What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-28 compared with 2023-05-08 · 280 added, 124 removed, 148 unchanged (73% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S.

Securities and Exchange Commission, or the SEC, on March 10, 2023, or the 2022 Annual Report on Form 10-K, including the audited consolidated financial statements and related notes therein.

1 on Form 10-K/A filed with the U.S.

Securities and Exchange Commission, or the SEC , on August 28, 2023, or the 2022 Annual Report on Form 10-K/A , including the audited consolidated financial statements and related notes therein.

This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties.

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Our current portfolio includes:

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

• Auryxia® (ferric citrate) , a medicine approved and marketed in the United States, or U.S.

, for two indications:

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

The product is also available in Japan and Taiwan.

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

• Vafseo (vadadustat) , an oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH , inhibitor, is approved in Europe, the United Kingdom, and Switzerland for the treatment of symptomatic anemia due to chronic kidney disease, or CKD , in adult patients on chronic maintenance dialysis.

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

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

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

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

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

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

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

Today we market Auryxia in the U.S.

with our well-established, nephrology-focused commercial organization.

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

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

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

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

Food and Drug Administration, or FDA , in September 2014 as a phosphate binder for the Hyperphosphatemia Indication and was commercially launched in the U.S.

shortly thereafter.

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

shortly thereafter.

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

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

Akebia Therapeutics, Inc.

| Form 10-Q | Page 24

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

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

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

In April 2023, the European Commission, or EC , approved the marketing authorization of vadadustat under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis, which is applicable to all 27 European Union member states and Iceland, Norway and Liechtenstein.

In May 2023, the UK Medicines and Healthcare products Regulatory Agency approved the marketing authorization of vadadustat under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis.

In June 2023, the Swiss Agency for Therapeutic Products approved the marketing authorization of vadadustat under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis.

Following the termination of our U.S.

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

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

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

and international collaboration agreements with Otsuka Pharmaceutical Co.

Ltd., or Otsuka , in June 2022, we regained full rights to vadadustat in Europe, Australia, China, Canada, Latin America, the Middle East and Russia.

In May 2023, we entered into a License Agreement, or the Medice License Agreement , with MEDICE Arzneimittel Pütter GmbH & Co.

KG, or Medice , pursuant to which we granted Medice an exclusive license to develop and commercialize vadadustat for the treatment of anemia in patients with CKD in the EEA, the UK, Switzerland and Australia, or the Medice Territory .

We submitted a new drug application, or NDA , to the FDA for vadadustat in March of 2021.

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

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

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

In February 2023, we received a second interim response from the FDA to the FDRR.

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

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

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

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

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

As such, we began the process to dispute the FDA ruling, and in October 2022, we submitted a Formal Dispute Resolution Request with the FDA regarding the CRL, specifically related to DD-CKD adult patients and focused on the favorable balance of the benefits and risks of vadadustat for the treatment of adult DD-CKD patients in light of safety concerns expressed by the FDA in the CRL related to the rate of adjudicated thromboembolic events driven by vascular access thrombosis for vadadustat compared to the active comparator and the risk of drug-induced liver injury.

In May 2023, the Office of New Drugs, or OND , denied our appeal but provided a path forward for us to resubmit the NDA for vadadustat for the treatment of anemia due to CKD for dialysis dependent patients without the need for us to generate additional clinical data.

In July 2023, we held an End of Dispute Type A meeting with the FDA to align on the contents of the NDA resubmission.

We expect to resubmit the NDA by the end of the third quarter of 2023, with a potential Prescription Drug User Fee Act, or PDUFA , date that we project will be in March 2024.

Following the termination of our collaboration agreement with Otsuka we own full rights to vadadustat in the U.S., subject to our licensing agreement with CSL Vifor.

If we obtain FDA approval of vadadustat for DD-CKD adult patients, we plan to commercialize vadadustat in the U.S.

with CSL Vifor.

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

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

Akebia Therapeutics, Inc.

| Form 10-Q | Page 25

Operating Segments

We operate our business in a single segment and as one reporting unit, which is how our chief operating decision maker (who is our president and chief executive officer) reviews financial performance and allocates resources.

Operating Overview

We have incurred net losses in each year since inception.

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

Our net loss was $11.2 million for the three months ended June 30, 2023 and our net income was $29.4 million for the three months ended June 30, 2022.

Our net losses were $38.1 million and $34.1 million for the six months ended June 30, 2023 and 2022, respectively.

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

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

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

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

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

We expect to continue to incur additional operating expenses, including additional research and development expenses to our pipeline, additional costs related to vadadustat, and research and development and selling, general and administrative expenses for ongoing development and commercialization of Auryxia, which could lead to operating losses for the foreseeable future.

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

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

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

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

• address the issues identified in the CRL for vadadustat that we received from the FDA and pursue our appeal of the CRL for vadadustat with the FDA;

• continue our commercialization activities for Auryxia and vadadustat, if we are able to obtain marketing approval for vadadustat following our anticipated NDA resubmission, and any other product or product candidate, including those that may be in-licensed or acquired;

• address the issues identified in the CRL for vadadustat that we received from the FDA and pursue our anticipated NDA resubmission for vadadustat with the FDA;

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

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

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

• maintain marketing approvals for Auryxia and vadadustat, if we are able to obtain marketing approval for vadadustat following our anticipated NDA resubmission, and any other product, including those that may be in-licensed or acquired;

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

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

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

• continue to repay, and pay any associated pre-payment penalties, if applicable, the senior secured term loans in an aggregate principal amount of $43.0 million as of June 30, 2023, that were made available to us pursuant to the loan agreement that we entered into with funds managed by Pharmakon Advisors LP, or Pharmakon , in November 2019, or the Loan Agreement ;

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

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

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

Akebia Therapeutics, Inc.

| Form 10-Q | Page 26

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

We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties.

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

If we are unable to raise additional capital in sufficient amounts when needed or on attractive terms, we may not be

able to pursue development and commercial activities related to Auryxia and vadadustat, if approved, or any additional products and product candidates, including those that may be in-licensed or acquired.

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

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

From inception through March 31, 2023, we raised approximately $793.5 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $223.7 million from at-the-market offerings, or ATM offerings, pursuant to prior sales agreements with Cantor Fitzgerald & Co., and $70.0 million from the sale of 7,571,429 shares of common stock to CSL Vifor.

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

From inception through June 30, 2023, we raised approximately $793.5 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $223.7 million from at-the-market offerings, or ATM offerings, pursuant to prior sales agreements with Cantor Fitzgerald & Co., and $70.0 million from the sale of 7,571,429 shares of common stock to CSL Vifor.

As of June 30, 2023, through our collaboration agreement with MTPC and our prior collaboration agreements with Otsuka we received approximately $837.1 million in cost-share funding, and are not entitled to receive any additional cost-share funding.

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

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

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

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

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

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

Financial Overview

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

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

Also pursuant to the Vifor Second Amended Agreement, Vifor contributed $40.0 million to a working capital fund established to partially fund our costs of purchasing vadadustat from our contract manufacturers, or the Working Capital Fund , which amount of funding may fluctuate, and which funding we are required to repay to CSL Vifor over time.

Finally, on May 24, 2023, we entered into the Medice License Agreement pursuant to which Medice made an upfront payment to us of $10.0 million.

Akebia Therapeutics, Inc.

| Form 10-Q | Page 27

Impacts of COVID-19 Pandemic

Certain changes that occurred during the recent COVID-19 pandemic, including remote work arrangements, closures, limited access to healthcare facilities and labor shortages impacted us and the broader healthcare industry.

During the pandemic, the CKD patient population that we serve experienced both higher hospitalization and mortality rates due to COVID-19 which may or may not continue post-pandemic.

Further, the pandemic had an adverse impact on the phosphate binder market in which Auryxia competes.

Please see the section captioned “Part II.

Risk Factors” of this Quarterly Report on Form 10-Q for additional information with respect to the risks faced by our business in light of the recent COVID-19 pandemic.

While the pandemic has ended, we caution that there continues to be a possibility for potential future challenges associated with infections, staffing shortages or supply chain disruptions due to current or new variants of COVID-19 in certain jurisdictions.

The impact of these challenges is currently unknown but could be significant, and we continue to take precautions so as not to disrupt our business.

Financial Highlights

Product and Collaboration Revenue

To date, our revenues have been derived from net product revenue from commercial sales of Auryxia, royalties from the sale of Auryxia in Japan and collaboration revenues.

Collaboration revenue includes license and milestone payments, royalty and cost-sharing revenue generated through collaboration and license agreements with partners for the development and commercialization of vadadustat, a nonrefundable, non-creditable termination fee pursuant to the terms of the Termination Agreement with Otsuka, and royalty revenue from sales of Riona in Japan.

Our net product revenue requires judgement and estimates of rebates and returns which can fluctuate from quarter-to-quarter and year-over-year.

In addition, we evaluate at least annually and more frequently if needed, price increases of our commercial product Auryxia.

We expect our product revenue to continue to be generated primarily from our commercial sales of Auryxia.

In addition, we expect to continue to generate revenue through our collaborations with Medice, MTPC and JT and Torii and any other collaborations into which we have entered or may enter.

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

Cost of Goods Sold

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

Cost of goods sold includes costs closely correlated or directly related to the costs to manufacture commercial drug substance and drug product for Auryxia, as well as indirect costs.

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

and Japan product sales recognized during the period.

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

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

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

Cost of goods sold also includes costs to manufacture drug product provided to MTPC for commercial sale of Vafseo in Japan and personnel-related costs, including salaries and bonuses, employee benefits, and stock-based compensation attributable to employees in a particular function and associated with our products.

On June 28, 2018, we entered into an Agreement and Plan of Merger with Keryx and Alpha Therapeutics Merger Sub, Inc., or Merger Sub , pursuant to which Merger Sub merged with and into Keryx, with Keryx becoming a wholly owned subsidiary of ours, or the Merger .

On December 12, 2018, we completed the Merger.

As part of the purchase price allocation, we identified developed product rights for Auryxia as the primary intangible asset which is being amortized to cost of goods sold over its estimated useful life, which as of June 30, 2023 is estimated to be six years.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the development of vadadustat, which include:

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

• personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions;

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

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

Akebia Therapeutics, Inc.

| Form 10-Q | Page 28

Research and development costs are expensed as incurred.

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

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

From inception through June 30, 2023, we have incurred $1.6 billion in research and development expenses.

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

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

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

Three Months Ended March 31,

(in thousands)

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Vadadustat external costs $ 7,418 $ 11,760 $ 13,858 $ 28,913

External costs for other programs 2,475 6,353

Other programs external costs 3,423 5,087 5,897 11,440

Total external research and development expenses 10,841 16,847 19,755 40,353

Headcount, consulting, facilities and other 10,771 20,327

Internal personnel, consulting, facilities and other costs 9,356 9,180 20,128 29,507

Total research and development expenses $ 20,197 $ 26,027 $ 39,883 $ 69,860

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Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our commercial personnel, including our field sales force and other commercial support personnel, as well as personnel in executive and other administrative or non-research and development functions.

Other selling, general and administrative expenses include facility-related costs, fees for directors, accounting and legal services fees, recruiting fees and expenses associated with obtaining and maintaining patents.

Other selling, general and administrative expenses include facility-related costs, fees for directors, professional service fees (including legal, patent, accounting, audit, tax and consulting fees), insurance costs, general corporate expenses and allocated facilities-related expenses, including rent and maintenance.

Akebia Therapeutics, Inc.

| Form 10-Q | Page 29

Recent Events

Medice License Agreement

On May 24, 2023, we entered into the Medice License Agreement pursuant to which we granted Medice an exclusive license to develop and commercialize vadadustat for the treatment of anemia in patients with CKD in the Medice Territory.

We retain the rights to develop and commercialize in the Medice Territory for all other indications.

During the quarter ended June 30, 2023 we received an upfront payment of $10.0 million.

In the future we may receive commercial milestone payments up to an aggregate of $100 million, and tiered royalties ranging from 10% to 30% of Medice’s annual net sales of vadadustat in the Medice Territory, subject to reduction in certain circumstances.

See Note 5 of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

Boston Lease Assignment

Previously, we leased 27,924 square feet of office space in Boston, Massachusetts, or the Boston Lease .

On May 26, 2023, we entered into an Assignment and Assumption of Lease Agreement, or the Lease Assignment Agreement, with LG Chem Life Sciences Innovation Center, Inc., or LG Chem , pursuant to which we assigned all of our rights, title, and interest in, to, and under the Boston Lease to LG Chem, or the Lease Assignment .

As part of the Lease Assignment Agreement, we made a payment to LG Chem of $1.3 million, or the Lease Assignment Amount , and LG Chem assumed all of our rights and obligations under the Boston Lease.

Subsequent to the Lease Assignment, we have no further obligations for rent or other payments under the Boston Lease.

See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Impact of Inflation

We are experiencing rising costs for certain inflation-sensitive operating expenses such as labor and certain service providers that are heavily dependent on labor.

We do not believe these impacts were material to net loss during the six months ended June 30, 2023 or will be going forward.

However, significant sustained inflation driven by the macroeconomic environment or other factors could negatively impact our margins, profitability, and results of operations in future periods.

Restructuring/Reduction in Workforce

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

Following receipt of the CRL, in the second quarter of 2022, we implemented a restructuring and reduction of our workforce by approximately 42% across all areas of our company including several members of management.

These actions reflect our determination to refocus our strategic priorities around our commercial product, Auryxia®, and our development portfolio, and were steps in a broader cost savings plan to significantly reduce our operating expense profile.

We continue to decrease our operating expenses by seeking to operate more efficiently and curtail non-headcount related expense growth and expect to keep 2023 headcount relatively flat with current levels.

Akebia Therapeutics, Inc.

| Form 10-Q | Page 30

Results of Operations

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

Three Months Ended Increase

March 31, 2023 March 31, 2022 (Decrease)

(in thousands)

The tables and discussion below present the results for the periods indicated and the three months ended June 30, 2022 have been updated to reflect the impact of errors revised in prior periods and as described in more detail in Note 3 in the Notes to the Condensed Consolidated Financial Statements found in Part I, Item 1 of this Quarterly Report on Form 10-Q:

Comparison of the Three Months Ended June 30, 2023 and 2022

(dollars in thousands)

Three Months Ended Change

June 30, 2023 June 30, 2022 $ %

Product revenue, net $ 42,244 $ 43,309 $ (1,065) (2) %

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Product 8,273 9,589 (1,316) (14) %

Amortization of intangibles 9,011 9,011 —

Amortization of intangible asset 9,011 9,011 — — %

Total cost of goods sold 17,284 18,600 (1,316) (7) %

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Total operating expenses 48,088 73,690 (25,602) (35) %

Operating (loss) income (8,996) 34,075 (43,071) (126) %

Other expense, net (1,652) (4,626) 2,974 (64) %

Loss on lease termination (524) — (524) *

Net (loss) income $ (11,172) $ 29,449 $ (40,621) (138) %

*Percentage change not meaningful.

Product Revenue, Net— Net product revenue is derived from sales of our only commercial product in the U.S., Auryxia.

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

Net product revenue was $42.2 million for the three months ended June 30, 2023, compared to $43.3 million for the three months ended June 30, 2022.

The decrease was primarily due to the impact of shifting payor mix and a volume decrease partially caused by contracting dynamics and a decline in the phosphate binder market.

The decline was partially offset by higher revenues resulting from a price increase in January 2023

License, Collaboration and Other Revenue— License, collaboration and other revenue was $14.1 million for the three months ended June 30, 2023, compared to $83.1 million for the three months ended June 30, 2022.

The decrease was primarily due to a reduction in revenue from the Otsuka collaboration agreement that was terminated on June 30, 2022.

The Termination Agreement, among other things, terminated the cost sharing arrangement under the Otsuka collaboration agreement for the U.S.

the Otsuka U.S.

Agreement , and the Otsuka collaboration agreement for certain territories outside the U.S., or the Otsuka International Agreement .

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

During the three months ended June 30, 2023, we recognized $2.2 million in collaboration revenue in connection with the Packaging Validation Transfer Agreement we entered into with Otsuka on April 20, 2023.

However, we do not expect to recognize any future revenue under the Otsuka U.S.

Agreement or the Otsuka International Agreement.

This decrease was partially offset by the $10.0 million upfront payment recognized in connection with the Medice License Agreement during the three months ended June 30, 2023.

Cost of Goods Sold - Product— Cost of goods sold was $8.3 million for the three months ended June 30, 2023 compared to $9.6 million for the three months ended June 30, 2022.

The decrease of $1.3 million is primarily due to a decrease in inventory

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write-downs as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold during the three months ended June 30, 2023.

Cost of Goods Sold - Amortization of Intangible Asset— Amortization of intangible asset relates to the acquired developed product rights for Auryxia, which is being amortized using a straight-line method over its estimated useful life of approximately six years.

Amortization of intangible asset during each of the three months ended June 30, 2023 and 2022 was $9.0 million.

Research and Development Expenses— Research and development expenses were $20.2 million for the three months ended June 30, 2023, compared to $26.0 million for the three months ended June 30, 2022, a decrease of $5.8 million.

The decrease was primarily due to a reduction in spending on vadadustat development, including decreased clinical trial costs as well as decreased outsourced contract services.

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

Selling, General and Administrative Expenses— Selling, general and administrative expenses were $27.0 million for the three months ended June 30, 2023, compared to $32.2 million for the three months ended June 30, 2022.

The decrease of $5.2 million was primarily due to decreased headcount related costs as a result of the April and November 2022 reductions in force, reduced Auryxia marketing and promotional expenses and reduced professional service expenses.

License Expenses— License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.9 million for each of the three months ended June 30, 2023 and 2022.

Restructuring— Restructuring expenses were $14.5 million for the three months ended June 30, 2022 that were incurred in connection with our reductions of our workforce in the second quarter 2022 by approximately 42% across all areas of our company including several members of management.

Other Expense, Net— Other expense, net, was $1.7 million for the three months ended June 30, 2023, compared to $4.6 million for the three months ended June 30, 2022.

The decrease of $3.0 million was primarily due to a decrease in interest expense as a result of reducing our outstanding principal balance on the Pharmakon Term Loans by $57.0 million since the period ended June 30, 2022.

This decrease was offset by nearly a 135 basis point increase in the interest rate as a result of the current rising interest rate macroeconomic environment.

In addition, our non-cash interest expense from our liability for the sale of future royalties decreased due to a drop in the effective interest rate on the liability for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

Loss on Lease Termination— Loss on lease termination was $0.5 million for the three months ended June 30, 2023.

On May 26, 2023, we entered into the Lease Assignment Agreement with LG Chem, pursuant to which we assigned all of our rights, title, and interest in, to, and under the Boston Lease to LG Chem.

In accordance with ASC 842, Leases , we wrote off the right-of-use asset and lease liability associated with the Boston Lease, and recognized the difference between the right-of-use asset and the lease liability offset by the payment we made to LG Chem of $1.3 million, or the Lease Assignment Amount, as a loss on lease termination in the condensed consolidated statement of operations and comprehensive income (loss) of $0.5 million during the three months ended June 30, 2023.

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The tables and discussion below present the results for the periods indicated and the six months ended June 30, 2022 have been updated to reflect the impact of errors revised in prior periods and as described in more detail in Note 3 in the Notes to the Condensed Consolidated Financial Statements found in Part I, Item 1 of this Quarterly Report on Form 10-Q:

Comparison of the Six Months Ended June 30, 2023 and 2022

(dollars in thousands)

Six Months Ended Change

June 30, 2023 June 30, 2022 $ %

Product revenue, net $ 76,950 $ 84,681 $ (7,731) (9) %

License, collaboration and other revenue 19,431 $ 103,307 (83,876) (81) %

Total revenues 96,381 187,988 (91,607) (49) %

Cost of goods sold

Product 19,452 $ 32,694 (13,242) (41) %

Amortization of intangible asset 18,021 18,021 — — %

Total cost of goods sold 37,473 50,715 (13,242) (26) %

Operating expenses

Research and development 39,883 69,860 (29,977) (43) %

Selling, general and administrative 52,090 76,806 (24,716) (32) %

License expense 1,517 1,580 (63) (4) %

Restructuring 12 14,531 (14,519) *

Total operating expenses 93,502 162,777 (69,275) (43) %

Operating loss (34,594) (25,504) (9,090) 36 %

Other expense, net (2,932) (8,554) 5,622 (66) %

Loss on lease termination (524) — (524) *

Net loss $ (38,050) $ (34,058) $ (3,992) 12 %

Product Revenue, Net .

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

*Percentage change not meaningful.

Product Revenue, Net— Net product revenue is derived from sales of our only commercial product in the U.S., Auryxia.

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

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

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

License, Collaboration and Other Revenue.

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

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

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

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

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

Agreement or the Otsuka International Agreement.

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

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

Net product revenue was $77.0 million for the six months ended June 30, 2023, compared to net product revenue of $84.7 million for the six months ended June 30, 2022.

The decrease was primarily due to a decline in volume and impact of shifting payor mix partially caused by contracting dynamics and a decline in the phosphate binder market.

In addition, the decline was partially offset by higher revenues resulting from a price increase in January 2023.

License, Collaboration and Other Revenue— License, collaboration and other revenue was $19.4 million for the six months ended June 30, 2023 compared to $103.3 million for the six months ended June 30, 2022.

The decrease was primarily due to a reduction in revenue from the Otsuka collaboration agreement that we terminated on June 30, 2022 pursuant to the Termination Agreement which, among other things, terminated the cost sharing arrangement under the Otsuka collaboration agreement for the Otsuka U.S.

Agreement, and the Otsuka International Agreement.

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

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

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

We recognized $2.2 million in collaboration revenue in connection with the Packaging Validation Transfer Agreement during the six months ended June 30, 2023.

However, we do not expect to recognize any future revenue under the Otsuka U.S.

Agreement, the Otsuka International Agreement or the Packaging Validation Transfer Agreement.

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

The Esteve Assignment Agreement transferred the rights and obligations of the

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Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by us and accepted by Esteve.

Therefore, we expect significantly less revenue in the future under our supply agreement with MTPC.

This decrease was partially offset by the $10.0 million upfront payment received as part of the Medice License Agreement signed during the three months ended June 30, 2023.

Cost of Goods Sold - Product .

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

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

Cost of Goods Sold - Amortization of Intangibles.

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

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

Research and Development Expenses .

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

The decrease was primarily due to the following:

(in millions)

Vadadustat development expenses $ (10.7)

Headcount, consulting, facilities and other (13.4)

Total net decrease $ (24.1)

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

Cost of goods sold was $19.5 million for the six months ended June 30, 2023, compared to $32.7 million for the six months ended June 30, 2022.

The decrease of $13.2 million is primarily due to a decrease in inventory write-downs as a result of excess, obsolescence, scrap or other reasons and charged to cost of goods sold during the six months ended June 30, 2023, as well as a decrease in sales volume.

Amortization of intangible asset during each of the six months ended June 30, 2023 and 2022 was $18.0 million.

Research and Development Expenses— Research and development expenses were $39.9 million for the six months ended June 30, 2023, compared to $69.9 million for the six months ended June 30, 2022, a decrease of $30.0 million.

The decrease was primarily due to a reduction of vadadustat development expenses of approximately $20.6 million.

In addition, research and development expense declined by approximately $9.4 million due to the reduced headcount related costs as a result of the 2022 reduction in force, decreased outsourced consulting and contract services, and decreased clinical trial costs and development expenses related to vadadustat.

Selling, General and Administrative Expenses .

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

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

License Expenses.

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

Restructuring.

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

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

Other Expense, Net .

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

The decrease of $2.6 million was primarily due to a decrease in interest expense as a result of principal prepayments totaling $25.0 million made on the Term Loans pursuant to the Second Amendment and Waiver in the year ended December 31, 2022, as well as an additional $24.0 million of quarterly principal payments made on the Term Loans pursuant to the Loan Agreement with Pharmakon, reducing our outstanding balance on the Term Loans.

The decrease was also related to a decrease in non-cash interest expense from our liability for the sale of future royalties due to a decrease in the effective interest rate on the liability for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

Selling, General and Administrative Expenses— Selling, general and administrative expenses were $52.1 million for the six months ended June 30, 2023, compared to $76.8 million for the six months ended June 30, 2022.The decrease of $24.7 million was primarily due to decreased headcount related costs as a result of the 2022 reductions in force and lower marketing and promotional expenses.

License Expenses— License expense related to royalties due to Panion relating to sales of Riona in Japan was $1.5 million and $1.6 million for the six months ended June 30, 2023 and 2022, respectively.

Restructuring— Restructuring expenses were $14.5 million for the six months ended June 30, 2022 that were incurred in connection with our reduction of our workforce in the second quarter 2022 by approximately 42% across all areas of our company including several members of management.

Other Expense, Net— Other expense, net, was $2.9 million for the six months ended June 30, 2023 compared to $8.6 million for the six months ended June 30, 2022.

The decrease of $5.6 million was primarily due to a decrease in interest expense as a result of reducing our outstanding principal balance on the Pharmakon Term Loans by $57.0 million since the period ended June 30, 2022.

This decrease was offset by nearly 135 basis point increase in the interest rate as a result of the current rising interest rate macroeconomic environment.

In addition, our non-cash interest expense from our liability for the sale of future royalties decreased due to a drop in the effective interest rate on the liability for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Loss on Lease Termination— On May 26, 2023 we incurred a loss on lease termination of $0.5 million in connection with the Lease Assignment Agreement, with LG Chem pursuant to which we assigned all of our rights, title, and interest in, to, and under the Boston Lease to LG Chem.

In accordance with ASC 842, Leases , we wrote off the right-of-use asset and lease liability associated with the Boston Lease, and recognized the difference between the right-of-use asset and the least liability offset by the Lease Assignment Amount as a loss on lease termination in the condensed consolidated statement of operations and comprehensive income (loss) of $0.5 million during the six months ended June 30, 2023.

Liquidity and Capital Resources

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

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

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

Historical Cash Flows

We have incurred recurring losses from inception and anticipate net losses and negative operating cash flows for the near future.

For the six months ended June 30, 2023 and 2022, we incurred net operating losses of $38.1 million and $34.1 million, respectively.

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As of June 30, 2023 and December 31, 2022, we had an accumulated deficit of $1,595.1 million and $1,557.0 million, respectively.

Our primary uses of capital are, and we expect will continue to be for the near future, funding operating activities, principal payments on our debt and funding our vadadustat inventory on hand which is included in research and development expense on the condensed consolidated statement of operations and comprehensive income (loss).

Our cash flows may fluctuate and are difficult to forecast and will depend on many factors.

Cash and Cash Equivalents

As of June 30, 2023 and December 31, 2022, we had cash and cash equivalents of $53.6 million and $90.5 million, respectively.

Sources of Liquidity

As of June 30, 2023, we had outstanding debt of $42.5 million, net of debt issuance costs.

See Note 11, Debt , in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.

As of June 30, 2023, we were in compliance with these covenants.

On August 11, 2023, we received an extension from Pharmakon of the deadline in the Loan Agreement with respect to our obligation to deliver quarterly financial statements for the period ended June 30, 2023 through August 28, 2023.

At-the-Market Offering

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

1 unchanged sentence

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

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

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

Three Months Ended

March 31, 2023 March 31, 2022

(in thousands)

Net cash (used in) provided by:

Cost-Share Funding

As of June 30, 2023, through our former and current collaboration agreements with Otsuka and MTPC, respectively, we received approximately $837.1 million in cost-share funding, and are not entitled to receive any additional cost-share funding.

Contractual Obligations, Commitments and Contingencies Other than Debt

We are party to contractual obligations involving commitments to make payments to third parties in the future.

Certain contractual obligations are reflected on our condensed consolidated balance sheet as of June 30, 2023, while others are considered future obligations.

Our material cash requirements as of June 30, 2023, include the following contractual obligations and commitments arising in the normal course of business, including leases, purchases commitments, and purchase obligations described in more detail below.

As of June 30, 2023, other than as disclosed in Note 11, Debt , and Note 13, Commitments and Contingencies , in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this From 10-Q, there have been no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report on Form 10-K/A.

Off-Balance Sheet Arrangements

Letter of Credit

As of June 30, 2023, in connection with our leased properties in Cambridge, MA, we had $1.7 million in a letter of credit outstanding.

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Director and Officer Indemnification

We have entered into indemnification agreements with our directors and certain officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated financial statements.

The following table provides a summary of cash flow data for each applicable period:

Six Months Ended

NET CASH PROVIDED BY/(USED IN) ( in thousands ):

June 30, 2023 June 30, 2022

Operating activities $ (13,909) $ (52,280)

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Financing activities (23,966) 47,536

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

Decrease in cash, cash equivalents and restricted cash $ (37,875) $ (4,858)

Cash, cash equivalents and restricted cash — beginning of period 93,169 151,839

Cash, cash equivalents and restricted cash — end of period $ 55,294 $ 146,981

Operating Activities

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

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

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

Net cash used in operating activities was $13.9 million for the six months ended June 30, 2023.

Net cash used in operating activities consists of a net loss of $38.1 million, adjusted for non-cash items such as amortization of our intangible asset of $18.0 million, stock-based compensation expense of $6.0 million and the effect of changes in working capital.

In addition, we had a one time expense related to the termination of our Boston Lease of $0.8 million.

Net cash used in operating activities was $52.3 million for the six months ended June 30, 2022.

Net cash used in operating activities consists of a net loss of $34.1 million, adjusted for non-cash items such as amortization of intangible asset of $18.0 million, stock-based compensation expense of $11.5 million, non-cash collaboration revenue decrease of $9.6 million, non-cash interest and royalty revenue related to the sale of future royalties and the effect of changes in working capital.

Investing Activities

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

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

No net cash was used in investing activities for the six months ended June 30, 2023.

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

Financing Activities

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

Net cash provided by financing activities for the three months ended March 31, 2022 was $47.5 million and consisted of net proceeds from a refund liability to a customer of $40.0 million, net proceeds from the issuance of common stock of $7.2 million, and proceeds from the sale of stock under our employee stock purchase plan.

Net cash used in financing activities for the six months ended June 30, 2023 primarily consisted of principal payments of debt of $24.0 million.

On June 29, 2023, we entered into the Third Amendment to the Loan Agreement with Pharmakon, which replaced LIBOR with the Secured Overnight Financing Rate, or SOFR , effective June 30, 2023.

As of and for the six months ended June 30, 2023, the effect of switching from LIBOR to SOFR would not have been material to our consolidated financial statements.

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

Operating Capital Requirements

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

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

We have funded our operations principally through sales of our common stock, including through our employee stock purchase plan, payments received from our collaboration and licensing partners, product sales, a working capital payment from Vifor, debt and a royalty transaction.

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

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

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

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

We have incurred losses and cumulative negative cash flows from operations in each year since our inception in February 2007, and as of March 31, 2023, we had an accumulated deficit of $1.6 billion.

Following loss of exclusivity in the U.S., we may not be

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able realize enough product revenue from sales of Auryxia to realize net profits from product sales after March 2025.

We have incurred losses and cumulative negative cash flows from operations in each year since our inception in February 2007, and as of June 30, 2023, we had an accumulated deficit of $1.6 billion.

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

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

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

The revenue from sales of our only commercial product Auryxia at the present time is not sufficient to cover our long-term operating costs.

Our ability to achieve sufficient revenue to cover our long-term operating costs is highly dependent upon us obtaining market approval for vadadustat in the U.S.

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

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

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

We believe our expense management, future decisions by the FDA or foreign regulatory agencies related to the potential regulatory approval of vadadustat, and our ability to generate additional value from vadadustat, if approved, could potentially further extend our cash runway for a period greater than twelve months.

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

4 unchanged sentences

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

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

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

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

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

Contractual Obligations

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

Critical Accounting Estimates and Significant Judgments

2 unchanged sentences

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

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

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

1 unchanged sentence

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

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

During the six months ended June 30, 2023, there were no material changes to our methodologies used for our critical accounting estimates as reported in our 2022 Annual Report on Form 10-K/A.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, please see Note 2 of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis