) $ 3.33 Unvested balance, December 31, 2022 5,668,035 $ 2.09 The total fair value of RSUs and PSUs that vested during 2022, 2021 and 2020 (measured on the date of vesting) was $ 11.2 million, $ 15.4 million, and $ 9.4 million, respectively. As of December 31, 2022, there was approximately $ 5.2 million of unrecognized compensation cost related to RSUs and PSUs, which is expected to be recognized over a weighted average period of 1.44 years. Employee Stock Purchase Plan The first offering period under the ESPP opened on January 2, 2015. The Company issued 335,146 shares during the year ended December 31, 2022. The Company recorded approximately $ 0.1 million, $ 0.6 million and $ 0.8 million of stock-based compensation expense related to the ESPP during 2022, 2021 and 2020, respectively. Compensation Expense Summary The Company has classified its stock-based compensation expense related to share-based awards as follows (in thousands): Years ended December 31, 2022 2021 2020 Research and development $ 3,683 $ 5,816 $ 6,113 Selling, general and administrative 10,969 16,919 18,347 Total $ 14,652 $ 22,735 $ 24,460 Compensation expense by type of award (in thousands): Years ended December 31, 2022 2021 2020 Stock options $ 6,839 $ 8,958 $ 8,517 Restricted stock units 7,566 12,927 14,639 Performance RSUs 100 294 464 Employee stock purchase plan 147 556 840 Total $ 14,652 $ 22,735 $ 24,460 14. Income Taxes The Company’s income tax provision was computed based on the federal statutory rate and the state statutory rates, net of the related federal benefit. There was no current or deferred income tax expense or benefit for the years ended December 31, 2022 and 2021 due to the Company’s net losses and increases in its valuation allowance against its deferred tax assets. Our effective income tax rate differs from the statutory federal income tax rate as follows for the years ended December 31, 2022, 2021 and 2020: 127 Table of Contents Year ended December 31, 2022 2021 2020 Federal tax at statutory rate 21.0 % 21.0 % 21.0 % State and local tax at statutory rate 2.5 3.0 3.1 Research and development tax credits — — 0.1 Change in valuation allowance ( 19.3 ) ( 22.7 ) ( 21.5 ) Other permanent differences ( 1.0 ) ( 1.0 ) ( 0.4 ) Stock option cancellations ( 2.5 ) — — Stock option shortfalls ( 1.6 ) — — Effect of rate changes 0.6 0.3 0.7 Provision to return adjustment 0.3 0.3 ( 1.5 ) Prior period adjustment to State NOL DTA — — ( 1.5 ) Other — ( 0.9 ) — Effective tax rate — % — % — % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets. Accordingly, the Company has recorded a valuation allowance against the Company’s otherwise recognizable net deferred tax assets. The Company continues to maintain the underlying tax benefits to offset future taxable income and to monitor the need for a valuation allowance based on the profitability of its future operations. The valuation allowance increased by approximately $ 18.2 million and $ 64.2 million during the years ended December 31, 2022 and 2021, respectively. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2022 2021 Deferred tax assets: Accrued expenses and other current liabilities $ 2,924 $ 3,306 Deferred revenue 1,250 9,725 Sale of royalty 13,291 12,037 Stock-based compensation 8,317 9,194 Research and development credits 4,827 5,034 Capitalized research and development costs 13,825 — Other non-current liabilities 2,754 20,424 Net operating loss carryforward 288,842 287,194 ASC 842 lease liability 8,032 9,096 Inventories reserve 17,411 10,281 Refund liability 9,478 — Other 13,159 10,483 Total deferred tax assets 384,110 376,774 Less: valuation allowance ( 360,621 ) ( 342,408 ) Total deferred tax assets, net of valuation allowance 23,489 34,366 Deferred tax liabilities: Intangible asset ( 15,981 ) ( 25,598 ) ASC 842 ROU asset ( 7,426 ) ( 8,486 ) Other ( 82 ) ( 282 ) Total deferred tax liabilities ( 23,489 ) ( 34,366 ) Net deferred tax liability $ — $ — 128 Table of Contents At December 31, 2022 and 2021, the Company had approximately $ 0.1 million (after amortization of $ 1.8 million) and $ 0.3 million (after amortization of $ 1.7 million), respectively, of start-up expenses capitalized for income tax purposes with amortization available to offset future federal, state and local income tax. As of December 31, 2022 and 2021, the Company had approximately $ 1,230.7 million and $ 1,224.5 million, respectively, of federal NOL carry-forwards which expire through 2037. Included in the $ 1,230.7 million of federal NOLs are losses of $ 648.7 million that will carry forward indefinitely as a result of the Tax Cuts and Jobs Act. Additionally, at December 31, 2022 and 2021, the Company had approximately $ 1,808.5 million and $ 1,794.2 million, respectively, of state NOL carry-forwards, which expire through 2042. The Company also has approximately $ 2.5 million of federal research and development tax credit carryforwards which expire through 2040 and $ 2.9 million of state research and development tax credit carryforwards which expire through 2036. Under the provisions of the Internal Revenue Code ("IRC"), the net operating losses and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating losses and tax credit carryforwards may become subject to an annual limitation under Internal Revenue Code 382 and 383 if there is more than a 50% change in ownership of the stockholders that own 5% or more of the Company’s outstanding stock over a three-year period. The Company completed an evaluation of its ownership changes and concluded that an ownership change did occur on December 12, 2018 for both Akebia and Keryx in connection with the Merger. As a consequence of this ownership change, the Company’s NOLs and tax credit carryforwards allocable to the tax periods preceding the ownership change became subject to limitation under Section 382 of the IRC. The Company reduced its associated deferred tax assets by $ 44.9 million as a result of the limitation. The Company files income tax returns in the U.S. federal and various state and local jurisdictions. For federal and state income tax purposes, the 2021, 2020 and 2019 tax years remain open for examination under the normal three-year statute of limitations. The statute of limitations for income tax audits in the United States will commence upon utilization of net operating losses and will expire three years from the filing of the tax return the loss was utilized on. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ending December 31, 2022 and 2021 are as follows (in thousands): Balance at December 31, 2020 $ 2,352 Additions based on tax positions of current years 161 Balance at December 31, 2021 $ 2,513 Additions based on tax positions of current years 184 Balance at December 31, 2022 $ 2,697 The Company does not believe there will be a material change in its unrecognized tax positions over the next twelve months. All of the unrecognized tax benefits, if recognized, would be offset by the valuation allowance. 15. Employee Retirement Plan In 2008, the Company established a retirement plan, or the Plan, authorized by Section 401(k) of the Internal Revenue Code. In accordance with the Plan, all employees who have attained the age of 21 are eligible to participate in the Plan as of the first Entry Date, as defined, following their date of employment. Each employee can contribute a percentage of compensation up to a maximum of the statutory limits per year. Company contributions are discretionary and contributions in the amount of approximately $ 2.6 million, $ 1.8 million and $ 1.6 million were made during the years ended December 31, 2022, 2021 and 2020, respectively. 16. Commitments and Contingencies Leases The Company leases approximately 65,167 square feet of office and lab space in Cambridge, Massachusetts under a lease which was most recently amended in November 2020, collectively the Cambridge Lease. Under the Third Amendment to the Cambridge Lease, or the Third Amendment, executed in July 2016, total monthly lease payments under the initial base rent were approximately $ 242,000 and are subject to annual rent escalations. In addition to such annual rent escalations, base rent 129 Table of Contents payments for a portion of said premises commenced on January 1, 2017 in the monthly amount of approximately $ 22,000 . The Fourth Amendment to the Cambridge Lease, executed in May 2017, provided additional storage space to the Company and did not impact rent payments. In April 2018, the Company entered into a Fifth Amendment to the Cambridge Lease, or the Fifth Amendment, for an additional 19,805 square feet of office space on the 12t h floor. Monthly lease payments for the existing 45,362 square feet of office and lab space, under the Third Amendment, remain unchanged. The new space leased by the Company was delivered in September 2018 and additional monthly lease payments of approximately $ 135,000 commenced in February 2019 and are subject to annual rent escalations, which commenced in September 2019. In November 2020, the Company entered into a Sixth Amendment to the Cambridge Lease, or the Sixth Amendment, to extend the term of the Cambridge Lease with respect to the lab space from November 30, 2021 to January 31, 2025. The Sixth Amendment includes two months of free rent starting in December 2020 and additional monthly lease payments of approximately $ 48,000 , which commenced in December 2021, and is subject to annual rent escalations, which commenced in December 2022. Additionally, the Company has a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease. The total monthly lease payments under the base rent are approximately $ 136,000 and are subject to annual rent escalations. In February 2022, the Company entered into the First Amendment to the Boston Lease, or the First Lease Amendment, to extend the term of the Boston Lease from February 2023 to July 2031. The First Lease Amendment includes five months of free rent starting in March 2023 and monthly lease payments of $ 200,122 commencing on August 1, 2023, with an annual rent escalation of approximately 2 % commencing on August 1, 2024. The First Lease Amendment also includes a landlord's allowance for certain leasehold improvements to the premises in an amount of up to $ 1,954,680 , provided that such allowance must be used prior to August 1, 2024. The term of the Cambridge Lease with respect to the office space expires on September 11, 2026, with one five-year extension option available. The term of the Boston Lease office space expires on July 31, 2031, with an extension option for one additional five-year extension option available. The renewal options in these real estate leases were not included in the calculation of the operating lease assets and operating lease liabilities as the renewal is not reasonably certain. The term of the Cambridge Lease with respect to the lab space expires on January 31, 2025, with an extension option for one additional period through September 11, 2026. The renewal options in this real estate lease were included in the calculation of the operating lease assets and operating lease liabilities as the renewal is reasonably certain. The lease agreements do not contain residual value guarantees. Operating lease costs were $ 7.1 million, $ 6.7 million and $ 6.7 million for the years ended December 31, 2022, 2021and 2020, respectively. Cash paid for amounts included in the measurement of operating lease liabilities were $ 7.2 million, $ 7.1 million and $ 7.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. In September 2019, Keryx entered into an agreement to sublease the Boston office space to Foundation Medicine, Inc., or Foundation. The sublease is subject and subordinate to the Boston Lease between Keryx and the landlord. The term of the sublease commenced on October 16, 2019, upon receipt of the required consent from the landlord for the sublease agreement, and expired on February 27, 2023. Foundation is obligated to pay Keryx rent that approximates the rent due from Keryx to its landlord with respect to the Boston Lease. Sublease rental income is recorded to other income. Keryx continues to be obligated for all payment terms pursuant to the Boston Lease, and the Company will guaranty Keryx’s obligations under the sublease. Keryx recorded $ 1.8 million in sublease rental income from Foundation during each of the years ended December 31, 2022, 2021 and 2020. The Company has not entered into any material short-term leases or financing leases as of December 31, 2022. The total security deposit in connection with the Cambridge Lease is $ 1.6 million as of December 31, 2022. Additionally, the Company recorded $ 1.1 million for the security deposit under the Boston Lease. Both the Cambridge Lease and the Boston Lease have their security deposits in the form of a letter of credit, all of which are included as restricted cash in prepaid expenses and other current assets in the Company’s consolidated balance sheet as of December 31, 2022. As of December 31, 2022, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter are as follows (in thousands): 130 Table of Contents Year ending December 31, Operating Leases Lease Payments to be Received from Sublease Net Operating Lease Payments 2023 $ 6,950 $ 307 $ 6,643 2024 8,162 — 8,162 2025 8,289 — 8,289 2026 6,132 — 6,132 2027 2,570 — 2,570 Thereafter 9,631 — 9,631 Total $ 41,734 $ 307 $ 41,427 In arriving at the operating lease liabilities, the Company applied incremental borrowing rates ranging from 6.65 % to 7.25 %, which were based on the remaining lease term at either the date of adoption of ASC 842 or the effective date of any subsequent lease term extensions. As of December 31, 2022, the remaining lease terms ranged from 3.70 years to 8.59 years. As of December 31, 2022, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities (in thousands): Operating Leases Undiscounted minimum rental commitments $ 41,734 Present value adjustment using incremental borrowing rate ( 8,030 ) Operating lease liabilities $ 33,704 Manufacturing Agreements As a result of the Merger, the Company's contractual obligations include Keryx’s commercial supply agreements with BioVectra and Siegfried to supply commercial drug substance for Auryxia. Pursuant to the Manufacture and Supply Agreement with BioVectra and the Product Manufacture and Supply and Facility Construction Agreement with BioVectra, the Company agreed to purchase minimum quantities of Auryxia drug substance annually at predetermined prices. On September 4, 2020, the Company and BioVectra entered into an Amended and Restated Product Manufacture and Supply and Facility Construction Agreement, which provided for reduced minimum quantity commitments and revised the predetermined prices. The price per kilogram decreased with an increase in quantity above the predetermined purchase quantity tiers. In addition, the Manufacture and Supply Agreement with BioVectra and the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement with BioVectra required the Company to reimburse BioVectra for certain costs in connection with construction of a new facility for the manufacture and supply of Auryxia drug substance. These construction costs were recorded in other assets and amortized into drug substance as inventory was released to the Company from BioVectra. On December 22, 2022, the Company and BioVectra entered into the BioVectra Termination Agreement, pursuant to which the parties agreed, among other things, to terminate, effective immediately, any and all existing agreements entered into between the parties in connection with the manufacture and supply, by BioVectra to the Company, of Auryxia drug substance. Under the terms of the BioVectra Termination Agreement, the Company agreed to pay BioVectra a total of $ 32.5 million consisting of (i) an upfront payment of $ 17.5 million and (ii) six quarterly payments of $ 2.5 million commencing in April 2024, totaling $ 15.0 million. The upfront payment of $ 17.5 million was made during the quarter ended December 31, 2022 and was recognized to cost of goods sold. In accordance with ASC 420, Exit or Disposal Cost Obligations , the Company recognized a liability and corresponding expense for the remaining termination fees based on estimated fair value as of December 22, 2022, or the BioVectra Effective Date. The Company imputed interest on the liability for the remaining termination fees at a rate of 17.0 % per annum, which was determined based on certain factors, including the Company's credit rating, comparable securities yield, and expected repayment period of the remaining termination fees. The Company recorded an initial discount on the remaining termination fees on the consolidated balance sheet as of the BioVectra Effective Date. This resulted in the recording of a liability and corresponding charge to cost of goods sold of $ 11.2 million during the quarter ended December 31, 2022. The discount on the liability balance is being amortized to interest expense using the effective interest rate method over the term of the liability. In addition, each of the Company and BioVectra have released one another from all existing and future claims and liabilities and the return of certain materials and documents. Furthermore, as it relates to all open purchase orders, BioVectra is relieved from any obligations to manufacture any product or perform services under any such open purchase orders, and the Company is relieved from any obligations to purchase any product under such open purchase orders. The Company is also relieved from any obligations to pay any outstanding invoices related to performance by BioVectra of services and all other obligations under the agreements. 131 Table of Contents Pursuant to the Master Manufacturing Services and Supply Agreement between the Company and Siegfried, as amended through December 31, 2022, or the Siegfried Agreement, the Company has agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices. The term of the Siegfried Agreement was to expire on December 31, 2022, but was automatically extended into 2023 as a result of Siegfried’s updated production schedule for delivery of product originally scheduled for delivery in 2022. The Siegfried Agreement provides the Company and Siegfried with certain termination rights. As of December 31, 2022, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $ 8.4 million through the third quarter of 2023. As of the date of the filing of th Annual Report on Form 10-K, filed on March 10, 2023, the Company has amended the Siegfried Agreement pursuant to which, the Company agreed to extend the term and purchase a minimum quantity of drug substance of Auryxia at a predetermined price as further described in Note 18 to the Company's consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report. Certain of the Company's commercial supply agreements are executory contracts between Keryx and its contract manufacturers for Auryxia, which include future firm purchase commitments. These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast. The Company regularly reviews its estimate of the excess purchase commitment liability including review of assumptions of expected future demand, estimates of anticipated expiry of inventory under firm purchase commitments that are estimated to expire before they could be sold as well as any modifications to supply agreements during each reporting period. The excess purchase commitment liability relating to these executory contracts was $ 0 million and $ 76.7 million as of December 31, 2022 and 2021, respectively. During the quarter ended December 31, 2022, the Company recorded a $ 74.3 million reduction to the excess purchase commitments liability within cost of goods sold driven by the reduction in purchase commitments due to execution of the BioVectra Termination Agreement. On April 9, 2019, the Company entered into a Supply Agreement with Esteve Química, S.A., or Esteve, or the Esteve Agreement. The Esteve Agreement included the terms and conditions under which Esteve would manufacture vadadustat drug substance for commercial use. Pursuant to the Esteve Agreement, the Company provided rolling forecasts to Esteve on a quarterly basis, or the Esteve Forecast. The Esteve Forecast reflected the Company’s needs for vadadustat drug substance produced by Esteve over a certain number of months, represented as a quantity of vadadustat drug substance per calendar quarter. The parties agreed to a volume-based pricing structure under the Esteve Agreement. On December 16, 2022, the Company, MTPC, and Esteve executed the Assignment Agreement, pursuant to which the Supply Agreement between the Company and Esteve was assigned to MTPC. The Assignment Agreement transferred the rights and obligations of the Supply Agreement to MTPC, specifically including the obligations under certain purchase orders issued by the Company and accepted by Esteve. As such, the Company will have no further obligation to take delivery of or pay for product delivered by Esteve under the transferred purchase orders. On March 11, 2020, the Company entered into a Supply Agreement with Patheon Inc., or Patheon, or the Patheon Agreement. The Patheon Agreement includes the terms and conditions under which Patheon will manufacture vadadustat drug product for commercial use. Pursuant to the Patheon Agreement, the Company provides Patheon a long-term forecast on an annual basis, as well as short-term forecasts on a quarterly basis, or the Patheon Forecast. The Patheon Forecast reflects the Company’s needs for commercial supply of vadadustat drug product produced by Patheon, represented as a quantity of drug product per calendar quarter. The parties have agreed to a volume-based pricing structure under the Patheon Agreement. The Patheon Agreement has an initial term beginning March 11, 2020 and ending June 30, 2023 and automatically renews for successive one-year terms unless either party gives the other party eighteen months ' prior written notice. The current term of the Patheon Agreement ends June 30, 2025. Pursuant to the Patheon Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug product from Patheon. As of December 31, 2022, the Company had a minimum commitment with Patheon for $ 3.1 million through the third quarter of 2023. On April 2, 2020, the Company entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec, or WuXi STA, or the WuXi STA DS Agreement. The WuXi STA DS Agreement includes the terms and conditions under which WuXi STA will manufacture vadadustat drug substance for commercial use. Pursuant to the WuXi STA DS Agreement, the Company provides rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA DS Forecast. The WuXi STA DS Forecast reflects the Company’s needs for vadadustat drug substance produced by WuXi STA over a certain number of quarters. The parties have agreed to a volume-based pricing structure under the WuXi STA DS Agreement. The WuXi STA DS Agreement has an initial term of four years , beginning April 2, 2020 and ending April 2, 2024. Pursuant to the WuXi STA DS Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA. As of December 31, 2022, the Company has committed to purchase $ 15.3 million of vadadustat drug substance from WuXi STA through the end of 2023. On February 10, 2021, the Company entered into a Supply Agreement with WuXi STA, or the WuXi STA DP Agreement. The WuXi STA DP Agreement includes the terms and conditions under which WuXi STA will manufacture and supply vadadustat drug product for commercial purposes. Pursuant to the WuXi STA DP Agreement, the Company will provide rolling forecasts 132 Table of Contents to WuXi STA on a quarterly basis, or the WuXi STA DP Forecast. Each WuXi STA DP Forecast will reflect the quantities of vadadustat drug product that the Company expects to order from WuXi STA over a certain number of months, represented as a quantity of vadadustat drug product per calendar quarter. Pursuant to the WuXi STA DP Agreement, the Company has agreed to purchase a certain percentage of global demand for vadadustat drug product from WuXi STA. The parties have agreed to a volume-based pricing structure under the WuXi STA DP Agreement. The vadadustat drug product price will remain fixed for the first 12 months and thereafter shall be annually reviewed by the Company and WuXi STA. The Company will also reimburse WuXi STA for certain reasonable expenses. The WuXi STA DP Agreement has an initial term of four years , beginning February 10, 2021 and ending February 10, 2025. The WuXi STA DP Agreement may be renewed or extended by mutual agreement of the Company and WuXi STA with at least 18 months’ prior written notice. The WuXi STA DP Agreement allows the Company to terminate the relationship on 180 calendar days’ prior written notice to WuXi STA for any reason. In addition, each party has the ability to terminate the WuXi STA DP Agreement upon the occurrence of certain conditions. Other Third Party Contracts The Company contracts with various organizations to conduct research and development activities with remaining contract costs to the Company of approximately $ 90.2 million at December 31, 2022. The scope of the services under these research and development contracts can be modified and the contracts cancelled by the Company upon written notice. In some instances, the contracts may be cancelled by the third party upon written notice. Litigation and Related Matters From time to time, the Company may become subject to legal proceedings and claims which arise in the ordinary course of its business. Consistent with ASC 450, Contingencies , the Company’s policy is to record a liability if a loss in a significant legal dispute is considered probable and an amount can be reasonably estimated. The Company provides disclosure when a loss in excess of any reserve is reasonably possible, and if estimable, the Company discloses the potential loss or range of possible loss. Significant judgment is required to assess the likelihood of various potential outcomes and the quantification of loss in those scenarios. The Company’s estimates change as litigation progresses and new information comes to light. Changes in Company estimates could have a material impact on the Company’s results and financial position. As of December 31, 2022, the Company does not have any significant legal disputes that require a loss liability to be recorded. The Company continually monitors the need for a loss liability for litigation and related matters. 17. Net Loss per Share The shares in the table below were excluded from the calculation of diluted net loss per share, prior to the use of the treasury stock method, due to their anti-dilutive effect: Year ended December 31, 2022 2021 2020 Warrants — 509,611 509,611 Outstanding stock options 11,326,090 11,398,215 9,386,517 Unvested restricted stock units 6,081,137 4,667,003 4,722,311 Total 17,407,227 16,574,829 14,618,439 18. Subsequent Events On February 28, 2023, the Company and Siegfried entered into Amendment No. 5 to the Siegfried Agreement, or the Amendment. Pursuant to the Amendment, the Company has agreed to purchase a minimum quantity of drug substance for Auryxia at a predetermined price. In connection with the Amendment, the Company incurred a $ 0.7 million loss for the purchase and destruction of inventory manufactured in prior years. As a result of the Amendment, the term of the Siegfried Agreement expires on December 31, 2024, subject to the Company's option to extend through December 31, 2026 by providing 12 months' prior written notice to Siegfried. 133 Table of Contents