Akebia Therapeutics, Inc. 10-Q

akba-20230930 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to__________ Commission File Number 001-36352 AKEBIA THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware 20-8756903 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 245 First Street , Cambridge , MA 02142 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: ( 617 ) 871-2098 Not Applicable (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading symbol(s) Name of each exchange on which registered Common Stock, $0.00001 par value per share AKBA The Nasdaq Capital Market Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer ý Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 6, 2023 was 188,389,415 . Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements that are being made pursuant to the provisions of the U.S. Private Securities Litigation Reform Act of 1995 with the intention of obtaining the benefits of the “safe harbor” provisions of that Act. All statements contained in this Quarterly Report on Form 10‑Q other than statements of historical fact are forward-looking statements. These forward-looking statements may be accompanied by words such as “anticipate,” “believe,” “build,” “can,” “contemplate,” “continue,” “could,” “should,” “designed,” “estimate,” “project,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “strategy,” “seek,” “target,” “will,” “would,” and other words and terms of similar meaning, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements about: • the potential therapeutic benefits, safety profile and effectiveness of vadadustat; • delivering value broadly to the kidney community, as well as others who may benefit from our medicines, will result in delivering value for stockholders; • our pipeline and portfolio, including its potential, and our related research and development activities; • the timing of or likelihood of regulatory filings and approvals, including with respect to labeling or other restrictions, such as the anticipated timing of a response by the FDA to our resubmission of our new drug application for vadadustat following our receipt of a complete response letter from the FDA, and potential indications for vadadustat; • the timing, investment and associated activities involved in continued commercialization of Auryxia® (ferric citrate), its growth opportunities and our ability to execute thereon; • the potential indications, demand and market opportunity, potential and acceptance of Auryxia and vadadustat, if approved, including the size of eligible patient populations; • the potential therapeutic applications of the hypoxia inducible factor pathway; • our competitive position, including estimates, developments and projections relating to our competitors and their products and product candidates, and our industry; • our expectations, projections and estimates regarding our capital requirements, need for additional capital, financing our future cash needs, costs, expenses, revenues, capital resources, cash flows, financial performance, profitability, tax obligations, liquidity, growth, contractual obligations, the period of time our cash resources will fund our current operating plan, estimates with respect to our ability to operate as a going concern, our internal control over financial reporting and disclosure controls and procedures, and any future deficiencies or material weaknesses in our internal controls and procedures; • the direct or indirect impacts of the recent COVID-19 pandemic on our business, operations and the markets and communities in which we and our partners, collaborators, vendors and customers operate; • our manufacturing, supply and quality matters and any recalls, write-downs, impairments or other related consequences or potential consequences; • estimates, beliefs and judgments related to the valuation of intangible asset, goodwill, debt and other assets and liabilities, including our impairment analysis and our methodology and assumptions regarding fair value measurements; • the timing of the availability and disclosure of clinical trial data and results; • the designs of our studies, and the type of information and data expected from our studies and the expected benefits thereof; • our and our collaborators’ strategy, plans and expectations with respect to the development, manufacturing, supply, commercialization, launch, marketing and sale of Auryxia, Vafseo® and vadadustat, if approved, and the associated timing thereof; • our collaborator's plans with respect to commercializing Vafseo® in Europe; • our ability to maintain any marketing authorizations we currently hold or will obtain, including our marketing authorizations for Auryxia and our ability to complete post-marketing requirements with respect thereto; • our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms and processes on a timely basis, or at all, with third-party payors for Auryxia and vadadustat, if approved; • the timing of initiation of our clinical trials and plans to conduct preclinical studies and clinical trials in the future; Table of Contents • the timing and amounts of payments from or to our collaborators and licensees, and the anticipated arrangements and benefits under our collaboration and license agreements, including with respect to milestones and royalties; • our intellectual property position, including obtaining and maintaining patents, and the timing, outcome and impact of administrative, regulatory, legal and other proceedings relating to our patents and other proprietary and intellectual property rights, patent infringement suits that we have filed or may file, or other actions that we may take against companies, and the timing and resolution thereof; • expected ongoing reliance on third parties, including with respect to the development, manufacturing, supply and commercialization of Auryxia and vadadustat, if approved; • accounting standards and estimates, their impact, and their expected timing of completion; • estimated periods of performance of key contracts; • our facilities, lease commitments and future availability of facilities; • cybersecurity; • insurance coverage; • management of personnel, including our management team, and our employees, including employee compensation, employee relations, and our ability to attract, train and retain high quality employees; • the implementation of our business model, current operating plan, and strategic plans for our business, product candidates and technology, and business development opportunities including potential collaborations, alliances, mergers, acquisitions or licensing of assets; • our workforce reductions, future charges expected to be incurred in connection therewith and estimated reductions in net cash required for operating activities in connection therewith; and • the timing, outcome and impact of current and any future legal proceedings. Any or all of these forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. These forward-looking statements involve risks and uncertainties, including those that are discussed below under the heading "Risk Factors Summary", and the risk factors identified further in Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q, that could cause our actual results, financial condition, performance or achievements to be materially different from those indicated in these forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason. Unless otherwise stated, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. This Quarterly Report on Form 10-Q also contains estimates and other information concerning our industry and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Unless otherwise expressly stated, we obtained this industry, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Table of Contents RISK FACTORS SUMMARY Investing in our common stock involves numerous risks, including the risks summarized below and described in further detail in “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q, any one of which could materially adversely affect our business, financial condition, results of operations and prospects. These risks include, but are not limited to, the following: • We have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses and cannot guarantee when, if ever, we will become profitable or attain positive cash flows. • We may require substantial additional financing to achieve our goals. A failure to obtain this necessary capital when needed, or on acceptable terms, could force us to delay, limit, reduce or terminate our product development or commercialization efforts. • Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product and product candidates on unfavorable terms to us. • If we fail to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. • We may not be successful in our efforts to identify, acquire, in-license, discover, develop and commercialize additional products or product candidates or our decisions to prioritize the development of certain product candidates over others may not be successful , which could impair our ability to grow. • We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates or technologies or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense. • Our business has been and may continue to be, directly or indirectly, adversely affected by the recent COVID-19 pandemic. • Our obligations in connection with the loan agreement with Pharmakon and requirements and restrictions in the loan agreement could adversely affect our financial condition and restrict our operations. • Our Royalty Interest Acquisition Agreement with HealthCare Royalty Partners IV, L.P. contains various covenants and other provisions, which, if violated, could materially adversely affect our financial condition. • Our business is substantially dependent on the commercial success of Auryxia and vadadustat, if approved. If we are unable to continue to successfully commercialize Auryxia, our results of operations and financial condition will be materially harmed. • If we are unable to maintain or expand, or, if vadadustat is approved, initiate, sales and marketing capabilities or enter into additional agreements with third parties, we may not be successful in commercializing Auryxia, vadadustat, if approved, or any other product candidates that may be approved. • Our, or our partners', failure to obtain or maintain adequate coverage, pricing and reimbursement for Auryxia, vadadustat, if approved, or any other future approved products, could have a material adverse effect on our or our collaboration partners’ ability to sell such approved products profitably and otherwise have a material adverse impact on our business. • We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do. • The commercialization of Riona® and Vafseo in Japan, Vafseo in Europe and other territories where it is approved, and our current and potential future efforts with respect to the development and commercialization of our products and product candidates outside of the United States subject us to a variety of risks associated with international operations, which could materially adversely affect our business. • Clinical drug developme nt involves a lengthy and expensive process with an uncertain outcome, and we will incur additional costs in connection with, and may experience delays in completing, or ultimately be unable to complete, the development of vadadustat and any other product candidates. • We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired. • Conducting clinical trials outside of the United States, as we have done historically and as we may decide to do in the future, presents additional risks and complexities and, if we decide to conduct a clinical trial outside of the United States in the future, we may not complete such trials successfully, in a timely manner, or at all, which could affect our ability to obtain regulatory approvals. • Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired, may cause undesirable side effects or have other properties that may delay or prevent marketing approval or limit their commercial potential. • We may not be able to obtain marketing approval for vadadustat or any other product candidate, or we may experience significant delays in doing so, any of which would materially harm our business. • Products approved for marketing are subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties, including withdrawal of marketing approval, if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, or product candidates, when and if any of them is approved. • We are subject to a complex regulatory scheme that requires significant resources to ensure compliance and our failure to comply with applicable laws could subject us to government scrutiny or enforcement, potentially resulting Table of Contents in costly investigations, fines, penalties or sanctions, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings. • We will incur significant liability if it is determined that we are promoting any “off-label” use of Auryxia or any other product we may develop, in-license or acquire or if it is determined that any of our activities violates the federal Anti-Kickback Statute. • Disruptions in the FDA, regulatory authorities outside the U.S. and other government agencies caused by global health concerns or funding shortages could prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business. • Compliance with privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations. • Legislative and regulatory healthcare reform may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain for any products that are approved in the United States or foreign jurisdictions. • We depend on collaborations with third parties for the development and commercialization of Auryxia, Riona, Vafseo and vadadustat and if these collaborations are not successful or if our collaborators terminate their agreements with us, we may not be able to capitalize on the market potential of Auryxia, Riona, Vafseo and vadadustat, and our business could be materially harmed. • We may seek to establish additional collaborations and, if we are not able to establish them on commercially reasonable terms, or at all, we may have to alter our development and commercialization plans. • We rely upon third parties to conduct all aspects of our product manufacturing, and in many instances only have a single supplier, and the loss of these manufacturers, their failure to supply us on a timely basis, or at all, or their failure to successfully carry out their contractual duties or comply with regulatory requirements, cGMP requirements, or guidance could cause delays in or disruptions to our supply chain and substantially harm our business. • We rely upon third parties to conduct our clinical trials and certain of our preclinical studies. If they do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain or maintain marketing approval for Auryxia, vadadustat or any of our product candidates, and our business could be substantially harmed. • If the licensor of certain intellectual property relating to Auryxia terminates, modifies or threatens to terminate existing contracts or relationships with us, our business may be materially harmed. • If we are unable to adequately protect our intellectual property, third parties may be able to use our intellectual property, which could adversely affect our ability to compete in the market. • We may not be able to protect our intellectual property rights throughout the world. • The intellectual property that we own or have licensed and related non-patent exclusivity relating to our current and future products is, and may be, limited, which could adversely affect our ability to compete in the market and adversely affect the value of Auryxia. • The market entry of one or more generic competitors or any third party’s attempt to challenge our intellectual property rights will likely limit Auryxia sales and have an adverse impact on our business and results of operation. • Litigation and administrative proceedings, including third party claims of intellectual property infringement and opposition/invalidation proceedings against third party patents, may be costly and time consuming and may delay or harm our drug discovery, development and commercialization efforts. • We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties. • If we fail to attract, retain and motivate senior management and qualified personnel, we may be unable to successfully develop, obtain and/or maintain marketing approval of and commercialize vadadustat or commercialize Auryxia. • Our cost savings plan and the associated workforce reductions implemented in April, May and November 2022 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business. • We may encounter difficulties in managing our growth, including with respect to our employee base, and managing our partnerships and operations successfully. • We have identified a material weakness in our internal control over financial reporting as of December 31, 2022 relating to our product return reserves that resulted in a revision of our financial statements for the years ended December 31, 2022, 2021 and 2020. If we are not able to remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in our internal control over financial reporting in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. • We are currently subject to legal proceedings that could result in substantial costs and divert management's attention, and we could be subject to additional legal proceedings. • Our stock price has been and may continue to be volatile, which could result in substantial losses for holders or future purchasers of our common stock and lawsuits against us and our officers and directors. Table of Contents Akebia Therapeutics, Inc. Form 10-Q For the Quarter Ended September 30, 2023 TABLE OF CONTENTS Page Part I Item 1 Financial Statements (Unaudited) 2 Condensed Consolidated Balance Sheet 2 Condensed Consolidated Statement of Operations and Comprehensive Loss 3 Condensed Consolidated Statements of Stockholders' (Deficit) Equity 4 Condensed Consolidated Statements of Cash Flows 5 Notes to the Condensed Consolidated Financial Statements 6 Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 23 Item 3 Quantitative and Qualitative Disclosures A bout Market Risk 35 Item 4 Controls and Procedures 35 Part II 36 Item 1 Legal Proceedings 36 Item 1A Risk Factors 38 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 92 Item 3 Defaults Upon Senior Securities 92 Item 4 Mine Safety Disclosures 92 Item 5 Other Information 92 Item 6 Exhibits 93 Signatures 94 In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to “Akebia,” “we,” “us,” “our,” “the Company,” "our Company" and similar references refer to Akebia Therapeutics, Inc. and, where appropriate, its consolidated subsidiaries. On December 12, 2018, in connection with the consummation of the merger (Merger) with Keryx Biopharmaceuticals, Inc. (Keryx), Keryx became a wholly owned subsidiary of the Company. AURYXIA®, AKEBIA Therapeutics®, Vafseo® and their associated logos are trademarks of Akebia and/or its affiliates. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, trademarks, trade names, and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other company. Akebia Therapeutics, Inc. | Form 10-Q | Page 1 Table of Contents PART I—FINANCIAL INFORMATION Item 1. Financial Statements. Akebia Therapeutics, Inc. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) September 30, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 46,529 $ 90,466 Inventories 18,442 21,568 Accounts receivable, net 22,592 40,284 Prepaid expenses and other current assets 22,039 32,864 Total current assets 109,602 185,182 Property and equipment, net 4,023 5,214 Operating right-of-use assets 13,414 29,158 Intangible asset, net 45,053 72,084 Goodwill 59,044 59,044 Other long-term assets 3,862 5,372 Total assets $ 234,998 $ 356,054 Liabilities and stockholders' (deficit) equity Current liabilities: Accounts payable $ 9,038 $ 18,021 Accrued expenses and other current liabilities 62,664 75,777 Short-term deferred revenue — 3,738 Current portion of long-term debt 8,000 32,000 Total current liabilities 79,702 129,536 Deferred revenue, net of current portion 43,296 43,296 Long-term operating lease liabilities 10,227 28,961 Embedded debt derivative 760 760 Long-term debt, net 34,613 34,078 Liability related to sale of future royalties 56,061 57,484 Refund liability to customer 40,346 40,992 Other long-term liabilities 9,415 15,717 Total liabilities 274,420 350,824 Commitments and contingencies (Note 12) Stockholders' (deficit) equity: Preferred stock $ 0.00001 par value, 25,000,000 shares authorized; no shares issued and outstanding at September 30, 2023 and December 31, 2022 — — Common stock $ 0.00001 par value; 350,000,000 shares authorized at September 30, 2023 and December 31, 2022; 188,313,807 and 184,135,714 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 2 2 Additional paid-in capital 1,570,134 1,562,247 Accumulated other comprehensive income 6 6 Accumulated deficit ( 1,609,564 ) ( 1,557,025 ) Total stockholders' (deficit) equity ( 39,422 ) 5,230 Total liabilities and stockholders' (deficit) equity $ 234,998 $ 356,054 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-Q | Page 2 Table of Contents Akebia Therapeutics, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Product revenue, net $ 40,118 $ 41,989 $ 117,068 $ 126,670 License, collaboration and other revenue 1,928 6,725 21,359 110,032 Total revenues 42,046 48,714 138,427 236,702 Cost of goods sold Product 8,998 29,270 28,452 61,965 Amortization of intangible asset 9,011 9,011 27,032 27,032 Total cost of goods sold 18,009 38,281 55,484 88,997 Operating expenses: Research and development 13,330 28,028 53,214 97,888 Selling, general and administrative 22,710 31,887 74,797 108,693 License expense 864 743 2,381 2,323 Restructuring 169 180 181 14,711 Total operating expenses 37,073 60,838 130,573 223,615 Loss from operations ( 13,036 ) ( 50,405 ) ( 47,630 ) ( 75,910 ) Other income (expense) Interest expense ( 1,410 ) ( 3,952 ) ( 4,614 ) ( 14,051 ) Other (expense) income ( 43 ) 1,167 229 2,712 Loss on extinguishment of debt — ( 906 ) — ( 906 ) Loss on termination of lease — — ( 524 ) — Net loss $ ( 14,489 ) $ ( 54,096 ) $ ( 52,539 ) $ ( 88,155 ) Comprehensive loss $ ( 14,489 ) $ ( 54,096 ) $ ( 52,539 ) $ ( 88,155 ) Net loss per share: Basic and diluted $( 0.08 ) $( 0.29 ) $( 0.28 ) $( 0.48 ) Weighted average common shares outstanding: Basic and diluted 188,306,350 183,882,446 186,643,878 182,375,443 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-Q | Page 3 Table of Contents Akebia Therapeutics, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity (Deficit) (dollars in thousands) Shares Amount 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 7,177 — — 7,178 Proceeds from sale of stock under employee stock purchase plan 191,146 — 367 — — 367 Stock-based compensation expense — — 4,536 — — 4,536 Restricted stock unit vesting 1,789,326 — — — — — Net loss — — — — ( 63,509 ) ( 63,509 ) Balance at March 31, 2022 183,386,035 $ 2 $ 1,548,880 $ 6 $ ( 1,526,308 ) $ 22,580 Stock-based compensation expense — — 6,841 — — 6,841 Exercise of options 142,440 — 67 — — 67 Restricted stock unit vesting 176,179 — — — — — Net income — — — — 29,449 29,449 Balance at June 30, 2022 183,704,654 $ 2 $ 1,555,788 $ 6 $ ( 1,496,859 ) $ 58,937 Proceeds from sale of stock under employee stock purchase plan 144,000 — 43 — — 43 Share-based compensation expense — — 3,375 — — 3,375 Restricted stock unit vesting 102,929 — — — — — Net loss — — — — ( 54,096 ) ( 54,096 ) Balance at September 30, 2022 183,951,583 $ 2 $ 1,559,206 $ 6 $ ( 1,550,955 ) $ 8,259 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity (Deficit) (dollars in thousands) Shares Amount Balance at December 31, 2022 184,135,714 $ 2 $ 1,562,247 $ 6 $ ( 1,557,025 ) $ 5,230 Proceeds from sale of stock under employee stock purchase plan 103,500 — 34 — — 34 Stock-based compensation expense — — 2,489 — — 2,489 Restricted stock unit vesting 1,596,732 — — — — — Net loss — — — — ( 26,878 ) ( 26,878 ) Balance at March 31, 2023 185,835,946 $ 2 $ 1,564,770 $ 6 $ ( 1,583,903 ) $ ( 19,125 ) Stock-based compensation expense — — 3,490 — — 3,490 Restricted stock unit vesting 2,292,923 — — — — — Net loss — — — — ( 11,172 ) ( 11,172 ) Balance at June 30, 2023 188,128,869 $ 2 $ 1,568,260 $ 6 $ ( 1,595,075 ) $ ( 26,807 ) Proceeds from sale of stock under employee stock purchase plan 96,694 — 50 — — 50 Stock-based compensation expense — — 1,824 — — 1,824 Restricted stock unit vesting 88,244 — — — — — Net loss — — — — ( 14,489 ) ( 14,489 ) Balance at September 30, 2023 188,313,807 $ 2 $ 1,570,134 $ 6 $ ( 1,609,564 ) $ ( 39,422 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-Q | Page 4 Table of Contents Akebia Therapeutics, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, (dollars in thousands) 2023 2022 Operating Activities: Net loss $ ( 52,539 ) $ ( 88,155 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 1,191 1,246 Amortization of intangible asset 27,032 27,032 Non-cash interest expense related to sale of future royalties — 6,352 Non-cash royalty revenue related to sale of future royalties ( 1,423 ) ( 1,195 ) Non-cash collaboration revenue — ( 9,550 ) Non-cash research and development expense 782 3,941 Non-cash interest expense 1,318 1,467 Non-cash operating lease expense ( 1,221 ) ( 1,818 ) Non-cash write-off from termination of lease ( 825 ) — Non-cash loss on extinguishment of debt — 406 Write-down of inventory 1,327 10,002 Change in excess inventory purchase commitments — 14,095 Stock-based compensation expense 7,803 14,808 Change in fair value of embedded debt derivative — ( 1,060 ) Changes in operating assets and liabilities: Accounts receivable 17,692 28,312 Inventory 9,238 ( 5,365 ) Prepaid expenses and other current assets 10,043 9,798 Other long-term assets ( 8,175 ) 21,031 Accounts payable ( 9,747 ) ( 17,420 ) Accrued expense and other current liabilities ( 13,735 ) ( 21,534 ) Operating lease liabilities 1,128 1,771 Deferred revenue ( 3,738 ) 2,181 Other long-term liabilities ( 7,227 ) ( 14,820 ) Net cash used in operating activities ( 21,076 ) ( 18,475 ) Investing Activities: Purchases of equipment — ( 114 ) Net cash used in investing activities — ( 114 ) Financing Activities: Proceeds from refund liabilities to customers — 40,000 Proceeds from issuance of common stock, net of issuance costs — 7,122 Proceeds from issuances of stock under employee stock purchase plan 84 410 Proceeds from the exercise of stock options — 67 Repayments of term debt ( 24,000 ) ( 33,000 ) Net cash (used in) provided by financing activities ( 23,916 ) 14,599 Decrease in cash, cash equivalents and restricted cash ( 44,992 ) ( 3,990 ) Cash, cash equivalents and restricted cash — beginning of period 93,169 151,839 Cash, cash equivalents and restricted cash — end of period $ 48,177 $ 147,849 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-Q | Page 5 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Organization Akebia Therapeutics, Inc., and it's subsidiaries, referred to as Akebia or 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, which provided that it could not approve the new drug application, or NDA , for vadadustat for the treatment of anemia due to CKD in adult patients in its present form. In October 2022, the Company submitted a Formal Dispute Resolution Request with the FDA and in May 2023, the Office of New Drugs, or OND , denied the Company's appeal but provided a path forward for the Company to resubmit the NDA for vadadustat for the treatment of anemia due to CKD for dialysis dependent patients without the need for the Company to generate additional clinical data. In September 2023, the Company completed its resubmission to its NDA for vadadustat for the treatment of anemia due to CKD for dialysis dependent patients. In October 2023, the FDA acknowledged that the resubmission was complete, classified it as a Class 2 response and set a user fee goal date, or PDUFA date , of March 27, 2024. 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. 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 was subsequently approved in May 2023 in the United Kingdom, or UK , by the Medicines and Healthcare products Regulatory Agency, in June 2023 in Switzerland by the Swiss Agency for Therapeutics Products, in March 2023 in Korea by the Ministry of Food and Drug Safety (under trade name Vadanem) and in September 2023 in Australia and Taiwan by the Therapeutic Goods Administration, or TGA, and Taiwan Food and Drug Administration, respectively. In May 2023, the Company entered into a License Agreement, or the Medice License Agreement, with MEDICE Arzneimittel Pütter GmbH & Co. KG, or Medice, pursuant to which the Company granted Medice an exclusive license to develop and commercialize vadadustat for the treatment of anemia in patients with CKD in the European Economic Area, the UK, Switzerland and Australia, or the Medice Territory. Vadadustat is also approved in Japan as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD patients under the trade name Vafseo, and marketed and sold in Japan by Mitsubishi Tanabe Pharma Corporation, or MTPC. 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 Royalty Agreement , whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC, or MTPC Agreement , subject to certain caps and other terms and conditions (see Note 4 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. Going Concern 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 in 2014 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. In addition, the Company continues to explore additional development opportunities to expand its pipeline and portfolio of novel therapeutics. If the Company does not successfully commercialize vadadustat, if approved, or any other potential product candidate, it may be unable to achieve profitability. As of September 30, 2023, the Company had cash and cash equivalents of approximately $ 46.5 million. Based on its current operating plan, the Company believes its cash resources and the cash the Company expects to generate from product, royalty and license revenues will be sufficient to fund its current operating plan for at least twelve months from the filing of this Quarterly Report on Form 10-Q. However, if the Company’s operating performance deteriorates significantly from the levels expected in the Company’s operating plan, or if vadadustat is not approved in the U.S., it would affect 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 Akebia Therapeutics, Inc. | Form 10-Q | Page 6 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS product revenue and royalty and license revenue and, if the Company believes its resources are insufficient to satisfy its liquidity requirements, the Company may seek to sell public or private equity, enter into new debt transactions, explore potential strategic transactions or a combination of these approaches. 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 its operating plan for the period of time anticipated by the Company, or that additional funding will be available on terms acceptable to the Company, or at all. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company's significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2022, and notes thereto, which are included in the Company's Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A that was filed with the Securities and Exchange Commission, or SEC, on August 28, 2023, or 2022 Annual Report on Form 10-K/A . Since the date of those financial statements, there have been no material changes to the Company's significant accounting policies. In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. Interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any other future period. Basis of Presentation and Principals of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB . The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements herein. Certain monetary amounts, percentages, and other figures included elsewhere in these unaudited condensed consolidated financial statements have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them. Use of Estimates The preparation of financial statements in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities as of and during the reported period. On an ongoing basis, management evaluates its estimates. Management bases its estimates and assumptions on historical experience when available and on various factors, including expected business and operational changes, sensitivity and volatility associated with the assumption that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of the assets and liabilities that are not readily apparent from other sources. In certain circumstances, management must apply significant judgment in this process. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management selects an amount that falls within that range of reasonable estimates. 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. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to: accrued expenses, right-of-use assets and liabilities, embedded debt derivative, refund liabilities to customers, other long-term liabilities, stock-based compensation expense and certain judgments regarding product and collaboration revenues. including various rebates, returns and reserves related to product sales, non-cash interest expense on the liability related to sale of future royalties, inventories, income taxes, intangible asset and goodwill. Reconciliation of Cash, Cash Equivalents and Restricted Cash In determining its cash, cash equivalents and restricted cash, the Company considers only those highly liquid investments, readily convertible to cash which as of September 30, 2023 primarily included funds invested in money market funds. The following table reconciles cash, cash equivalents and restricted cash reported within the Company's consolidated balance sheet to the total amounts showing in the consolidated statement of cash flows: Akebia Therapeutics, Inc. | Form 10-Q | Page 7 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands) September 30, 2023 December 31, 2022 Cash and cash equivalents $ 46,529 $ 90,466 Restricted cash included in other long-term assets 1,648 2,703 Total cash, cash equivalents and restricted cash $ 48,177 $ 93,169 3. PRODUCT REVENUE AND RESERVES FOR VARIABLE CONSIDERATION To date, the Company’s only source of product revenue has been from the U.S. sales of Auryxia. Total net product revenue was $ 40.1 million and $ 42.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 117.1 million and $ 126.7 million for the nine months ended September 30, 2023 and 2022, respectively. Product revenue allowance and reserve categories were as follows: (in thousands) Chargebacks and Discounts Rebates, Fees and other Deductions Product Returns Total Balance at December 31, 2022 $ 1,259 $ 25,947 $ 10,896 $ 38,102 Current provisions related to sales in current year 7,485 58,824 3,513 69,822 Adjustments related to prior year sales 92 ( 1,924 ) ( 56 ) ( 1,888 ) Credits/payments made ( 7,993 ) ( 59,318 ) ( 9,736 ) ( 77,047 ) Balance at September 30, 2023 $ 843 $ 23,529 $ 4,617 $ 28,989 (in thousands) Chargebacks and Discounts Rebates, Fees and other Deductions Product Returns Total Balance at December 31, 2021 $ 1,047 $ 24,173 $ 10,038 $ 35,258 Current provisions related to sales in current year 8,544 63,938 4,056 76,538 Adjustments related to prior year sales ( 248 ) 33 ( 194 ) ( 409 ) Credits/payments made ( 8,194 ) ( 65,611 ) ( 3,669 ) ( 77,474 ) Balance at September 30, 2022 $ 1,149 $ 22,533 $ 10,231 $ 33,913 Chargebacks, discounts and estimated product returns are recorded as a reduction of revenue in the period the related product revenue is recognized in the unaudited condensed consolidated statement of operations and comprehensive loss. Chargebacks are recorded as a reduction to accounts receivable while discounts, rebates, fees and other deductions are recorded with a corresponding increase to accrued expenses and other current liabilities or accounts payable on the unaudited condensed consolidated balance sheets. Estimated product returns for the period related to product sales are recorded as other long-term liabilities in the unaudited condensed consolidated balance sheet. Accounts receivable, net related to product sales, was approximately $ 21.3 million and $ 37.3 million as of September 30, 2023 and December 31, 2022, respectively. 4. LICENSE, COLLABORATION AND OTHER REVENUE The Company recognized the following revenues from its license, collaboration and other revenue agreements (in thousands): Three Months Ended September 30, Nine Months Ended September 30, License, collaboration and other revenue: 2023 2022 2023 2022 MTPC Collaboration Agreement $ 487 $ 5,487 $ 5,165 $ 13,885 Otsuka U.S. Agreement — — 2,225 86,773 Otsuka International Agreement — — — 5,503 Total collaboration revenue $ 487 $ 5,487 $ 7,390 $ 106,161 JT and Torii Sublicense Agreement 1,441 1,238 3,969 3,871 Medice License Agreement — — 10,000 — Total license, collaboration and other revenue $ 1,928 $ 6,725 $ 21,359 $ 110,032 Akebia Therapeutics, Inc. | Form 10-Q | Page 8 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following tables present changes in the Company’s contract assets and liabilities (in thousands): Nine Months Ended September 30, 2023 Balance at Beginning of Period Additions Deductions Balance at End of Period Contract assets: Accounts receivable (1) $ 1,901 $ 1,426 $ ( 2,847 ) $ 480 Prepaid expenses and other current assets $ 781 $ — $ ( 781 ) $ — Contract liability: Deferred revenue $ 47,034 $ — $ ( 3,738 ) $ 43,296 Nine Months Ended September 30, 2022 Balance at Beginning of Period Additions Deductions Balance at End of Period Contract assets: Accounts receivable (1) $ 19,094 $ 92,612 $ ( 109,836 ) $ 1,870 Prepaid expenses and other current assets $ 4,309 $ 9,550 $ ( 8,250 ) $ 5,609 Contract liabilities: Deferred revenue $ 42,380 $ 66,307 $ ( 64,126 ) $ 44,561 Accounts payable $ 3,171 $ — $ ( 3,171 ) $ — (1) Excludes accounts receivable related to amounts due to the Company from product sales of Auryxia which are included in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2023 and 2022. 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): Three Months Ended September 30, Nine Months Ended September 30, Revenue Recognized in the Period: 2023 2022 2023 2022 Deferred revenue — beginning of the period $ — $ 5,047 $ — $ 29,574 During the three and nine months ended September 30, 2023 and 2022, the Company recognized no revenue from performance obligations satisfied in previous periods. MTPC Collaboration Agreement On December 11, 2015, the Company and MTPC entered into 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. In February 2021, the Company entered into the Royalty Agreement with HCR, 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 5 for additional information and Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of the MTPC Agreement. 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 . 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 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 NDA filing Akebia Therapeutics, Inc. | Form 10-Q | Page 5 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS in Japan and $ 15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $ 4.4 million in royalties from net sales of Vafseo. As of September 30, 2023, 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. The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. 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. During the three and nine months ended September 30, 2023, the Company recognized revenue from MTPC royalties totaling approximately $ 0.5 million and $ 1.4 million, respectively, and approximately $ 0.4 million and $ 1.2 million during the three and nine months ended September 30, 2022, 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 terms and conditions (see Note 5 for additional information). The revenue is classified as license, collaboration and other revenue in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. As of September 30, 2023, there were no accounts receivable, contract assets, payables or deferred revenue recorded in connection with the MTPC Agreement. Supply of Drug Product to MTPC On July 15, 2020, the Company and MTPC entered into a supply agreement, or MTPC Supply Agreement , 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. See Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of this supply agreement. On December 16, 2022, the Company, MTPC and Esteve Química, S.A., or Esteve, executed an Assignment of Supply Agreement, or Esteve Assignment Agreement , pursuant to which the Supply Agreement between the Company and Esteve, or Esteve Agreement (see Note 12) was assigned to MTPC. The Esteve Assignment Agreement transferred the rights and obligations of the Company under the Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by the Company and accepted by Esteve that 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 has no further obligation to take delivery of, or pay for, product delivered by Esteve. The Company recognized no revenue and $ 3.7 million in revenue under the MTPC Supply Agreement during the three and nine months ended September 30, 2023, respectively, and $ 5.1 million and $ 12.7 million in revenue during the three and nine months ended September 30, 2022, respectively. Due to the Esteve Agreement, the Company no longer records accounts receivable, deferred revenue or other current liabilities relating to the MTPC Supply Agreement. Cyclerion License Agreement On June 4, 2021, the Company entered into a License Agreement, or 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 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 and recorded to research and development expense in June 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. A more detailed description of this agreement can be found in Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A. CSL Vifor License Agreement O n May 12, 2017, the Company entered into a License Agreement, as amended and restated on February 18, 2022, or the Vifor Agreement, with Vifor (International) Ltd. (now a part of CSL Limited), or CSL Vifor , which grants CSL Vifor an exclusive license to sell vadadustat to Fresenius Kidney Care Group LLC, an affiliate of Fresenius Medical Care North America, or 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 certain non-retail specialty pharmacies, collectively, the Supply Group , in the United States, or Vifor Territory . CSL Vifor has agreed not to sell or otherwise supply vadadustat until the FDA has granted regulatory approval for vadadustat for the treatment of Akebia Therapeutics, Inc. | Form 10-Q | Page 6 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS anemia due to CKD in adult patients with DD-CKD in the Vifor Territory and until CSL Vifor has entered a supply agreement with the applicable member of the Supply Group. The Vifor Agreement is structured as a profit share arrangement between the Company and CSL Vifor in which the Company will receive approximately 66 % of the profits, net of certain pre-specified costs. In addition, CSL Vifor made an upfront payment to the Company of $ 25.0 million in February 2022 in connection with the amendment and restatement of the Vifor Agreement, which was recorded as long-term deferred revenue in the accompanying unaudited condensed consolidated balance sheet. Unless earlier terminated, the Vifor 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 Vifor Territory. CSL Vifor may terminate the Vifor 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 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 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 First Investment Agreement , pursuant to which the Company sold an aggregate of 3,571,429 shares of the Company’s common stock, or 2017 Shares, to CSL Vifor at a price per share of $ 14.00 for a total of $ 50.0 million. On February 18, 2022, in connection with the amendment and restatement, the Company and CSL Vifor entered into an investment agreement, or Second Investment Agreement , pursuant to which the Company sold an aggregate of 4,000,000 shares of its common stock, or 2022 Shares, to CSL Vifor at a price per share of $ 5.00 for a total of $20 million on February 22, 2022. The amounts representing the premium over the closing stock price and the amount paid of $ 4.7 million under the First Investment Amendment and $13.6 million under the Second Investment Amendment were determined by the Company to represent consideration related to the Vifor Agreement and recorded as long-term deferred revenue in long-term liabilities on the unaudited condensed consolidated financial statements. CSL Vifor agreed to a lock-up restriction not to sell the 2017 Shares or the 2022 Shares for a period of time following the effective date of the First Investment Agreement and Second Investment Agreement, respectively, which restriction with respect to the 2017 Shares has expired. The First Investment Agreement and the Second Investment Agreement each contain a customary standstill agreement. In addition, the First Investment Agreement and Second Investment Agreement contain voting agreements made by CSL Vifor with respect to the 2017 Shares and 2022 Shares, respectively. The 2017 Shares and 2022 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 as the transaction did not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act. See Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of the Vifor Agreement. Revenue Recognition The Company identified one performance obligation under the Vifor Agreement, as amended, the deliverable of the license. Thus until the license is delivered, the transaction price of $ 43.3 million which is comprised of the up-front payment of $ 25.0 million and the premiums paid by CSL Vifor on the First Investment Agreement and Second Investment Agreement of $ 4.7 million and $ 13.6 million, respectively, will remain in long-term deferred revenue in the accompanying unaudited condensed consolidated balance sheet. Under the Vifor Agreement, these payments from CSL Vifor are non-refundable and non-creditable against any other amount due to the Company. In addition, 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 Agreement and will be required to repay the up-front payment of $ 25.0 million and the premiums paid by CSL Vifor of $ 18.3 million. Refund Liability to Customer Pursuant to the Vifor Agreement, CSL Vifor contributed $ 40.0 million to a working capital fund established to fund approximately 50 % of the Company’s costs of purchasing vadadustat from its contract manufacturers, or Working Capital Akebia Therapeutics, Inc. | Form 10-Q | Page 7 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Fund , for the supply of vadadustat for the Vifor Territory already delivered or to be delivered to the Company through the end of 2023. The amount of the Working Capital Fund can be reviewed at specified intervals and may be adjusted based on a number of factors including outstanding supply commitments for vadadustat and agreed upon vadadustat inventory levels held by the Company for the Vifor Territory. Upon termination or expiration of the Vifor 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 determined the Working Capital Fund itself does not represent an obligation to transfer goods or services to CSL Vifor in the future and thus under ASC 606 was recorded as a refund liability. The refund liability is considered a debt arrangement with zero coupon interest and the Company imputes interest on the refund liability 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. On March 18, 2022, when the $ 40.0 million was received from CSL Vifor, the Company recorded an initial discount on the refund liability and a corresponding deferred gain on the condensed consolidated balance sheet. The discount on the refund liability is being amortized to interest expense using the effective interest method over the expected term of the Vifor Agreement. The deferred gain is being amortized to interest income on a straight-line basis over the expected term of the Vifor Agreement. The amortization of the discount was $ 0.7 million and $ 2.4 million for the three and nine months ended September 30, 2023, respectively, and $ 1.1 million and $ 2.3 million for the three and nine months ended September 30, 2022, respectively. The amortization of the deferred gain was $ 1.0 million and $ 3.0 million for the three and nine months ended September 30, 2023, respectively, and $ 0.9 million and $ 1.8 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, the $ 40.3 million refund liability is classified as a long-term liability based on management's estimated timing of the repayment of the refund liability to Vifor exceeding one-year. Panion License Agreement The Company had a license agreement, which was amended from time to time, with Panion & BF Biotech, Inc., or Panion , under which Keryx Biopharmaceuticals, Inc., or Keryx , the Company's wholly owned subsidiary, was the contracting party, or Panion License Agreement , pursuant to which Keryx in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, or 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 Panion Amended License Agreement , which amends and restates in full the Panion License Agreement, effective as of April 17, 2019. The Panion Amended License Agreement provides Keryx with an exclusive license under Panion-owned know-how and patents with the right 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 the Keryx-owned patents, with the right 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. See Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of this license agreement. The Company recognized royalty payments due to Panion of approximately $ 3.1 million and $ 9.3 million during the three and nine months ended September 30, 2023, respectively, and $ 2.9 million and $ 9.5 million during the three and nine months ended September 30, 2022, respectively, relating to the Company’s sales of Auryxia in the United States and JT and Torii’s net sales of Riona in Japan. JT and Torii Sublicense Agreement The Company has an Amended and Restated Sublicense Agreement, which was amended in June 2013, with JT and Torii, or 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. See Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for a more detailed description of this sublicense agreement. 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 Akebia Therapeutics, Inc. | Form 10-Q | Page 8 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. The Company recognized license revenue of $ 1.4 million and $ 4.0 million during the three and nine months ended September 30, 2023, respectively, and $ 1.2 million and $ 3.9 million during the three and nine months ended September 30, 2022, respectively, 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. Averoa License Agreement On December 22, 2022, the Company and Averoa SAS, or Averoa, entered into a license agreement, or Averoa License Agreement , pursuant to which the Company granted to Averoa an exclusive license to develop and commercialize ferric citrate, or Averoa Licensed Product , in the European Economic Area, Turkey, Switzerland and the United Kingdom, or Averoa 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 Averoa Territory, including certain minimum royalty amounts in certain years, and subject to reduction in certain circumstances. The Company and Averoa have established a joint steering committee to oversee the development, manufacturing and commercialization of the Averoa Licensed Product in the Averoa Territory. The Averoa License Agreement expires on the date of expiration of all royalty obligations due thereunder with respect to the Averoa Licensed Product on a country-by-country basis in the Averoa Territory, unless earlier terminated in accordance with the Averoa License Agreement . The Averoa License Agreement provides that the Company and Averoa will enter into a supply agreement pursuant to which the Company will supply the Averoa Licensed Product to Averoa for commercial use in the Averoa 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. As of September 30, 2023, the Company and Averoa have not yet entered into a supply agreement. A more detailed description of the Averoa License Agreement can be found in Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A. Medice License Agreement On May 24, 2023, or Medice Effective Date , the Company and Medice entered into the Medice License Agreement, pursuant to which the Company granted to Medice an exclusive license to develop and commercialize vadadustat, or Medice Licensed Product, for the treatment of anemia in adult patients with chronic kidney disease in the Medice Territory. Under the Medice License Agreement, the Company received an up-front payment of $ 10.0 million and is entitled to receive the following payments: (i) commercial milestone payments up to an aggregate of $ 100.0 million, and (ii) tiered royalties ranging from 10 % to 30 % of Medice's annual net sales of the Medice Licensed Product in the Medice Territory, subject to reduction in certain circumstances. The royalties will expire on a country-by-country basis upon the latest to occur of (a) the date of expiration of the last-to-expire valid claim of any Company, Medice or joint patent that covers the Medice Licensed Product in such country in the Medice Territory, (b) the date of expiration of data or regulatory exclusivity for the Medice Licensed Product in such country in the Medice Territory and (c) the date that is 12 years from first commercial sale of the Medice Licensed Product in such country in the Medice Territory. Under the Medice License Agreement, the Company retains the right to develop the Medice Licensed Product for non-dialysis patients with anemia due to chronic kidney disease in the Medice Territory. If the Company develops the Medice Licensed Product for non-dialysis patients and such Medice Licensed Product receives marketing approval in the Medice Territory, Medice will commercialize the Medice Licensed Product for both indications in the Medice Territory. In this instance, the Company would receive 70 % of the net product margin of any sales of the Medice Licensed Product in the non-dialysis patient population, unless Medice requests to share the cost of the development necessary to gain approval to market the Medice Licensed Product for non-dialysis patients in the Medice Territory and the parties agree on alternative financial terms. If the Company develops the licensed product for non-dialysis patients, the Company has determined that the activities under the Medice License Agreement represent joint operating activities in which both parties are active participants and of which both parties are exposed to significant risks and rewards that are dependent on the success of the activities. Accordingly, if the Company develops the Medice Licensed Product for non-dialysis patients the Company will account for the joint activities in accordance with ASC No. 808, Collaborative Arrangements, or ASC 808 . Additionally, the Company has determined that in the Akebia Therapeutics, Inc. | Form 10-Q | Page 9 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS context of the development of the Medice Licensed Product for non-dialysis patients, Medice does 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 development activities for the Medice Licensed Product for non-dialysis patients will be accounted for as a component of the related expense in the period incurred. The Company and Medice expect in the future to establish a joint steering committee to oversee the development and commercialization of the Medice Licensed Product in the Medice Territory. The Medice License Agreement expires on the date of expiration of all payment obligations due thereunder with respect to the Medice Licensed Product in the last country in the Medice Territory, unless earlier terminated in accordance with the terms of the Medice License Agreement. Either party may, subject to a cure period, terminate the Medice License Agreement in the event of the other party's uncured material breach. Medice has the right to terminate the Medice License Agreement in its entirety for convenience upon 12 months' prior written notice delivered on or after the date that is 12 months after the Medice Effective Date. The Medice License Agreement includes customary terms relating to, among others, indemnification, confidentiality, remedies, and representations and warranties. The Medice License Agreement provides that the Company and Medice will enter into a supply agreement pursuant to which the Company will supply the Medice Licensed Product to Medice for commercial use in the Medice Territory. Revenue Recognition The Company evaluated the elements of the Medice License Agreement in accordance with the provisions of ASC 606 and concluded Medice is a customer. The Company's arrangement with Medice contains one material promise under the contract at inception, which is the exclusive license under the Company's intellectual property to develop and commercialize the Medice Licensed Product in the Medice Territory during the term of the Medice License Agreement and use the Akebia Trademark solely in connection with the commercialization of the Medice Licensed Product, or License Deliverable . The Company identified one performance obligation in connection with its obligations under the Medice License Agreement, which is the License Deliverable, or License Performance Obligation . The transaction price at inception was comprised of the up-front payment of $ 10.0 million, of which the Company received $ 8.6 million during the quarter ended June 30, 2023. The remaining $ 1.4 million was withheld by the German Federal Tax Office and is included in other long-term assets on the condensed consolidated balance sheet as of September 30, 2023. Pursuant to the terms of the Medice License Agreement, the up-front payment of $ 10.0 million is non-refundable and non-creditable against any other amount due to the Company and was allocated to the License Performance Obligation, which was satisfied as of the Medice Effective Date. As such, the Company recognized the $ 10.0 million up-front payment as License, collaboration and other revenue in the condensed consolidated statement of operations and comprehensive loss during the nine months ended September 30, 2023. In accordance with ASC 606, the Company will recognize sales-based royalties and milestone payments at the later of when the performance obligation is satisfied or the related sales occur. Past Collaboration and License Agreements U.S. Collaboration and License Agreement with Otsuka Pharmaceutical Co. Ltd. On December 18, 2016, the Company entered into a collaboration and license agreement, or Otsuka U.S. Agreement, with Otsuka Pharmaceutical Co. Ltd., or Otsuka . The collaboration was focused on the development and commercialization of vadadustat in the United States. 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 April 25, 2017 collaboration and license agreement with Otsuka, or Otsuka International Agreement . On June 30, 2022, the Company and Otsuka entered into the Termination and Settlement Agreement, or 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. The Company did not recognize collaboration revenue with respect to the Otsuka U.S. Agreement during the three months ended September 30, 2023 or 2022. During the nine months ended September 30, 2022, the Company recognized collaboration revenue totaling $ 86.8 million with respect to the Otsuka U.S. Agreement. During the nine months ended September 30, 2023, the Company recognized $ 2.2 million in collaboration revenue in connection with the Packaging Validation Transfer Agreement entered into with Otsuka on April 20, 2023. The Company evaluated the agreement under ASC Akebia Therapeutics, Inc. | Form 10-Q | Page 10 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 606 and concluded it was closely tied to the prior collaboration revenue agreements and under ASC606 recognized collaboration revenue in the current quarter. A more detailed description of the Otsuka U.S. Agreement can be found in Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A. International Collaboration and License Agreement with Otsuka Pharmaceutical Co. Ltd. On April 25, 2017, the Company entered into 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 . As discussed above, the Otsuka International Agreement was terminated on June 30, 2022 pursuant to the Termination Agreement. During the three and nine months ended September 30, 2022, the Company recognized no collaboration revenue and $ 5.5 million with respect to the Otsuka International Agreement, respectively. A more detailed description of this collaboration agreement and the Company's evaluation of this agreement under ASC 606 can be found in Note 5 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A. 5. LIABILITY RELATED TO SALE OF FUTURE ROYALTIES On February 25, 2021, the Company entered into the Royalty Agreement with 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 Annual Cap, and an aggregate maximum “cap” of $ 150.0 million, or Aggregate Cap . The Company received $ 44.8 million from HCR (net of certain transaction expenses) under the Royalty Agreement. The Company retains the right to receive all potential future regulatory milestones for vadadustat under the MTPC Agreement. 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 and is amortizing it 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, is 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 September 30, 2023 was 0 % which is reflected as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss. On a quarterly basis, the Company reassesses the effective interest rate and adjusts the rate prospectively as needed. A more detailed description of Royalty Agreement can be found in Note 7 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A. The activity within the long-term liability account for the nine months ended September 30, 2023 is as follows (in thousands): Liability related to sale of future royalties, beginning balance at December 31, 2022 $ 57,484 MTPC royalties payable ( 1,423 ) Liability related to sale of future royalties, ending balance at September 30, 2023 $ 56,061 Akebia Therapeutics, Inc. | Form 10-Q | Page 11 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6. FAIR VALUE OF FINANCIAL INSTRUMENTS The tables below present certain assets and liabilities measured at fair value categorized by the level of input used in the valuation of each asset and liability (in thousands): September 30, 2023 Level 1 Level 2 Level 3 Total Fair Value Cash equivalents: Money market funds $ 6,069 $ — $ — $ 6,069 Long-term liability: Embedded debt derivative $ — $ — $ 760 $ 760 December 31, 2022 Level 1 Level 2 Level 3 Total Fair Value Cash equivalents: Money market funds $ 52,442 $ — $ — $ 52,442 Long-term liability: Embedded debt derivative $ — $ — $ 760 $ 760 Cash and cash equivalents —Money market funds included within cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Embedded debt derivative —As described in Note 10, the Company’s Loan Agreement with Pharmakon 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. The Company did not meet one of the regulatory conditions and 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 concluded the acceleration of the obligations under the Loan Agreement under certain events of default, and under certain circumstances, the application of a default interest rate on all outstanding obligations during the occurrence and continuance of an event of default represent a single compound embedded debt derivative required to be bifurcated from the debt host instrument that is required to be re-measured at fair value on a quarterly basis. The estimated fair value of the embedded debt derivative on both September 30, 2023 and December 31, 2022 was determined using a scenario-based approach and discounted cash flow model that includes principal and interest payments under various cash flow assumptions. 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 embedded debt derivative. The determination of the fair value of the embedded debt derivative includes inputs not observable in the market and as such, represents Level 3 measurement. The methodology utilized requires inputs based on certain subjective assumptions, specifically, probabilities of acceleration of the obligations under the Loan Agreement by Pharmakon under certain events of default. The probabilities used in the valuation of the embedded debt derivative included a 95 % probability that the obligations under the Loan Agreement will not be accelerated due to an event of default under the Loan Agreement. The fair value of the embedded debt derivative related to the Company’s Loan Agreement with Pharmakon was $ 0.8 million as of September 30, 2023 and December 31, 2022. Akebia Therapeutics, Inc. | Form 10-Q | Page 12 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7. INVENTORIES Inventories consists of the following (in thousands): September 30, 2023 December 31, 2022 Work-in-process $ 2,640 $ 7,892 Finished goods 15,802 13,676 Inventories, current $ 18,442 $ 21,568 Raw materials included in other long-term assets 848 610 Total inventories $ 19,290 $ 22,178 For the period ended December 31, 2022, inventory consisted only of inventory related to our commercial product, Auryxia. On April 24, 2023, or the EC Marketing Authorization Date , vadadustat received marketing authorization from the EC under the trade name Vafseo. Costs associated with converting the vadadustat drug substance to finished goods after the EC Marketing Authorization Date, which will be used to supply Europe, have been capitalized as inventory on the condensed consolidated balance sheet of the Company as of September 30, 2023. Inventory written down for Auryxia as a result of excess, obsolescence, scrap or other reasons charged to cost of goods in the unaudited condensed consolidated statement of operations and comprehensive loss totaled approximately $ 0.7 million and $ 2.6 million during the three months ended September 30, 2023 and 2022, respectively, and $ 1.3 million and $ 10.0 million during the nine months ended September 30, 2023 and 2022, respectively. The Company records advance payments for vadadustat drug substance that it expects to use for the potential US launch as prepaid manufacturing costs. Upon the quality release of the vadadustat batches and transfer of title to the Company, the Company records the cost as research and development expense. As of September 30, 2023 and December 31, 2022, the Company had $15.6 million of prepaid manufacturing costs for vadadustat drug substance expected to be used in the potential U.S. launch of vadadustat included in other current assets on the condensed consolidated balance sheet. 8. INTANGIBLE ASSET AND GOODWILL Intangible Asset Intangible asset, net of accumulated amortization, prior impairments and adjustments as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands): September 30, 2023 December 31, 2022 Intangible asset: Gross Carrying Value Accumulated Amortization Net Book Value Net Book Value Estimated Useful Life Developed product rights for Auryxia $ 214,705 $ ( 169,652 ) $ 45,053 $ 72,084 6 years The Company recorded $ 9.0 million in amortization expense for each of the three month periods ended September 30, 2023 and 2022, and $ 27.0 million for each of the nine month periods ended September 30, 2023 and 2022. Goodwill The Company assesses goodwill for impairment annually, or under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be an impairment. As of September 30, 2023 and December 31, 2022, the Company had goodwill of $ 59.0 million and no accumulated impairment losses related to goodwill recorded in connection with the December 2018 merger with Keryx. 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consists of the following (in thousands): Akebia Therapeutics, Inc. | Form 10-Q | Page 13 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2023 December 31, 2022 Product revenue allowances $ 23,834 $ 26,268 Product return reserves, current portion 3,312 7,789 Compensation and related benefits 7,204 11,481 Operating lease liabilities, current portion 4,861 4,744 Royalties 3,076 3,804 Professional fees 4,648 1,886 Accrued manufacturing costs 4,156 4,310 BioVectra termination fees 5,000 — Clinical trial costs 312 5,755 Restructuring costs 617 2,751 Other 5,644 6,989 Total accrued expenses and other current liabilities $ 62,664 $ 75,777 Accrued manufacturing costs includes the costs associated with the Company's commercial product Auryxia and vadadustat, a product for which the Company is seeking approval from the FDA to market in the U.S. and for which the Company recently signed a license agreement with Medice to market in Europe and other territories (see Note 4 for further details). 10. DEBT Pharmakon Term Loans On November 11, 2019, the Company, with Keryx as guarantor, entered into a loan agreement, or Loan Agreement , with BioPharma Credit PLC as collateral agent and a lender, or Collateral Agent, and BioPharma Credit Investments V (Master) LP as a lender, and a Guaranty and Security Agreement with the Collateral Agent. BioPharma Credit PLC subsequently transferred its interest in the 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 Loan Agreement, as amended, consists of a secured term loan facility in an aggregate amount of up to $ 100.0 million, or Term Loans , which was made available under two tranches: (i) the first tranche of $ 80.0 million, or Tranche A , and (ii) the second tranche of $ 20.0 million, or Tranche B . On November 25, 2019, the Company drew $ 77.3 million on Tranche A, net of fees and expenses of $ 2.7 million. On December 10, 2020, the Company drew $ 20.0 million on Tranche B, net of immaterial lender expenses and issuance costs. On July 15, 2022, or Second Amendment Effective Date , the Company prepaid $ 25.0 million of the then outstanding principal, $5.0 million on Tranche A and a $ 20.0 million on Tranche B as well as a $ 0.5 million prepayment fees under the terms of the Loan Agreement. During the three months ended September 30, 2022, the Company recorded a debt extinguishment loss of $ 0.9 million. As of September 30, 2023, the Company had $ 43.0 million of principal outstanding. The Term Loans, as amended, bear interest through maturity at a variable rate based on the three month Secured Overnight Financing Rate, or SOFR, plus a SOFR adjustment of 0.30% plus 7.50 %. The SOFR interest rate was capped at 3.35% through October 31, 2023, the date of the Fourth Amendment to the Loan Agreement, or Fourth Amendment . As of September 30, 2023, the three-month SOFR rate was above the SOFR cap, therefore, the Company's interest rate was 11.15 %. The Company recognized interest expense related to the Loan Agreement of $ 1.4 million and $ 2.1 million during the three months ended September 30, 2023 and 2022, respectively, and $ 4.7 million and $ 7.5 million during the nine months ended September 30, 2023 and 2022, respectively. Unamortized discount and issuance costs were $ 0.4 million as of September 30, 2023. The Company was required to make equal quarterly principal payments that started on the 33 rd-month anniversary of the applicable Funding Date until November 25, 2024, or Original Maturity Date. The Fourth Amendment, which the Company entered into on October 31, 2023, extended the maturity date to March 31, 2025, or New Maturity Date , and revised the principal payments to monthly principal payments starting in October 2024 on the remaining principal balance of $ 35.0 million. During the three months ended September 30, 2023, the Company made no quarterly principal payments under the Term Loans. During the nine months ended September 30, 2023, the Company made quarterly principal payments under the Term Loans totaling $ 24.0 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. Akebia Therapeutics, Inc. | Form 10-Q | Page 14 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS If the Company prepays the loan prior to the New Maturity Date, it will be required to make a prepayment fee of 0.50 % of such prepayment amount. A change of control, which includes a new entity or group owning a majority (greater than 50%) of the Company's voting stock, triggers a mandatory prepayment of the Term Loans. The obligations of the Company and Keryx under the Loan Agreement 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. The Loan Agreement contains various affirmative and negative covenants, including that limit the Company's ability to engage in specified types of transactions and require the Company to maintain one or more controlled cash accounts. In addition, the Loan Agreement, as amended, requires the Company to (i) report quarterly minimum net Auryxia sales for the trailing twelve-month period of $ 85.0 million, (ii) in certain instances maintain an annual minimum liquidity threshold and (iii) not be subject to any qualification as to going concern in its Annual Reports on Form 10-K. If an event of default occurs, including a qualification as a going concern, 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 September 30, 2023 and December 31, 2022, the Company was in compliance with the covenants under the Pharmakon Loan Agreement. The Company concluded the contingent put and call features that could require mandatory repayment upon the occurrence of an event of default, default interest rates to be payable and certain other events represent an embedded derivative required to be bifurcated from the debt host instrument and accounted for separately and re-measured at fair value on a quarterly basis. The fair value of the embedded debt derivative related to the Company’s Loan Agreement with Pharmakon was $ 0.8 million on September 30, 2023 and December 31, 2022. During the nine months ended September 30, 2023, there was no change in fair value of the embedded debt derivative. During the nine months ended September 30, 2022, we recognized a $ 1.1 million gain in other (expense) income in the consolidated statements of operations and comprehensive loss related to the decrease in the fair value of the embedded debt derivative. See Note 12 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for further details. 11. CAPITAL STOCK, STOCK-BASED COMPENSATION AND BENEFIT PLAN 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 September 30, 2023, the authorized capital stock of the Company included 350,000,000 shares of common stock, $ 0.00001 par value per share, of which 188,313,807 and 184,135,714 shares were issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; and 25,000,000 shares of undesignated preferred stock, $ 0.00001 par value per share, of which no shares were issued and outstanding as of September 30, 2023 and December 31, 2022. At-the-Market Facility On April 7, 2022, the Company entered into an Open Market Sale Agreement, or Sales Agreement , with Jefferies LLC, or Jefferies, as agent, for the offer and sale of common stock at current market prices in amounts to be determined from time to time. Also, on April 7, 2022, 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 this Quarterly Report on Form 10-Q, the Company has not sold any shares of its common stock under this program. Terminated 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 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. On February 25, 2021, the Company filed a prospectus relating to the Prior Sales Agreement with its new shelf registration statement (which replaced the prior shelf registration statement and the sales agreement prospectus supplement), 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. 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 Akebia Therapeutics, Inc. | Form 10-Q | Page 15 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 0.8 million. Stock-Based Compensation and Benefit Plans The Company incurred stock-based compensation expenses of $ 1.8 million and $ 7.8 million for the three and nine months ended September 30, 2023, respectively, and $ 3.4 million and $ 14.8 million for the three and nine months ended September 30, 2022, respectively. Equity Incentive Plans The following table contains information about our equity plans: September 30, 2023 Title of Plan Group Eligible Type of Award Granted (or to be Granted) Awards Outstanding Additional Awards Authorized for Grant Keryx Equity Plans (1)(2) * Employees, directors and consultants Stock options and RSUs 284,556 — Akebia Therapeutics, Inc. Amended and Restated 2008 Equity Incentive Plan ( the 2008 Plan ) (2) Employees, directors and consultants Stock options and RSUs 419 — Akebia Therapeutics, Inc. 2014 Incentive Plan, as amended (2) (3) ( the 2014 Plan ) (replaces 2008 Plan) Employees, directors, consultants and advisors Stock options, RSUs, SARs and performance awards 17,033,234 — Akebia Therapeutics, Inc. 2023 Stock Incentive Plan (3) ( the 2023 Plan ) (replaces 2014 Plan) Employees, officers, directors, consultants and advisors Stock options, SARs, restricted stock, unrestricted stock, RSUs, performance awards, other share-based awards and dividend equivalents 1,558,500 16,169,791 (1) The Keryx Equity Plans consist of the Keryx Biopharmaceuticals, Inc. 1999 Share Option Plan, Keryx Biopharmaceuticals, Inc., as amended, the 2004 Long-Term Incentive Plan, as amended, the Keryx Biopharmaceuticals, Inc. 2007 Incentive Plan, the Keryx Biopharmaceuticals Inc. Amended and Restated 2013 Incentive Plan and the Keryx Biopharmaceuticals, Inc. 2018 Equity Incentive Plan. (2) Shares are no longer being issued under these plans. (3) Includes inducement awards that are subject to the terms and conditions of the applicable plan but were granted as inducement awards consistent with Nasdaq Listing Rule 5635(c)(4): 2,035,832 options outstanding under the 2014 Plan and 653,000 options outstanding under the 2023 Plan. Common Stock Options and SARs During the nine months ended September 30, 2023, the Company issued 2,489,500 options to employees under the 2014 Plan and 315,000 options to directors under the 2023 Plan. During the nine months ended September 30, 2023, the Company issued 635,313 SARs to one executive under the 2014 Plan. 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 and SARs 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 and SARs 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 and SARs generally expire 10 years after the date of grant. The Company also maintains an inducement award program with a share pool that is separate from the Company's equity plans under which inducement awards may be granted consistent with Nasdaq Listing Rule 5635(c)(4). During the nine months ended September 30, 2023, the Company granted 704,000 options to purchase shares of the Company’s common stock to new hires as inducements to such employees' entering into employment with the Company, of which 701,000 options remained outstanding as of September 30, 2023. The Company grants annual service-based stock options to employees and directors and SARs to certain executives under the 2023 and 2014 Plans. In addition, the Company issues stock options to directors, new hires and occasionally to other employees not in connection with the annual grant process. During the nine months ended September 30, 2023, the Akebia Therapeutics, Inc. | Form 10-Q | Page 16 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Company granted options not in connection with the annual grant process with an aggregate grant date fair values of $ 1.2 million calculated using the Black-Scholes option-pricing model. The fair value of stock options that vested during the nine months ended September 30, 2023 was $ 5.3 million. The combined stock option activity for the nine months ended September 30, 2023, is as follows: Stock Options Weighted Average Exercise Price Weighted-Average Remaining Contractual Life (years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 11,775,411 $ 5.82 7.26 years — Granted 4,143,813 $ 0.83 — — Expired ( 5,989 ) $ 7.43 Canceled and forfeited ( 1,299,122 ) $ 5.82 — — Outstanding at September 30, 2023 14,614,113 $ 4.40 7.17 years $ 2,345 Exercisable at September 30, 2023 8,215,979 $ 6.52 5.80 years Performance Awards The performance-based stock options granted by the Company generally vest in connection with the achievement of specified commercial, regulatory and corporate milestones. The performance-based stock options also generally feature a time-based vesting component. 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 also grants performance-based restricted stock units, or PSUs , to employees under the 2023 Plan and the 2014 Plan. The PSUs granted by the Company generally vest in connection with the achievement of specified commercial, regulatory and corporate milestones. The PSUs also generally feature a time-based vesting component. 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 did not issue any performance-based stock options under the 2023 Plan or the 2014 Plan during the nine months ended September 30, 2023. Restricted Stock Units Generally, restricted stock units, or 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 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 grant-date fair value of the RSUs is recognized as expense on a straight-line basis. The Company determines the fair value of the RSUs based on the closing price of the common stock on the date of the grants. RSU activity is as follows: 2014 Plan 2023 Plan Number of Shares Weighted Average Fair Value Number of Shares Weighted Average Fair Value Outstanding as of December 31, 2022 5,674,406 $ 2.10 — — Granted 2,759,675 $ 0.68 590,500 $ 1.50 Vested ( 3,971,168 ) $ 1.02 — — Forfeited and canceled ( 790,817 ) $ 1.05 — — Outstanding as of September 30, 2023 3,672,096 $ 1.31 590,500 $ 1.50 Akebia Therapeutics, Inc. | Form 10-Q | Page 17 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2023, there was $ 4.0 million of unrecognized compensation costs related to time-based RSUs which is expected to be recognized over a weighted-average period of 1.75 years. Employee Stock Purchase Plan On June 6, 2019, the Company's stockholders approved the Amended and Restated 2014 Employee Stock Purchase Plan, or ESPP . Under the ESPP substantially all employees may voluntarily enroll to purchase shares of the Company’s common stock through payroll deductions at a price equal to 85 % of the lower of the fair market values of the stock as of the beginning or the end of the six-month offering period. An employee's payroll deductions under the ESPP are limited to 15 % of the employee's compensation, and an employee may not purchase more than $ 25,000 worth of stock during any calendar year. In addition, an employee may not purchase more than 1,500 shares in any offering period. As of September 30, 2023, a total of 4,637,801 shares of the Company’s common stock are available for future issuance under the ESPP. The Company issued 200,194 shares under the ESPP during the nine months ended September 30, 2023. Stock-Based Compensation Expense The Black-Scholes option pricing model is used to estimate the fair value of the stock options. The weighted-average assumptions used in calculating the fair values of the rights to acquire stock under the 2023 Plan, the 2014 Plan and inducement awards were as follows: Three Months Ended September 30, Nine Months Ended September 30, Stock Options 2023 2022 2023 2022 Risk-free interest rate 4.08 % - 4.55 % 2.68 % - 3.96 % 3.54 % - 4.55 % 1.69 % - 3.96 % Expected volatility 102.41 % - 107.01 % 87.34 % - 88.92 % 100.97 % - 111.71 % 79.77 % - 91.57 % Expected term (years) 6.25 years - 6.25 years 6.25 years - 6.25 years 5.51 years - 6.25 years 5.51 years - 6.25 years Expected dividend yield — % — % — % — % Fair value at grant date $ 1.38 $ 0.26 $ 0.69 $ 1.19 The Company has classified stock-based compensation in its condensed consolidated statement of operations and comprehensive loss as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Cost of goods sold $ 74 $ 227 $ 214 $ 386 Research and development 403 644 1,604 2,579 Selling, general and administrative 1,135 2,534 5,355 8,590 Restructuring 212 ( 50 ) 630 3,253 Total stock-based compensation $ 1,824 $ 3,355 $ 7,803 $ 14,808 12. COMMITMENTS AND CONTINGENCIES Cambridge 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, or, collectively, the Cambridge Lease . Under the Third Amendment to the Cambridge Lease, or Third Amendment , executed in July 2016, total monthly lease payments under the initial base rent were approximately $ 0.2 million and are subject to annual rent escalations. In addition to such annual rent escalations, base rent 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 (Fifth Amendment) for an additional 19,805 square feet of office space on the 12th 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 $ 0.1 million 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 (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. Akebia Therapeutics, Inc. | Form 10-Q | Page 18 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 renewal option in this real estate lease was not included in the calculation of the right-of-use asset and operating lease liability 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 option in this real estate lease was included in the calculation of the right-of-use assets and operating lease liabilities as the renewal is reasonably certain. The lease agreements do not contain residual value guarantees. Operating lease costs were $ 1.2 million and $ 1.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 4.4 million and $ 5.4 million for the nine months ended September 30, 2023 and 2022, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.4 million and $ 1.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 4.5 million and $ 5.5 million for the nine months ended September 30, 2023 and 2022, respectively. The security deposit in connection with the Cambridge Lease is $ 1.6 million in the form of a letter of credit, which is included as restricted cash in prepaid expenses and other current assets in the Company’s unaudited condensed consolidated balance sheets as of September 30, 2023. The Company has not entered into any material short-term leases or financing leases as of September 30, 2023. Former Boston Lease Previously, the Company leased 27,924 square feet of office space in Boston, Massachusetts, or Boston Lease . In February 2022, the Company entered into the First Amendment to the Boston Lease, or First Lease Amendment, to extend the term of the Boston Lease from February 2023 to July 2031. The First Lease Amendment included five months of free rent starting in March 2023 and monthly lease payments of $ 0.2 million commencing on August 1, 2023, with an annual rent escalation of approximately 2 % commencing on August 1, 2024. In May 2023, the Company entered into an Assignment and Assumption of Lease Agreement, or Lease Assignment Agreement, with LG Chem Life Sciences Innovation Center, Inc., or LG Chem , pursuant to which the Company assigned all of its rights, title, and interest in, to, and under the Boston Lease to LG Chem, or the Assignment . As part of the Lease Assignment Agreement, the Company made a payment to LG Chem of $ 1.3 million, or Lease Assignment Amount, and LG Chem assumed all of the rights and obligations of the Company under the Boston Lease. Subsequent to the Assignment, the Company has no further obligations for rent or other payments under the Boston Lease. In accordance with ASC 842, Leases, the Company 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 Assignment Amount as a loss on lease termination in the condensed consolidated statement of operations and comprehensive loss of $ 0.5 million during the three and six months ended June 30, 2023. Under the terms of the Lease Assignment Agreement the Company was entitled to, and received back, its security deposit of $ 1.0 million as of June 30, 2023, which had been recorded as restricted cash in prepaid expenses and other current assets in the Company's condensed consolidated balance sheet as of December 31, 2022. In September 2019, the Company entered into an agreement to sublease the Boston office space to Foundation Medicine, Inc., or Foundation . The sublease was subject and subordinate to the Boston Lease between the Company 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 was obligated to pay the Company rent that approximated the rent due from the Company to its landlord with respect to the Boston Lease. Sublease rental income is recorded to other income in the condensed consolidated statement of operations and other comprehensive loss. The Company was obligated for all payment terms pursuant to the Boston Lease, and the Company guaranteed the obligations under the sublease. The Company did not record any sublease rental income for the three months ended September 30, 2023 and recorded $ 0.3 million in sublease rental income from Foundation during the nine months ended September 30, 2023. The Company recorded sublease rental income of $ 0.5 million and $ 1.4 million during the three and nine months ended September 30, 2022, respectively. Future Lease Commitments Future commitments under non-cancelable lease agreements are as follows: Akebia Therapeutics, Inc. | Form 10-Q | Page 19 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Years ending December 31, Operating Lease Commitments Remainder of 2023 $ 1,421 2024 5,741 2025 5,819 2026 3,613 Total lease commitments $ 16,594 Less: present value adjustment ( 1,501 ) Current and long-term operating lease liabilities $ 15,093 In arriving at the operating lease liabilities, the Company applied incremental borrowing rates ranging from 6.65 % to 6.94 %, 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 September 30, 2023, the remaining lease term for the Cambridge Lease was 2.95 years. Manufacturing and Unconditional Purchase Commitment Agreements The Company's contractual obligations include a commercial supply agreement with Siegfried Evionnaz SA, or Siegfried, to supply commercial drug substance for Auryxia. Pursuant to the Master Manufacturing Services and Supply Agreement between the Company and Siegfried, as amended (the most recent amendment having been executed on February 28, 2023), or Siegfried Agreement , the Company has agreed to purchase a minimum quantity of drug substance of Auryxia at a predetermined price. The term of the Siegfried Agreement expires on December 31, 2024, unless otherwise agreed by the parties and subject to the Company's option to extend the term through December 31, 2026 by providing 12 months’ prior written notice to Siegfried. The Siegfried Agreement provides the Company and Siegfried with certain early termination rights. As of September 30, 2023, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $ 18.1 million through the end of 2024. On April 9, 2019, the Company and Esteve entered into the Esteve Agreement, which 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 Esteve Assignment Agreement, pursuant to which the Supply Agreement between the Company and Esteve was assigned to MTPC. The Esteve 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 Esteve Agreement. On March 11, 2020, the Company entered into a Supply Agreement with Patheon Inc., or Patheon, or the Patheon Agreement , under which Patheon will manufacture vadadustat drug product for commercial use under a volume-based pricing structure through June 30, 2025, renewing annually unless either party gives the other party eighteen months ' prior written notice. Pursuant to the Patheon Agreement, the Company has agreed to purchase from Patheon a certain percentage of the estimated global demand for vadadustat drug product based on certain quarterly and annual forecasts provided by the Company. As of September 30, 2023, the Company had no minimum commitments with Patheon, however, as estimated global demand fluctuates, the Company may have future obligations under the Patheon Agreement. 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 , as amended on April 15, 2021, or 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 September 30, 2023, the Company has committed to purchase $ 14.9 million of vadadustat drug substance from WuXi STA through the second quarter of 2024. Akebia Therapeutics, Inc. | Form 10-Q | Page 20 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 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. Former Manufacturing and Unconditional Purchase Commitments Pursuant to the Manufacture and Supply Agreement with BioVectra and the Amended and Restated 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 as well as reimburse BioVectra for certain costs in connection with construction of a new facility for the manufacture and supply of Auryxia drug substance. On December 22, 2022, the Company and BioVectra entered into a termination agreement, or B ioVectra 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, 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. In addition, 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 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. The amortization of the discount was $ 0.5 million and $ 1.4 million for the three and nine months ended September 30, 2023, respectively. 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 $ 45.4 million at September 30, 2023. 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 The Company is involved from time to time in various legal proceedings arising in the normal course of business. 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. Changes in the Company’s estimates could have a material impact and are recorded as litigation progresses and new information comes to light. Although the outcomes of potential legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations or cash flows. Akebia Therapeutics, Inc. | Form 10-Q | Page 21 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Guarantees and Indemnifications As permitted under Delaware law, the Company may indemnify its officers, directors and employees for certain events or occurrences that happen by reason of their relationship with, or position held at, the Company. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions. The Company maintains director and officer liability insurance coverage that is intended to cover a portion of amounts that may be due with respect to indemnification after a deductible is met. Further, the Company is a party to a variety of agreements in the ordinary course of business under which it may be obligated to indemnify third parties with respect to certain matters. For the three and nine months ended September 30, 2023 and 2022, the Company did not experience any losses related to these indemnification obligations, and no claims were outstanding as of September 30, 2023. The Company does not have any claims related to these indemnification obligations and consequently concluded that the fair value of these obligations is negligible and no related accruals were recorded. 13. NET LOSS PER SHARE Potentially dilutive securities, common stock options, RSUs and SARs have been excluded from the calculation of diluted net loss per share as their effects would be anti-dilutive. For periods in which the Company reports a net loss, the weighted average number of shares outstanding used to calculate both basic and diluted net loss per share were the same except for the three months ended September 30, 2022, as the Company had net income for that period. 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: Three Months Ended September 30, 2023 2022 Outstanding common stock options and SARs 14,214,113 11,844,609 Unvested RSUs 4,662,596 6,971,930 Total 18,876,709 18,816,539 14. SUBSEQUENT EVENTS The Company has completed an evaluation of all subsequent events after the balance sheet date of September 30, 2023, through the filing date of this Quarterly Report on Form 10-Q with the SEC, to ensure that the condensed consolidated financial statements include appropriate disclose of events both recognized in the consolidated financial statements as of September 30, 2023, and events which occurred subsequently but were not recognized in the consolidated financial statements. The Company has concluded that no subsequent events have occurred that require disclosure other than the amendment to the Company's Loan Agreement as disclosed in Note 10. ****** Akebia Therapeutics, Inc. | Form 10-Q | Page 22 Table of Contents Akebia Therapeutics, Inc. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations 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 as amended by Amendment No. 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 . In addition to historical information, the following discussion and analysis contains forward-looking statements that reflect our plans, estimates, beliefs and explanations that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. Business Overview We are a fully integrated biopharmaceutical company committed to addressing patients’ unmet needs. Since our initial public offering in 2014, we have built a business focused on developing and commercializing innovative therapeutics that we believe serve as a foundation for future growth. Our purpose is to better the life of each person impacted by kidney disease, and we have established ourselves as a leader in the kidney community. We believe our demonstrated ability to deliver value broadly to the kidney community has enabled us to build a sustainable company. While our current focus centers on people living with kidney disease, we believe our continued commitment to our products and pipeline assets, focusing on all patients who can realize a meaningful benefit from our medicines, will result in delivering value for our shareholders. Our current portfolio includes: • 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, the United Kingdom, Switzerland, Australia and Taiwan 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. We continue to pursue approval for vadadustat in the U.S., and in September 2023, we completed our resubmission to our New Drug Application, or NDA , for the treatment of anemia due to CKD for dialysis dependent patients to the U.S. Food and Drug Administration, or FDA . In October 2023, the FDA acknowledged that the resubmission was complete, classified it as a Class 2 response and set a user fee goal date, or PDUFA Date , of March 27, 2024. Further, we have several lifecycle management and indication expansion opportunities currently under evaluation or in development for vadadustat. • HIF-PH inhibitors in preclinical development. The discovery of hypoxia-inducible factor, or HIF , laid the foundation to explore the central role of oxygen sensing in many diseases. As we have seen through the development of vadadustat as a treatment for anemia due to CKD, when stabilized, HIF triggers wide-ranging adaptive, protective responses during hypoxic or ischemic conditions. Our clinical team and research scientists are eager to further develop HIF-PH inhibitors for various indications, including acute kidney injury, or AKI , and retinopathy of prematurity, or ROP . We continue to explore additional commercial and development opportunities to expand our pipeline and portfolio of novel therapeutics through both internal research and external innovation to leverage our fully integrated team. Auryxia Today, we market Auryxia in the U.S. with our well-established, nephrology-focused commercial organization. Auryxia is a non-calcium, non-chewable, orally administered tablet approved for marketing by the 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 23 Table of Contents Vadadustat We are seeking regulatory approval in the U.S. for vadadustat as an oral treatment of anemia in adult DD-CKD patients. 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 applies to all 27 European Union member states and Iceland, Norway and Liechtenstein. 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 was subsequently approved in May 2023 in the UK, by the Medicines and Healthcare Products Regulatory Agency, in June 2023 in Switzerland by the Swiss Agency for Therapeutic Products and in September 2023 in Australia by the Therapeutic Goods Administration, or TGA . 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. Vadadustat is also approved in Japan as a treatment for anemia due to CKD in both DD-CKD and NDD-CKD patients under the trade name Vafseo, and is marketed and sold in Japan by our collaborator Mitsubishi Tanabe Pharma Corporation, or MTPC . Additionally, in September 2023, vadadustat was approved in Taiwan by the Taiwan Food and Drug Administration under the trade name Vafseo for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis. MTPC plans to commercialize vadadustat in Taiwan. Additionally, vadadustat is approved in Korea as an anemia treatment for patients with CKD on hemodialysis. We submitted an NDA to the FDA for vadadustat in March of 2021. On March 29, 2022, the FDA issued a complete response letter, or CRL , to our NDA for vadadustat. The FDA concluded that the data in the NDA did not support a favorable benefit-risk assessment of vadadustat for dialysis and non-dialysis patients. The FDA expressed safety concerns, noting failure to meet non-inferiority in MACE in the non-dialysis patient population, the increased risk of thromboembolic events driven by vascular access thrombosis in dialysis patients and the risk of drug-induced liver injury. We believe there are compelling data supporting a positive benefit-risk profile for the use of vadadustat broadly in patients with CKD, including non-dialysis patients, though we have always remained cautious about receiving a broad label for vadadustat that extends to non-dialysis patients with anemia due to CKD. 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 the 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 September 2023, we completed our resubmission to our NDA for vadadustat for the treatment of anemia due to CKD for dialysis dependent patients. In October 2023, the FDA acknowledged that the resubmission was complete, classified it as a Class 2 response and set a PDUFA date of March 27, 2024. 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 provide additional license and product revenue. However, these future decisions and transactions are not contemplated in our current operating plan and are outside of our control. 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. We believe this potential applies to vadadustat as well as other preclinical assets we are internally developing. Regarding broader uses of vadadustat, in July 2020, we partially funded an investigator-sponsored clinical trial conducted by The University of Texas Health Science Center at Houston, or UTHealth , in Houston, Texas, evaluating the use of vadadustat as a potential therapy to prevent and treat acute respiratory distress syndrome, or ARDS , in adult patients who have been hospitalized due to COVID-19 and hypoxemia (O2 saturation ≤94%). The study was a phase 2, randomized, double-blind, placebo-controlled trial that measured the proportion of patients who had scores of 6, 7, or 8 on the National Institute of Allergy and Infectious Disease Ordinal Scale, or NIAID-OS , at Day 7 and Day 14, with Day 14 being the primary endpoint. While the study missed the primary endpoint, the data detailed in the Clinical Development Program section were encouraging. For reference, subjects receiving vadadustat demonstrated a 94% probability for conferring benefit on the NIAID-OS at Day 14, slightly below the primary superiority threshold of >95% probability. We believe hypoxia-inducible factors, or HIFs , have the Akebia Therapeutics, Inc. | Form 10-Q | Page 24 Table of Contents potential to prevent the worsening of ARDS more broadly since the mechanism underlying the benefits is not specific to COVID-19, and we will further explore HIFs in an acute care indication. Manufacturing and Clinical Development/Use of Third Parties We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. We utilize third parties to distribute our products to our customers. Additionally, we currently utilize contract research organizations, or CROs , to carry out our clinical development activities. 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. Factors Affecting Our Performance and Results of Operations We believe that our performance and future success depend on many factors that present significant opportunities for us, but also pose risks and challenges, including those discussed more fully under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Financial Components Product and Collaboration Revenue We generate 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 judgment and estimates of discounts, rebates and product 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 net 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 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 include fees 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 and personnel-related costs, including salaries and bonuses, employee benefits and stock-based compensation attributable to employees in a particular function and associated direct with our commercial products. On December 12, 2018, we merged 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. 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 September 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, bonuses, benefits and stock-based compensation expenses for employees engaged in research and development functions; • expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials; • the cost of acquiring, developing and manufacturing clinical trial materials through CMOs; • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies; • costs associated with preclinical, clinical and regulatory activities; and Akebia Therapeutics, Inc. | Form 10-Q | Page 25 Table of Contents • costs associated with the pre-launch inventory build for vadadustat in the United States and Europe, for which we received the CRL from the FDA in the United States in March 2022. Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. We cannot determine with certainty the duration and completion costs of current or future clinical trials of Auryxia and vadadustat or if, when, or to what extent we will receive marketing approval for vadadustat or generate revenue from the commercialization and sale of vadadustat, if approved. We may fail to achieve marketing approval for vadadustat. The duration, costs and timing of clinical trials and development of Auryxia and vadadustat will depend on various factors including, but not limited to, those described in Part II, Item 1A. Risk Factors. A change in the outcome of any of these variables with respect to the development of Auryxia and vadadustat could mean a significant difference in the costs and timing associated with that development. For example, if the FDA, the European Medicines Agency, 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 September 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. Our direct research and development expenses consist principally of external costs, such as fees paid to clinical trial sites, consultants, central laboratories and CROs in connection with our clinical trials, and drug substance and drug product manufacturing for clinical trials. In 2020, we completed our global Phase 3 clinical program for vadadustat, to which the majority of our historical research and development costs are attributable. A significant portion of our research and development costs have been external costs, which we track on a program-by-program basis. These external costs include fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to acquiring and manufacturing clinical trial materials. Our internal research and development costs are primarily personnel-related costs, depreciation and other indirect costs. We do not track our internal research and development expenses on a program-by-program basis, as they are deployed across multiple projects under development. The following table summarizes our external research and development expenses by program, as well as costs not allocated to programs, for the three and nine months ended September 30, 2023 and 2022 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Vadadustat external costs $ 2,297 $ 14,517 $ 16,154 $ 43,430 Other programs external costs 2,769 3,840 8,668 15,280 Total external research and development expenses 5,066 18,357 24,822 58,710 Internal personnel, consulting, facilities & other costs 8,264 9,671 28,392 39,178 Total research and development expenses $ 13,330 $ 28,028 $ 53,214 $ 97,888 Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our commercial personnel, including our field sales force and other commercial support personnel, as well as personnel in executive and other administrative or non-research and development functions. Other selling, general and administrative expenses include facility-related costs, fees for directors, 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 26 Table of Contents Financial Highlights Product revenue in the first nine months of 2023 has declined by approximately 8% to $117.1 million from $126.7 million in the first nine months of 2022, primarily due to decreases in product volume partially offset by price increases. We have incurred net losses in each year since inception. Our net losses were $14.5 million and $54.1 million for the three months ended September 30, 2023 and 2022, respectively. Our net losses were $52.5 million and $88.2 million for the nine months ended September 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. Recent Events International Approval of vadadustat In September 2023, we were granted approval for Vafseo (vadadustat) by Australia's Therapeutic Goods Administration and the Taiwan Food and Drug Administration for the treatment of symptomatic anemia associated with CKD in adults on chronic maintenance dialysis. Submission of NDA with FDA for vadadustat In September 2023, we completed our resubmission to our NDA for vadadustat for the treatment of anemia due to CKD for dialysis dependent patients. In October 2023, the FDA acknowledged that the resubmission to the NDA for vadadustat as a treatment for anemia due to CKD in adult patients on dialysis was complete, classified it as a Class 2 response, and set a PDUFA date of March 27, 2024. Vadadustat is currently approved for use in 36 countries. Amendment to Pharmakon Loan Agreement See Debt Financing and Covenants Below and Note 10, Debt , in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information. 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 our net loss during the nine months ended September 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. 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. 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. Economic Conditions (Impacts of COVID-19 Pandemic) Certain changes 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 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. Item 1A. 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. Akebia Therapeutics, Inc. | Form 10-Q | Page 27 Table of Contents Results of Operations The tables and discussion below present the results for the periods indicated and the three months ended September 30, 2022 have been updated to reflect the errors revised in prior periods and as described in more detail in Note 1 in the Notes to the Consolidated Financial Statements found in Part II, Item 8 of our Annual Report on Form 10-K/A: Comparison of the Three Months Ended September 30, 2023 and 2022 Three Months Ended September 30, Change (dollars in thousands) 2023 2022 $ % Revenues Product revenue, net $ 40,118 $ 41,989 $ (1,871) (4) % License, collaboration and other revenue 1,928 6,725 (4,797) (71) % Total revenues 42,046 48,714 (6,668) (14) % Cost of goods sold Product 8,998 29,270 (20,272) (69) % Amortization of intangible asset 9,011 9,011 — — % Total cost of goods sold 18,009 38,281 (20,272) (53) % Operating expenses Research and development 13,330 28,028 (14,698) (52) % Selling, general and administrative 22,710 31,887 (9,177) (29) % License expense 864 743 121 16 % Restructuring 169 180 (11) * Total operating expenses 37,073 60,838 (23,765) (39) % Loss from operations (13,036) (50,405) 37,369 (74) % Other expense, net (1,453) (2,785) 1,332 (48) % Loss on extinguishment of debt — (906) 906 * Net loss $ (14,489) $ (54,096) $ 39,607 (73) % *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 $40.1 million for the three months ended September 30, 2023, compared to $42.0 million for the three months ended September 30, 2022. The decrease was primarily due to a reduction in volume and the impact of shifting payor mix, partially caused by contracting dynamics and a decline in the phosphate binder market. The decline was partially offset by price increases in January 2023 and July 2023. License, Collaboration and Other Revenue— License, collaboration and other revenue was $1.9 million for the three months ended September 30, 2023, compared to $6.7 million for the three months ended September 30, 2022. 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 under the Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by us and accepted by Esteve. Therefore, MTPC is purchasing some vadadustat directly from Esteve, and the decrease was primarily due to a reduction in revenue from the MTPC Supply Agreement. Cost of Goods Sold - Product— Cost of goods sold was $9.0 million for the three months ended September 30, 2023 compared to $29.3 million for the three months ended September 30, 2022. The decrease of $20.3 million is primarily due to a decrease in a non-cash charge related to the prior liability for excess purchase commitments, 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 three months ended September 30, 2023, as well as a decrease in the volume of sales resulting in a reduction in product costs. 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 Akebia Therapeutics, Inc. | Form 10-Q | Page 28 Table of Contents approximately six years. Amortization of intangible asset during each of the three months ended September 30, 2023 and 2022 was $9.0 million. Research and Development Expenses— Research and development expenses were $13.3 million for the three months ended September 30, 2023, compared to $28.0 million for the three months ended September 30, 2022, a decrease of $14.7 million. The decrease was primarily due to a reduction in spending on vadadustat development, including decreased clinical trial costs, and curtailment of 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 as well as the development of other potential product candidates. Selling, General and Administrative Expenses— Selling, general and administrative expenses were $22.7 million for the three months ended September 30, 2023, compared to $31.9 million for the three months ended September 30, 2022. The decrease of $9.2 million was primarily due to the reduction in headcount related costs, including stock based compensation, as a result of the April and November 2022 reductions in force, benefits realized from the assignment of the Boston Lease in May 2023 and targeted cutbacks in Auryxia marketing and promotional expenses that were offset by some one-time non-recurring expenses. See Note 12, Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information on the assignment of the Boston Lease. License Expenses— License expense related to royalties due to Panion relating to sales of Riona in Japan were $0.9 million and $0.7 million for the three months ended September 30, 2023 and 2022, respectively. Restructuring— Restructuring expenses were $0.2 million for the three months ended September 30, 2023 due to stock compensation expense related to our reductions of our workforce. Restructuring expenses were $0.2 million for the three months ended September 30, 2022 due to one-time termination benefits for severance, healthcare and related benefits related to our reductions of our workforce. Other Expense, Net— Other expense, net, was $1.5 million for the three months ended September 30, 2023, compared to $2.8 million for the three months ended September 30, 2022. The decrease of $1.3 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 $24.0 million offset by nearly a 136 basis point increase in the interest rate since the period ended September 30, 2022. In addition, during the three months ended September 30, 2022 we recorded 1.9 million non-cash interest expense on our liability for the sale of future royalties, and we no longer record interest related to our liability for the sale of future royalties. Loss on Extinguishment of Debt. During the three months ended September 30, 2022, we recorded $0.9 million loss on the extinguishment of debt in connection with the prepayments made on the Term Loans in connection with the Second Amendment and Waiver. Akebia Therapeutics, Inc. | Form 10-Q | Page 29 Table of Contents The tables and discussion below present the results for the periods indicated and the nine months ended September 30, 2022 have been updated to reflect the errors revised in prior periods and as described in more detail in Note 1 in the Notes to the Consolidated Financial Statements found in Part II, Item 8 of our Annual Report on Form 10-K/A: Comparison of the Nine Months Ended September 30, 2023 and 2022 Nine Months Ended September 30, Change (dollars in thousands) 2023 2022 $ % Revenues Product revenue, net $ 117,068 $ 126,670 $ (9,602) (8) % License, collaboration and other revenue 21,359 $ 110,032 (88,673) (81) % Total revenues 138,427 236,702 (98,275) (42) % Cost of goods sold Product 28,452 $ 61,965 (33,513) (54) % Amortization of intangible asset 27,032 27,032 — — % Total cost of goods sold 55,484 88,997 (33,513) (38) % Operating expenses Research and development 53,214 97,888 (44,674) (46) % Selling, general and administrative 74,797 108,693 (33,896) (31) % License expense 2,381 2,323 58 2 % Restructuring 181 14,711 (14,530) * Total operating expenses 130,573 223,615 (93,042) (42) % Operating loss (47,630) (75,910) 28,280 (37) % Other expense, net (4,385) (11,339) 6,954 (61) % Loss on extinguishment of debt — (906) 906 * Loss on termination of lease (524) — (524) * Net loss $ (52,539) $ (88,155) $ 35,616 (40) % *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 $117.1 million for the nine months ended September 30, 2023, compared to net product revenue of $126.7 million for the nine months ended September 30, 2022. The decrease was primarily due to a reduction 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 price increases in January 2023 and July 2023. License, Collaboration and Other Revenue— License, collaboration and other revenue was $21.4 million for the nine months ended September 30, 2023 compared to $110.0 million for the nine months ended September 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 nine 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 nine 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 nine months ended September 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 entered into the Esteve Assignment Agreement, pursuant to which the Esteve Agreement was assigned to MTPC. The Esteve Assignment Agreement transferred the rights and obligations Akebia Therapeutics, Inc. | Form 10-Q | Page 30 Table of Contents of the Esteve Agreement to MTPC, including the obligations under certain purchase orders issued by us and accepted by Esteve. Therefore, MTPC is purchasing some vadadustat directly from Esteve, and the decrease in license, collaboration and other revenue was partially due to a reduction in revenue from the MTPC Supply Agreement. 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 nine months ended September 30, 2023. Cost of Goods Sold - Product . Cost of goods sold was $28.5 million for the nine months ended September 30, 2023, compared to $62.0 million for the nine months ended September 30, 2022. The decrease of $33.5 million is primarily due to a decrease in a non-cash charge related to the prior liability for excess purchase commitments, 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 nine months ended September 30, 2023, as well as a decrease in sales volume resulting in a reduction in product costs. 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 nine months ended September 30, 2023 and 2022 was $27.0 million. Research and Development Expenses— Research and development expenses were $53.2 million for the nine months ended September 30, 2023, compared to $97.9 million for the nine months ended September 30, 2022, a decrease of $44.7 million. The decrease was primarily due to a reduction of vadadustat development expenses of approximately $27.3 million. In addition, research and development expense declined by approximately $17.4 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. 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 $74.8 million for the nine months ended September 30, 2023, compared to $108.7 million for the nine months ended September 30, 2022. The decrease of $33.9 million was primarily due to decreased headcount related costs, including stock based compensation, as a result of the 2022 reductions in force, decreased professional service and consulting expenses and lower marketing and promotional expenses. In addition, rent expense declined due to the assignment of the Boston Lease in May 2023. See Note 12, Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information on the Boston Lease. License Expenses— License expense related to royalties due to Panion relating to sales of Riona in Japan was $2.4 million and $2.3 million for the nine months ended September 30, 2023 and 2022, respectively. Restructuring— Restructuring expenses were $14.7 million for the nine months ended September 30, 2022 that were incurred in connection with our reductions of our workforce in the second quarter of 2022 which reduced our headcount by approximately 42% and impacted all departments, including several members of senior management. Other Expense, Net— Other expense, net, was $4.4 million for the nine months ended September 30, 2023 compared to $11.3 million for the nine months ended September 30, 2022. The decrease of $7.0 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 $24.0 million offset by nearly 136 basis point increase in the interest rate since the period ended September 30, 2022. In addition, we no longer record interest on our liability for the sale of future royalties. 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 loss of $0.5 million during the nine months ended September 30, 2023. Liquidity and Capital Resources As of September 30, 2023 and December 31, 2022, we had cash and cash equivalents of $46.5 million and $90.5 million, respectively, and restricted cash of $1.6 million and $2.7 million, respectively. To date, we have funded our operations principally through product sales, payments received from our collaboration and licensing partners, borrowings under term loans, sales of our common stock, including through our employee stock purchase plan, a working capital payment from CSL Vifor and a royalty transaction. From inception to September 30, 2023, we have raised approximately $813.5 million of net proceeds from the sale of equity, including $519.8 million from various Akebia Therapeutics, Inc. | Form 10-Q | Page 31 Table of Contents 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. We have incurred recurring losses and generated negative cash flow from operations from inception and anticipate net losses and negative operating cash flows for the near future. For the nine months ended September 30, 2023 and 2022, we incurred net operating losses of $52.5 million and $88.2 million, respectively. As of September 30, 2023 and December 31, 2022, we had an accumulated deficit of $1.6 billion. We currently have exclusive rights under a series of patents and patent applications to commercialize Auryxia in the U.S. that protect us from generic drug competition until March 2025. Following loss of exclusivity, or LoE , in the U.S., we may not be able to realize enough product revenue from sales of Auryxia to realize net profits from product sales. We believe the Centers for Medicare & Medicaid Services's, or CMS , decision to include phosphate binders in the dialysis bundle could potentially lead to higher sales of Auryxia after the LoE date than in other LoE scenarios, and plan to work with payors and providers to continue the use of Auryxia beyond LoE. However, Auryxia product sales have not generated, and may not generate, now or following LoE in the U.S, sufficient product revenue to realize net profits from product sales to cover our current or long-term operating costs. We believe our existing cash resources and the cash we expect to generate from product, royalty and license revenues are sufficient to fund our current operating plan for at least twelve months from the date of this filing. However, we may also seek to sell additional private or public equity, enter into new debt transactions, explore potential strategic transactions, or a combination of these approaches. If we raise additional funds by issuing equity securities, our shareholders would experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Additional financing may not be available to us in amounts or on terms acceptable to us, if at all. 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. There can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, or that our cash resources will fund our operating plan for the period of time anticipated by us, or that additional funding will be available on terms acceptable to us, or at all. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves numerous risks and uncertainties, and actual results could vary as a result of a number of factors, many of which are outside our control. We have based this estimate on assumptions that may be substantially different than actual results, and we could utilize our available capital resources sooner than we currently expect. If our operating performance deteriorates significantly from the levels expected in our operating plan or if vadadustat is not approved in the U.S., 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." Debt Financing and Covenants On November 11, 2019, we entered into the Loan Agreement with funds managed by Pharmakon Advisors LP, or Pharmakon , pursuant to which term loans in an aggregate principal amount of $100.0 million were made available to us in two tranches, subject to certain terms and conditions, or the Term Loans . The principal balance under the Term Loans was $43.0 million and $67.0 million as of September 30, 2023 and December 31, 2022, respectively. We are required to pay a variable rate of interest based upon the three-month Secured Overnight Financing Rate, or SOFR , plus 0.30%, plus 7.50%. As of September 30, 2023, the annual interest rate was 11.15% On October 31, 2023, we entered into the Fourth Amendment to Loan Agreement, or Fourth Amendment , with Pharmakon, which removed the SOFR interest cap of 3.35%. In addition, the Fourth Amendment, extended the maturity date from November 11, 2024 to March 31, 2025, or the New Maturity Date . The Fourth Amendment also delayed the payment of additional principal of each Term Loan until October 31, 2024, at which time we will make monthly payments of principal of $5.8 million; provided that, if certain pre-specified events occur, we will (a) make payments of principal of such Term Loans commencing on the Payment Date (as defined in the Loan Agreement) immediately following the occurrence of such event and continuing on a quarterly basis on each Payment Date thereafter through the New Maturity Date and (b) repay, on a specified date on or after July 1, 2024, all unpaid principal that would have been due and payable during the period commencing on the Payment Date immediately following the Fourth Amendment Effective Date and ending on the Payment Date immediately following such date (including all accrued and unpaid interest thereon, if any), as if w had been required to make equal quarterly payments of principal of such Term Loans commencing on the Payment Date immediately following the Fourth Amendment Effective Date. The Pharmakon Term Loans are secured by a first priority lien on certain of our and Keryx's assets, including Auryxia and certain related assets, cash and certain equity interests held by us and Keryx. The Loan Agreement contains various Akebia Therapeutics, Inc. | Form 10-Q | Page 32 Table of Contents affirmative and negative covenants, including that limit our ability to engage in specified types of transactions and require us to maintain one or more controlled cash accounts. In addition, the Loan Agreement, as amended, requires us to (i) report quarterly minimum net Auryxia sales for the trailing twelve-month period of $85.0 million, (ii) in certain instances maintain an annual minimum liquidity threshold and (iii) not be subject to any qualification as to going concern in its the Annual Reports on Form 10-K. If an event of default occurs, including a qualification as a going concern, 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 September 30, 2023, we were in compliance with these covenants. See Note 10, Debt , in the accompanying notes to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information. Other Agreements Accounted for as Debt On February 18, 2022, we entered into a Second Amended and Restated License Agreement, or the Vifor Agreement , with CSL Vifor pursuant to which CSL 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 . The Working Capital Fund amount may fluctuate, and will be repaid to CSL Vifor over time. We have determined the Working Capital Fund itself does not represent an obligation to transfer goods or services to CSL Vifor in the future and thus under ASC606 was recorded as a refund liability. The refund liability is considered a debt arrangement with zero coupon interest and we impute interest on the refund liability at a rate of 15.0% per annum. As of September 30, 2023, the $40.3 million refund liability is classified as a long-term liability based on management's estimated timing of the repayment of the refund liability to Vifor exceeding one-year. Equity and Other Funding Arrangements 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. Also, on April 7, 2022, we filed a prospectus supplement relating to the Sales Agreement, pursuant to which we are able to offer and sell under the Sales Agreement up to $26.0 million of our common stock at current market prices from time to time. From the date of filing of the prospectus supplement through the date of the filing of this Quarterly Report on Form 10-Q, we have not sold any shares of our common stock under this program. Cost-Share Funding As of September 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. 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. We subsequently received an additional $2.2 million in connection with the Packaging Validation Transfer Agreement entered into with Otsuka on April 20, 2023. 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 September 30, 2023, while others are considered future obligations. Our material cash requirements as of September 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 September 30, 2023, other than as disclosed in Note 10, Debt, and Note 12, 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 September 30, 2023, in connection with our leased properties in Cambridge, MA, we had $1.6 million in a letter of credit outstanding. Akebia Therapeutics, Inc. | Form 10-Q | Page 33 Table of Contents 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. Cash Flows The following table provides a summary of cash flow data for each applicable period: Nine Months Ended September 30, NET CASH PROVIDED BY/(USED IN) ( in thousands ): 2023 2022 Operating activities $ (21,076) $ (18,475) Investing activities — (114) Financing activities (23,916) 14,599 Decrease in cash, cash equivalents and restricted cash $ (44,992) $ (3,990) Cash, cash equivalents and restricted cash — beginning of period 93,169 151,839 Cash, cash equivalents and restricted cash — end of period $ 48,177 $ 147,849 Operating Activities Net cash used in operating activities was $21.1 million for the nine months ended September 30, 2023. Net cash used in operating activities consists of a net loss of $52.5 million, adjusted for non-cash items such as amortization of our intangible asset of $27.0 million, stock-based compensation expense of $7.8 million and the effect of changes in working capital. In addition, we had a write-off related to the termination of our Boston Lease of $0.8 million. Net cash used in operating activities was $18.5 million for the nine months ended September 30, 2022. Net cash used in operating activities consists of a net loss of $88.2 million, adjusted for non-cash items such as amortization of intangible asset of $27.0 million, stock-based compensation expense of $14.8 million, non-cash interest and royalty revenue related to the sale of future royalties, write-down of inventory of $10.0 million and the effect of changes in working capital. Investing Activities No net cash was used in investing activities for the nine months ended September 30, 2023. Net cash used in investing activities for the three months ended September 30, 2022 was $0.1 million and was primarily comprised of purchases of equipment. Financing Activities Net cash used in financing activities for the nine months ended September 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 SOFR effective June 30, 2023. As of and for the nine months ended September 30, 2023, the effect of switching from LIBOR to SOFR was not material to our consolidated financial statements. Under the Fourth Amendment , with Pharmakon, the SOFR interest cap of 3.35% was removed. Net cash provided by financing activities for the nine months ended September 30, 2022 was $14.6 million and consisted of net proceeds from a refund liability to a customer of $40.0 million, net proceeds from the issuance of common stock of $7.1 million and proceeds from the sale of stock under our employee stock purchase plan, partially offset by principal payments of debt of $33.0 million. 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. Critical Accounting Estimates and Significant Judgments Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements. On an ongoing basis, we evaluate our Akebia Therapeutics, Inc. | Form 10-Q | Page 34 Table of Contents 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 asset, stock-based compensation expense and income taxes. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. During the nine months ended September 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk. We are exposed to market risk related to changes in interest rates. As of September 30, 2023 and December 31, 2022, we had cash and cash equivalents of $46.5 million and $90.5 million, respectively, consisting primarily of money market mutual funds. Interest rate sensitivity is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our investments are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio. In addition, the Term Loans under our Loan Agreement with Pharmakon are subject to interest rate risk, and the amount due will increase if market interest rates increase. In addition, we are exposed to market risk related to exchange rates. A portion of our revenues for the nine months ended September 30, 2023 was received in royalty payments converted to U.S. dollars based on the net sales of Riona and Vafseo in Japanese yen. Our exchange rate risk arises from such foreign currency net sales. As a result, we are exposed to movements in the exchange rates of the Japanese yen against the U.S. dollar. For the royalty payments we received based on net sales of Riona and Vafseo in Japan for the nine months ended September 30, 2023, a 5.0% appreciation or depreciation of the Japanese yen against the U.S. dollar would have increased or decreased, respectively, our revenues in the nine months ended September 30, 2023 by approximately $0.3 million. We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this foreign currency risk. Item 4. Controls and Procedures. Management’s Evaluation of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, were not effective as of September 30, 2023 due to the material weakness in internal control over financial reporting described below. As previously disclosed in the Company's 2022 Annual Report on Form 10-K/A, in connection with the preparation of its financial statements for the quarter ended June 30, 2023, the Company's management identified a material weakness in its internal control over financial reporting. Specifically, the Company did not appropriately design the controls for the accrual of product returns to capture the return lag based on the Company's customer returns policy for Auryxia, or Product Return Reserve Material Weakness . While this control deficiency did not result in a material misstatement of the Company's consolidated financial statements, there is a reasonable possibility this control deficiency could have resulted in a material misstatement of the Company's annual or interim consolidated financial statements that would not be prevented or detected on a timely basis. Therefore, management concluded this control deficiency constitutes a material weakness. Remediation Efforts of Product Return Reserve Material Weakness Management has taken and plans to continue to take actions to remediate the deficiency in its internal control over financial reporting and implemented new processes, procedures and controls designed to address the underlying causes associated with the material weakness. For example, we are in the process of: (i) implementing and documenting a new methodology and new controls to help to ensure the completeness and accuracy of our product return reserves, (ii) engaging additional third party subject matter Akebia Therapeutics, Inc. | Form 10-Q | Page 35 Table of Contents experts and accounting personnel with accounting principles generally accepted in the U.S., or GAAP , experience specific to product returns accounting and (iii) establishing effective monitoring and oversight controls to help to ensure the completeness and accuracy of our accrued product returns included in our financial statements and related disclosures. As management continues to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address the material weakness. Until the controls have been operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively, the material weakness described above will continue to exist. Changes in Internal Control over Financial Reporting Except for the material weakness as noted in the preceding paragraphs, there have been no changes in the Company's internal control over financial reporting during the three months ended September 30, 2023, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II—OTHER INFORMATION Item 1. Legal Proceedings. Legal Proceedings Relating to Vadadustat Opposition Proceedings Against Akebia In September 2018, Dr. Reddy’s Laboratories Limited filed an opposition to our issued Indian Patent No. 287720 in the Indian Patent Office. On July 26, 2022, Sandoz AG filed an opposition against our issued European Patent No. 3277270 in the European Patent Office. An oral hearing is scheduled for February 6, 2024. On February 13, 2023, FibroGen, Inc., or FibroGen , filed an opposition against our issued European Patent No. 3357911 in the European Patent Office. Proceedings Filed by Akebia Against FibroGen, Inc. Japan In 2018, we and our collaboration partner in Japan, Mitsubishi Tanabe Pharma Corporation, or MTPC , jointly filed a Request for Trial before the JPO to challenge the validity of certain of FibroGen’s HIF-related patents in Japan: JP4845728, JP5474872 and JP5474741. On September 26, 2019, the JPO conducted an invalidation trial for JP5474872 and JP4845728. On November 11, 2019, the JPO conducted an invalidation trial for JP5474741. On April 1, 2022, the JPO issued a final decision for JP4845728, which invalidated all claims except claims directed to the medical use to treat anemia that does not respond to erythropoiesis. On May 18, 2022, the JPO issued a final decision for JP5474741 and JP5474872, which maintained the claims in amended form. In May 2022, MTPC filed revocation lawsuits for the three patents in the Intellectual Property High Court requesting cancellation of the JPO’s decisions. In July 2022, we filed a revocation lawsuit for JP4845728 in the Intellectual Property High Court requesting cancellation of the JPO’s decision. In August 2022, we filed revocation lawsuits for JP5474741 and JP5474872 in the Intellectual Property High Court requesting cancellation of the JPO’s decisions. In September 2022, FibroGen filed a revocation lawsuit for JP4845728 in the Intellectual Property High Court requesting cancellation of the JPO’s decision on the claims that were invalidated. We do not believe the JPO’s decisions will prevent our collaboration partner MTPC from continuing to commercialize vadadustat for the treatment of anemia due to CKD in Japan. United Kingdom On December 13, 2018, we filed Particulars of Claim in the Patents Court of the United Kingdom to challenge the validity of FibroGen’s six HIF-related patents in the UK: the ’823 EP Patent (UK), the ’333 EP Patent (UK), the ’153 EP Patent (UK), the ’155 EP Patent (UK), European Patent (UK) No. 2,289,531, or the ’531 EP Patent (UK), and European Patent (UK) No. 2,298,301, or the ’301 EP Patent (UK) . In May 2019, Astellas Pharma Inc., or Astellas , the exclusive licensee of FibroGen’s HIF-related patents, sued Akebia for patent infringement in the Patents Court of the UK. In September 2019, we filed an Amended Particulars of Claim to include FibroGen’s European Patent No. 1487472, or the ’472 EP Patent (UK) . On February 28, 2020, the parties agreed to dismiss the ’472 EP Patent (UK) from the trial. A trial was conducted in March 2020. On April 20, 2020, the Patents Court of the UK issued a judgment in favor of Akebia, which invalidated all the claims at issue in each of the ’823 EP Patent (UK), the ’333 EP Patent (UK), the ’153 EP Patent (UK), the ’155 EP Patent (UK) and the ’301 EP Patent (UK). The ’531 EP Patent (UK) was amended to a single claim to recite one specific compound; this claim was held to be valid but not infringed by vadadustat. On June 11, 2020, FibroGen and Astellas appealed the Patents Court’s judgment on the invalidity of the ’823 EP Patent (UK), the ’301 EP Patent (UK), the ’333 EP Patent (UK), the ’153 EP Patent (UK), and the ’155 EP Patent (UK) in the Court of Appeal (Civil Division). On June 8, 2021 - June Akebia Therapeutics, Inc. | Form 10-Q | Page 36 Table of Contents 10, 2021, the United Kingdom Court of Appeal held a three-day hearing for the appeal. On August 24, 2021, the Court of Appeal issued a judgment, which reversed the Patents Court’s judgment on the invalidity of the ’823 EP Patent (UK) and maintained certain claims of the ’823 EP Patent (UK) and the ’301 EP Patent (UK) in amended form, and which affirmed the Patents Court’s judgment on the invalidity of the ’333 EP Patent (UK), the ’155 EP Patent (UK), and the ’153 EP Patent (UK). Akebia sought permission to appeal to the UK Supreme Court, which was granted on October 3, 2022. Hearing for the appeal is scheduled for March 5-7, 2024. We do not expect the UK Court of Appeal’s judgment to have any effect on our commercialization of vadadustat in the UK because the patents expired in December 2022. Legal Proceedings Relating to Auryxia ANDA Litigation In February 2023, Keryx Biopharmaceuticals, Inc., or Keryx , received a Paragraph IV certification notice letter regarding an Abbreviated New Drug Application, or ANDA , submitted to the U.S. Food and Drug Administration, or FDA , by Zydus Worldwide DMCC requesting approval for a generic version of Auryxia tablets (210 mg ferric iron per tablet). On March 24, 2023, Keryx and Panion & BF Biotech, Inc., or Panion , filed a complaint for patent infringement against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc., and Zydus Lifesciences Limited, or collectively Zydus , in the Delaware District Court arising from Zydus’ ANDA filing with the FDA. On May 30, 2023, Keryx and Panion entered into a settlement and license agreement with Zydus, which resolved the patent litigation brought by Keryx and Panion. Such settlement and license agreement, consistent with Keryx’s prior ANDA settlements, granted Zydus a license to market a generic version of Auryxia in the United States beginning on March 20, 2025 (subject to FDA approval), or earlier under certain circumstances customary for settlement agreements of this nature. Additionally, in accordance with the settlement and license agreement, the parties terminated all ongoing litigation among Keryx, Panion and Zydus regarding Auryxia patents pending in the Delaware District Court. The settlement and license agreement is confidential and subject to review by the U.S. Federal Trade Commission and the U.S. Department of Justice. On June 5, 2023, the Delaware District Court entered a stipulation and order of dismissal filed by the parties to terminate the action against Zydus. Stockholder Litigation Relating to the Merger On June 28, 2018, we entered into an Agreement and Plan of Merger with Keryx and Alpha Therapeutics Merger Sub, Inc., or the Merger Sub, pursuant to which the 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. On July 15, 2021, a purported former Keryx stockholder filed a putative class action in the Supreme Court of the State of New York against Akebia, a current officer of Akebia (John P. Butler), a former officer of Akebia (Jason A. Amello), former directors of Akebia (Muneer A. Satter, Scott A. Canute, Michael D. Clayman, Maxine Gowen, Duane Nash, Ronald C. Renaud, Jr., and Michael S. Wyzga), a current director of Akebia (Cynthia Smith), a former director and officer of Keryx (Jodie P. Morrison), a former officer of Keryx (Scott A. Holmes) and former directors of Keryx (Michael Rogers, Kevin J. Cameron, Steven C. Gilman, Daniel P. Regan, Mark J. Enyedy, and Michael T. Heffernan, some of whom are current members of our Board of Directors). The action is captioned Loper v. Akebia Therapeutics, Inc., et al., or the Loper Action . The complaint in the Loper Action alleges that the registration statement filed in connection with the Merger contained allegedly false and misleading statements or failed to disclose certain allegedly material information in violation of Section 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended. It alleges, among other things, that Akebia failed to disclose heightened safety risks that allegedly threatened the prospects of the Phase 3 PRO2TECT clinical trial and the commercial viability of vadadustat. The complaint in the Loper Action seeks damages including interest thereon, an award of plaintiffs’ and the class’s costs and expenses, including counsel fees and expert fees, and rescission, disgorgement, or such other equitable or injunctive relief that the Court deems appropriate. On August 16, 2021, another purported former Keryx stockholder filed a putative class action making substantially similar allegations and asserting the same claims as the Loper Action, also in the Supreme Court of the State of New York against Akebia and many of the same individual defendants named in the Loper Action. The action is captioned Panicho v. Akebia Therapeutics, Inc., et al., or the Panicho Action . On September 13, 2021, the parties in the Loper Action and Panicho Action entered into a joint stipulation and proposed order, which provided for the consolidation of the two actions under the caption In re Akebia Therapeutics, Inc. Securities Litigation, or the Consolidated State Action . On October 27, 2021, plaintiffs filed a consolidated complaint in the Consolidated State Action. On January 10, 2022, defendants moved to dismiss the consolidated complaint in its entirety. Briefing on defendants’ motion to dismiss was completed on April 22, 2022. Oral argument was held on October 7, 2022, and the Court dismissed the complaint without prejudice on October 17, 2022, giving plaintiffs thirty days to amend their complaint. On November 16, 2022, plaintiffs filed an amended consolidated complaint, asserting the same claims and seeking the same relief as the consolidated complaint. On January 18, 2023, defendants moved to dismiss the amended consolidated complaint in its entirety. Briefing on defendants’ motion to dismiss the amended consolidated complaint was completed on April 5, 2023. Oral argument is currently scheduled to be held on January 12, 2024. Akebia Therapeutics, Inc. | Form 10-Q | Page 37 Table of Contents We deny any allegations of wrongdoing and intend to continue vigorously defending against the one active stockholder lawsuit described in this Legal Proceedings section, the Consolidated State Action. There is no assurance, however, that we will be successful in the defense of this action, or any associated appeals, or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of this action. Moreover, we are unable to predict the outcome or reasonably estimate a range of possible losses at this time. A resolution of the Consolidated State Action in a manner adverse to us, however, could have a material effect on our financial position and results of operations in the period in which the action is resolved. Item 1A. Risk Factors. We face a variety of risks and uncertainties in our business. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also become important factors that affect our business, reputation, results of operations, financial condition and stock price which can be materially and adversely affected. If any of the following risks occurs, our business, financial condition, financial statements, results of operations and future growth prospects could be materially and adversely affected. Risks Related to our Financial Position, Need for Additional Capital and Growth Strategy We have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses and cannot guarantee when, if ever, we will become profitable or attain positive cash flows. Investment in pharmaceutical product development and commercialization is highly speculative because it requires upfront capital expenditures and there is significant risk that a product candidate will fail to gain marketing approval or that an approved product will not be commercially viable. Since our inception, we have devoted most of our resources to research and development, including our preclinical and clinical development activities, commercializing Auryxia, and providing general and administrative support for these operations. We have funded our operations principally through product sales, payments received from our collaboration and licensing partners, borrowings under term loans, sales of our common stock, including through our employee stock purchase plan, a working capital payment from CSL Vifor and a royalty transaction. Prior to our merger, or the Merger , with Keryx Biopharmaceuticals, Inc., or Keryx , whereby Keryx became our wholly owned subsidiary, we had no products approved for commercial sale and had not generated any revenue from the sale of products. We are not currently profitable, and we have incurred net losses each year since our inception, including a net loss of $14.5 million for the three months ended September 30, 2023. As of September 30, 2023, we had an accumulated deficit of $1.6 billion. We cannot guarantee when, if ever, we will become profitable. In March 2022, we received a complete response letter, or CRL, from the U.S. Food and Drug Administration, or FDA, regarding our new drug application, or NDA, for vadadustat, our lead investigational product candidate, for the treatment of anemia associated with CKD. The FDA concluded that the data in the NDA do not support a favorable benefit-risk assessment of vadadustat for dialysis and non-dialysis patients. In October 2022, we submitted a Formal Dispute Resolution Request, or FDRR , to the FDA and focused on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult patients on dialysis in light of safety concerns expressed by the FDA in the CRL 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 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 September 2023, we filed our resubmission to our NDA, and in October 2023, the FDA acknowledged that the resubmission was complete and set a user fee goal date, or PDUFA date , of March 27, 2024. There can be no assurances that we will obtain approval for vadadustat in a timely manner, on favorable terms, or at all. As a result, the regulatory approval process for vadadustat in the U.S. is highly uncertain. Even if we are able to obtain approval, the expense and time to do so could adversely impact our ability to successfully commercialize vadadustat or conduct our other business operations, and our financial condition could be materially harmed . Our ability to generate product revenue and achieve profitability depends on the overall success of Auryxia (R) , vadadustat, if approved, and any current or future product candidates, including those that may be in-licensed or acquired, which depends on several factors, including: • obtaining adequate or favorable pricing and reimbursement from private and governmental payors for Auryxia, vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired; • obtaining and maintaining market acceptance of Auryxia, vadadustat, if approved, and any other product candidate, including those that may be in-licensed or acquired; • the size of any market in which Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired, receives approval and obtaining adequate market share in those markets; • the outcome of our resubmission to our NDA to the FDA; Akebia Therapeutics, Inc. | Form 10-Q | Page 38 Table of Contents • the timing and scope of marketing approvals for vadadustat, if approved, and any other product candidate, if approved, including those that may be in-licensed or acquired; • maintaining marketing approvals for Auryxia, vadadustat, if approved, and any other product, including those that may be in-licensed or acquired; • actual or perceived advantages or disadvantages of our products or product candidates as compared to alternative treatments, including their respective safety, tolerability and efficacy profiles, the potential convenience and ease of administration and cost; • maintaining an acceptable safety and tolerability profile of our approved products, including the frequency and severity of any side effects; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies, based, in part, on their perception of our clinical trial data and/or the actual or perceived safety, tolerability and efficacy profile; • establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate supplies of products that are compliant with good manufacturing practices, or GMPs , to support the clinical development and the market demand for Auryxia, vadadustat, if approved, and any other product and product candidate, including those that may be in-licensed or acquired; • current and future restrictions or limitations on our approved or future indications and patient populations or other adverse regulatory actions or in the event that the FDA requires Risk Evaluation and Mitigation Strategies, or REMS , or risk management plans that use restrictive risk minimization strategies; • the effectiveness of our collaborators' and our sales, marketing, manufacturing and distribution strategies and operations; • competing effectively with any products for the same or similar indications as our products; • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents and trade secrets; and • the impact of the recent COVID-19 pandemic on the above factors, including the disproportionate impact of the recent COVID-19 pandemic on CKD patients, the adverse impact on the phosphate binder market in which we compete, and the limitation of our sales professionals to meet in person with healthcare professionals as the result of limitations on access for non-patients. Our revenue also depends on our partners’ ability to successfully market and sell vadadustat and Auryxia in the territories in which they have licensed our products. For example, in May 2023, we entered into a 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 chronic kidney disease in the European Economic Area, or the EEA , the United Kingdom, Switzerland and Australia, or Medice Territory . If Medice’s launch of vadadustat in the Medice Territory is delayed or their sales are lower than anticipated, we may not receive the revenue that we expect from Medice on the timing anticipated, or at all. In addition, under the Second Amended and Restated License Agreement that we entered into with CSL Vifor, in February 2022, or the Vifor Agreement , we granted CSL Vifor an exclusive license to sell vadadustat to Fresenius Medical Care North America and its affiliates, including Fresenius Kidney Care Group LLC, to certain third-party dialysis organizations approved by us, to independent dialysis organizations that are members of group purchase organizations, and to certain non-retail specialty pharmacies in the United States, which represents a significant portion of the market for vadadustat. If vadadustat is approved, but CSL Vifor is not successful in commercializing vadadustat in a timely manner, or at all, our revenue related to vadadustat will be impacted. Our ability to achieve profitability also depends on our ability to manage our expenses. Following receipt of the CRL, in April and May 2022, we implemented a reduction of our workforce, by approximately 42% across all areas of the Company (47% inclusive of the closing of the majority of open positions), including several members of management. In November 2022, we also implemented a reduction of our workforce, by approximately 14% consisting of individuals within our commercial organization as a result of our decision to shift to a strategic account management focused model for our commercial efforts. We recorded a restructuring charge of approximately $15.9 million in the year ended December 31, 2022 primarily related to contractual termination benefits including severance, non-cash stock-based compensation expense, healthcare and related benefits. The reductions in workforce could impact our operations, including our commercialization of Auryxia, which could affect our ability to generate revenue. Additionally, we may incur additional costs not currently contemplated due to events associated with or resulting from the workforce reductions or other operating expenses, including additional costs related to vadadustat and selling, general and administrative expenses. We expect to continue to incur additional operating expenses, including additional research and development expenses related to our pipeline, additional costs related to vadadustat, and research and development and selling, general and Akebia Therapeutics, Inc. | Form 10-Q | Page 39 Table of Contents 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 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 product revenue, collaboration revenue, and our ability to obtain additional funding. In addition, 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 our resubmission to our NDA, and any other product or product candidate, including those that may be in-licensed or acquired; • 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, and any other product, including those that may be in-licensed or acquired; • manufacture Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired, for commercial sale and clinical trials; • conduct discovery and development activities for additional product candidates or platforms that may lead to the discovery of additional product candidates; • engage in transactions, including strategic, merger, collaboration, acquisition and licensing transactions, pursuant to which we would market and develop commercial products, or develop and commercialize other product candidates and technologies; • continue to repay, and pay any associated pre-payment penalties, if applicable, the senior secured term loans in an aggregate principal amount of $43.0 million, or the Term Loans , as of September 30, 2023, that were made available to us pursuant to the Loan Agreement; • make royalty, milestone or other payments under our license agreements and any future license agreements; • maintain, protect and expand our intellectual property portfolio; • make decisions with respect to our personnel, including the retention of key employees; • make decisions with respect to our infrastructure, including to support our operations as a fully integrated, publicly traded biopharmaceutical company; and • experience any additional delays or encounter issues with any of the above. We have and will continue to expend significant resources on our legal proceedings, as described above under Part II, Item 1. Legal Proceedings, or any other legal proceedings brought by or against us in the future. Because of the numerous risks and uncertainties associated with pharmaceutical product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses. The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter, the progress of our clinical development and our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline. We will continue to incur substantial expenditures relating to continued commercialization and post-marketing requirements for Auryxia and vadadustat, if we are able to obtain marketing approval for vadadustat, and any other products, including those that may be in-licensed or acquired, as well as costs relating to the research and development of any other product candidate, including those that may be in-licensed or acquired. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency, or the EMA , or other regulatory authorities, or if we otherwise believe it is necessary, to change our manufacturing processes or assays, to amend or replace our study protocols, to perform studies different from or larger than those currently planned, to conduct any additional clinical trials, whether in order to obtain approval or as a post-approval study, including any additional clinical trial that we decide to conduct for vadadustat, if there are any delays in completing our clinical trials or if there are further delays in or issues with obtaining marketing approval for vadadustat in the United States or other jurisdictions. In addition, our ability to generate revenue would be negatively affected if the size of our addressable patient population is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we sought or the patient population for treatment is narrowed by competition, physician choice, coverage or reimbursement, or payor or treatment Akebia Therapeutics, Inc. | Form 10-Q | Page 40 Table of Contents guidelines. Even though we generate product revenue from Auryxia and royalties from Riona and Vafseo in Japan, may generate royalties from Vafseo in Europe and other territories where it is approved, and may generate revenue and royalties from the sale of any products that may be approved in the future, including those that may be in-licensed or acquired, we may never generate revenue and royalties that are significant enough for us to become and remain profitable, and we may need to obtain additional funding to continue to fund our operating plan. We may require substantial additional financing to achieve our goals. A failure to obtain this necessary capital when needed, or on acceptable terms, could force us to delay, limit, reduce or terminate our product development or commercialization efforts. As of September 30, 2023, our cash and cash equivalents were $46.5 million. We expect to continue to expend substantial amounts of cash for the foreseeable future as we continue to commercialize Auryxia; pursue approval for vadadustat in the U.S. with the FDA; and develop and commercialize any other product or product candidate, including those that may be in-licensed or acquired. These expenditures will include costs associated with research and development, manufacturing, potentially obtaining marketing approvals and marketing products approved for sale. In addition, other unanticipated costs may arise. Because the outcomes of our current and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amount of funding necessary to successfully complete clinical development for any current or future product candidates, including the outcome of our NDA resubmission, or to complete post-marketing studies for Auryxia and vadadustat, if approved. Our future capital requirements depend on many factors, including: • the scope, progress, results and costs of conducting clinical trials or any post-marketing requirements or any other clinical trials for Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired; • the cost and timing of commercialization activities, including product manufacturing, marketing, sales and distribution costs, for Auryxia, vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired; • the results of our meetings with the FDA, the EMA and other regulatory authorities and any consequential effects, including on timing of and ability to obtain and maintain marketing approval, study design, study size and resulting operating costs; • any difficulties or delays in conducting our clinical trials, or enrolling patients in our clinical trials, for Auryxia, vadadustat or any other product candidates; • the outcome of our efforts to obtain marketing approval for vadadustat in the United States and in other jurisdictions and any other product candidates, including those that may be in-licensed or acquired, including any additional clinical trials or post-approval commitments imposed by regulatory authorities; • the timing of, and the costs involved in obtaining, marketing approvals for vadadustat, including in the United States and certain other markets, and any other product candidate, including those that may be in-licensed or acquired, including to fund the preparation, filing and prosecution of regulatory submissions; • the costs of maintaining marketing approvals for Auryxia or any other product, including those that may be in-licensed or acquired; • the number of generic versions of Auryxia that enter the market following loss of exclusivity for Auryxia in March 2025, and the timing of, and the magnitude of, the impact on the product revenue from Auryxia, including the impact on the price of Auryxia; • the cost of securing and validating commercial manufacturing for any of our product candidates, including those that may be in-licensed or acquired, and maintaining our manufacturing arrangements for Auryxia and vadadustat or any other product, including those that may be in-licensed or acquired, or securing and validating additional arrangements; • the costs involved in preparing, filing and prosecuting patent applications and maintaining, defending and enforcing our intellectual property rights, including litigation costs, and the outcome of such litigation; • the costs involved in any legal proceedings to which we are a party; • our status as a publicly traded company on the Nasdaq Capital Market; • our decisions with respect to personnel; • our decisions with respect to infrastructure; and • the extent to which we engage in transactions, including strategic, merger, collaboration, acquisition and licensing transactions, pursuant to which we could develop and market commercial products, or develop other product candidates and technologies. Akebia Therapeutics, Inc. | Form 10-Q | Page 41 Table of Contents We may need to obtain substantial additional funding to fund our operating plan. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. For example, in connection with the Fourth Amendment to the Loan Agreement with Pharmakon, we agreed to remove the 3.35% cap on the Secured Overnight Financing Rate, thus potentially increasing the interest rate that we will pay on the Term Loans. We failed to timely file our Quarterly Report on Form 10-Q for the three months ended June 30, 2023, or the Second Quarter 10-Q . When we file our Annual Report on Form 10-K for the year ending December 31, 2023, or the 2023 Form 10-K , such filing will serve as an update of our current Registration Statement on Form S-3, or the Current Form S-3 , for purposes of Section 10(a)(3) of the Securities Act and Rule 401(b) promulgated under the Securities Act. Because of our failure to timely file the Second Quarter 10-Q, we will not be eligible to file or use a Registration Statement on Form S-3, including the Current Form S-3, after we file our 2023 Form 10-K. At such time, if we have not already done so, we will be required to cease the at-the-market offering contemplated by the April 7, 2022 prospectus supplement and accompanying prospectus (to the extent such at-the-market offering has not already been terminated) and in no event later than March 31, 2024. This may make it more difficult for us to conduct a public offering of our securities. We believe our existing cash resources and cash we expect to generate from product, royalty and license revenue are sufficient to fund our current operating plan through at least the next twelve months from the filing of this Quarterly Report on Form 10-Q. However, if our operating performance deteriorates significantly from the levels expected in our operating plan, or if vadadustat is not approved in the U.S., it would affect our liquidity and our ability to continue as a going concern in the future. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves numerous risks and uncertainties, and actual results could vary as a result of a number of factors, many of which are outside our control. We have based this estimate on assumptions that may be substantially different than actual results, and we could utilize our available capital resources sooner than we currently expect. In addition, if we fail to satisfy any of the covenants under our Loan Agreement with Pharmakon, including the covenant that our Annual Report on Form 10-K for the fiscal year ending December 31, 2023 not be qualified as to going concern, and the loan is accelerated, or if certain pre-specified events occur and we are required to make principal payments to Pharmakon sooner than we currently anticipate, we may not have sufficient resources to fund our operating plan through the next twelve months. There can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, or that our cash resources will fund our operating plan for the period anticipated by us, or that additional funding will be available on terms acceptable to us, or at all. Any additional fundraising efforts may divert our management’s attention away from their day-to-day activities, which may adversely affect our ability to develop and commercialize Auryxia and any other products or product candidates, including vadadustat and those that may be in-licensed or acquired, or to continue to seek regulatory approval for vadadustat. Also, additional funds may not be available to us in sufficient amounts or on acceptable terms or at all. In addition, raising funds in the current economic environment may present additional challenges. For example, any sustained disruption in the capital markets from adverse macroeconomic conditions, such as rising inflation, increasing interest rates and slower economic growth or recession, could negatively impact our ability to raise capital, and we cannot predict the extent or duration of such macroeconomic disruptions. If we are unable to raise additional capital in sufficient amounts when needed or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development and/or commercialization of Auryxia and any other products or product candidates, including vadadustat and those that may be in-licensed or acquired, or to take any actions with respect to vadadustat depending on future decisions with respect to vadadustat in the U.S. Any of these events could significantly harm our business, financial condition and prospects. Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product and product candidates on unfavorable terms to us. We expect to finance future cash needs through product revenue and royalty and license revenue, and we may seek to sell public or private equity, enter into new debt transactions, explore potential strategic transactions or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, our fixed payment obligations may increase, any such securities may have rights senior to those of our common stock, and the terms may include liquidation or other preferences and anti-dilution protections that adversely affect the rights of our common stockholders. Additional debt financing, if available, may involve agreements that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, make capital expenditures, declare dividends, acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic transactions, we may have to relinquish valuable rights to our portfolio and future revenue streams, and enter into agreements that would restrict our operations and strategic flexibility. If we raise additional funds through strategic transactions with third parties, we may have to do so at an earlier stage than otherwise would be desirable. In connection with any such strategic transactions, we may be required to relinquish valuable rights to our product and product candidates, future revenue streams or research programs or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds when needed, we may not be able to pursue planned development and commercialization activities and we may need to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Akebia Therapeutics, Inc. | Form 10-Q | Page 42 Table of Contents If we fail to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price of $1.00 per share and timely filing of all periodic financial reports, or risk delisting, which would have a material adverse effect on our business. If we fail to maintain compliance with Nasdaq's continued listing requirements, it could affect our ability to raise capital on acceptable terms, or at all. In the event we are delisted from Nasdaq, the only established trading market for our common stock would be eliminated, and we would be forced to list our shares on the OTC Markets or another quotation medium, depending on our ability to meet the specific listing requirements of those quotation systems. As a result, an investor would likely find it more difficult to trade or obtain accurate price quotations for our shares. Delisting would likely also reduce the visibility, liquidity, and value of our common stock, reduce institutional investor interest in our Company, and may increase the volatility of our common stock. Delisting could also cause a loss of confidence of potential industry partners, lenders, and employees, which could further harm our business and our future prospects. On May 9, 2023, we received a letter from Nasdaq stating that the Company had not regained compliance with the minimum bid price rule during the compliance period and was subject to delisting. On May 22, 2023, we received a letter from the Office of General Counsel of Nasdaq informing us that Nasdaq confirmed that we had regained compliance with the $1.00 per share minimum bid price requirement. On August 11, 2023, we received a notification letter from Nasdaq informing us that since we had not yet filed our Second Quarter 10-Q, we are not in compliance with Nasdaq's listing rule requiring timely filing of all required periodic financial reports with the U.S. Securities and Exchange Commission, or the SEC. On August 30, 2023, we received a letter from the Office of General Counsel of Nasdaq informing us that Nasdaq confirmed that we had regained compliance with Nasdaq's listing rule requiring timely filing of all required periodic financial reports with the SEC. Although the minimum bid price deficiency and Nasdaq periodic reporting requirement matters are now closed, there can be no assurance that we will be able to continue to comply with the Nasdaq continued listing requirements. We may not be successful in our efforts to identify, acquire, in-license, discover, develop and commercialize additional products or product candidates or our decisions to prioritize the development of certain product candidates over others may not be successful, which could impair our ability to grow. Although we continue to focus a substantial amount of our efforts on the commercialization of Auryxia and to pursue approval for vadadustat in the U.S. with the FDA, a key element of our long-term growth strategy is to develop additional product candidates and acquire, in-license, dev elop and/or market additional products and product candidates. Research programs to identify product can didates require substantial technical, financial and human resources, regardless of whether product candidates are ultimately identified. Our research and development programs may initially show promise, yet fail to yield product candidates for clinical development or commercialization for many reasons, including the following: • the research methodology used may not be successful in identifying potential indications and/or product candidates; • we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates; • a product candidate may be shown to have harmful side effects, a lack of efficacy o r other characteristics that indicate that they are unlikely to be drugs that will receive marketing approval and/or achieve market acceptance ; • a product candidate we develop and seek regulatory approval for, including vadadustat, may not be approved by the FDA on a timely basis, or at all; • product candidates we develop may nevertheless be covered by third party patents or other exclusive rights; • the market for a product candidate may change during our program so that the continued development of that product candidate is no longer commercially reasonable; • a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; or • a product candidate may not be accepted as safe and effective by patients, the medical community, or third party payors, if applicable. If any of these events occur, we may be forced to abandon our research and development efforts for one or more of our programs, or we may not be able to identify, discover, develop or commercialize additional product candidates, which may have a material adverse effect on our business. Because we have limited financial and managerial resources, especially as a result of the CRL for vadadustat that we received in March 2022 and the reductions in workforce that we implemented in 2022, we have focused on products, research programs and product candidates for specific indications. As a result, we may forgo or delay pursuit of opportunities with other product candidates or for other indications, or out license rights to product candidates, that later prove to have greater Akebia Therapeutics, Inc. | Form 10-Q | Page 43 Table of Contents commercial potential. For example, as a result of receipt of the CRL and implementation of the reductions in workforce, we delayed certain research activities. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities on a timely basis, or at all. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. Because our internal research capabilities are limited, we may be dependent upon other pharmaceutical and biotechnology companies, academic scientists and institutions, and other researchers to sell or license product candidates, products or technology to us. The success of this strategy depends partly upon our ability to identify, select, and acquire promising product candidates and products. The process of identifying, selecting, negotiating and implementing a license or acquisition of a product candidate or an approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the license or acquisition of a product candidate or an approved product. We have limited resources to identify and execute the acquisition or in-licensing of third party products, businesses, and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. Any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA, the EMA, the Japanese Pharmaceuticals and Medical Devices Agency, or PMDA , or other regulatory authorities, or post-approval testing or other requirements if approved. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot provide assurance that any of our products will be manufactured in a cost effective manner, achieve market acceptance or not require substantial post-marketing clinical trials. Accordingly, there can be no assurance that we will ever be able to identi fy, acquire, in-license or develop suitable additional products or product candidates, which could materially adversely affect our future growth and prospects. We may focus our efforts and resources on potential products, product candidates or other programs that ultimately prove to be unsuccessful. We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates or technologies or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense. As part of our business strategy, we may engage in additional strategic transactions to expand and diversify our portfolio, including through the merger, acquisition or in-license of assets, businesses, or rights to products, product candidates or technologies or through strategic alliances or collaborations, similar to the Merger and our existing and prior collaboration and license arrangements. We may not identify suitable strategic transactions, or complete such transactions in a timely manner, on favorable terms, on a cost-effective basis, or at all. Moreover, we may devote resources to potential opportunities that are never completed or we may incorrectly judge the value or worth of such opportunities. Even if we successfully execute a strategic transaction, we may not be able to realize the anticipated benefits of such transaction and may experience losses related to our investments in such transactions. Integration of an acquired company or assets into our existing business may not be successful and may disrupt ongoing operations, require the hiring of additional personnel and the implementation and integration of additional internal systems and infrastructure, and require management resources that would otherwise focus on developing our existing business. Even if we are able to achieve the long-term benefits of a strategic transaction, our expenses and short-term costs may increase materially and adversely affect our liquidity. Any of the foregoing could have a detrimental effect on our business, results of operations and financial condition. For example, on June 4, 2021, we entered into a license agreement, the Cyclerion Agreement, with Cyclerion Therapeutics Inc., or Cyclerion , pursuant to which Cyclerion granted us an exclusive global license under certain intellectual property rights to research, develop and commercialize praliciguat, an investigational oral soluble guanylate cyclase, or sGC , stimulator. Although we have progressed preclinical studies for praliciguat, we need to do additional work to manufacture product for clinical trials before we can initiate the trials, and when started, we may be unsuccessful in developing praliciguat. If any of the assumptions that we made in valuing the transaction, including the costs or timing of development of, or the potential benefits of, praliciguat, were incorrect, we may not recognize the anticipated benefits of the transaction and our business could be harmed. In addition, future transactions may entail numerous operational, financial and legal risks, including: • incurring substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions; • exposure to known and unknown liabilities, including contingent liabilities, possible intellectual property infringement claims, violations of laws, tax liabilities and commercial disputes; • higher than expected acquisition and integration costs; • difficulty in integrating operations, processes, systems and personnel of any acquired business; • increased amortization expenses or, in the case of a write-down of the value of acquired assets, impairment losses, such as the Auryxia intangible asset impairment in the second quarter of 2020 and corresponding adjustments to the estimated useful life of the developed product rights for Auryxia; Akebia Therapeutics, Inc. | Form 10-Q | Page 44 Table of Contents • impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership; • inability to retain personnel, customers, distributors, vendors and other business partners integral to an in-licensed or acquired product, product candidate or technology; • potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges; • entry into indications or markets in which we have no or limited development or commercial experience and where competitors in such markets have stronger market positions; and • other challenges associated with managing an increasingly diversified business. If we are unable to successfully manage any transaction in which we may engage, our ability to develop new products and continue to expand and diversify our portfolio may be limited. Our business has been and may continue to be, directly or indirectly, adversely affected by the recent COVID-19 pandemic. The recent COVID-19 pandemic has presented a substantial public health and economic challenge around the world and has affected, and may continue to affect, our business, patients, healthcare providers with whom we interact, customers, our contract manufacturing organizations, or CMOs , and other vendors. The full extent to which the recent COVID-19 pandemic and the lasting effects of the pandemic will directly or indirectly impact our business, results of operations and financial condition continues to depend on future developments that are highly uncertain and cannot be accurately predicted, including any resurgences or variants of COVID-19, the actions taken to contain it or treat its impact and the economic and other impacts on local, regional, national and international markets where the healthcare providers with whom we interact, our CMOs, and our other vendors operate. The public health emergency declarations related to COVID-19 ended on May 11, 2023. The FDA ended twenty-two COVID-19-related policies on May 11, 2023 and allowed twenty-two to continue for 180 days. The FDA plans to retain twenty-four COVID-19-related policies with appropriate changes and four whose duration is not tied to the end of the public health emergency. At this point, it is unclear how, if at all, these developments will impact our efforts to develop and commercialize our product candidates. We believe our revenue growth was negatively impacted by the recent COVID-19 pandemic in 2021, 2022 and the first nine months of 2023 primarily as the CKD patient populations that we serve experienced both high hospitalization and mortality rates due to COVID-19, and the pandemic had an adverse impact on the phosphate binder market in which Auryxia competes. Labor shortages and costs have also adversely impacted dialysis providers. These impacts have refocused clinical efforts in addressing bone and mineral disorders like hyperphosphatemia to more acute operational issues to ensure patients receive dialysis treatments and still some patients have been rescheduled or missed treatments due to labor shortages. We believe, this and potentially other factors, led to the reduction in the phosphate binder market, which has not experienced growth since early 2020. While we are unable to quantify the impact of the recent COVID-19 pandemic on future revenues and revenue growth, the recent COVID-19 pandemic and the ongoing impacts from the recent COVID-19 pandemic continue to adversely and disproportionately impact CKD patients and the phosphate binder market; therefore, we expect the impacts from the pandemic to continue to have a negative impact on our revenue growth for the foreseeable future. In addition, several healthcare facilities have previously restricted access for non-patients, including the members of our sales force. For example, DaVita, Inc., or DaVita , which accounts for a significant portion of the dialysis population in the U.S., has previously restricted access to its clinics. As a result, we continue to engage with some healthcare providers and other customers virtually, where possible. The restrictions on our customer-facing employees’ in-person interactions with healthcare providers have, and could continue to, negatively impact our access to healthcare providers and, ultimately, our sales, including with respect to vadadustat, if approved. Recently, such precautionary measures have been relaxed at certain healthcare facilities and, as a result, members of our sales force have resumed in person interactions with certain customers. Nevertheless, some restrictions remain, and more restrictions may be put in place again due to a resurgence in COVID-19 cases, including those involving new variants of COVID-19, which may be more contagious and more severe than prior strains of the virus. Given this uncertain environment and the disproportionate impact of the recent COVID-19 pandemic on CKD patients, we are actively monitoring the demand in the United States for Auryxia and will be for vadadustat, if approved, including the potential for further declines or changes in prescription trends and customer orders, which could have a material adverse effect on our business, results of operations, and financial condition. In addition, the direct and indirect impacts of the pandemic or the response efforts to the pandemic, including, among others, competition for labor and resources and increases in labor, sourcing, manufacturing and shipping costs, may cause disruptions to, closures of or other impacts on our CMOs and other vendors in our supply chain on which we rely for the supply of our products and product candidates. At this time, our CMOs continue to operate at or near normal levels. However, it is possible that the recent COVID-19 pandemic and response efforts may have an impact in the future on our contract manufacturers’ Akebia Therapeutics, Inc. | Form 10-Q | Page 45 Table of Contents ability to manufacture and deliver Auryxia and vadadustat (if approved in the United States and which is currently marketed under the trade name Vafseo by MTPC in Japan and approved in Europe), which may result in increased costs and delays, or disruptions to the manufacturing and supply of our products. These impacts could have a negative effect on our inventory reserves, which could result in an increase in inventory write-offs due to expiry. If we or any of the third parties with whom we engage, including our collaboration partners, vendors, or any of our customers were to experience further shutdowns, delays or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned, and our revenue expectations, could be materially and negatively impacted, which could have a material adverse effect on our business and our financial results. While we are working to mitigate the impacts on our business, we are mindful that many of these risks and the impact to the larger healthcare market are outside of our control. The recent COVID-19 pandemic has, and may continue to, significantly impact the phosphate binder market in which we compete and economies and financial markets worldwide, which could result in adverse effects on our business and operations, impact our ability to raise additional funds and impact the volatility of our stock price and trading in our stock. Even now that the COVID-19 pandemic has been largely contained, we may continue to experience adverse impacts to our business as a result of the adverse impact on the patient population for Auryxia, the decline in the phosphate binder market and any economic recession or depression that has occurred or may occur in the future. Risks Related to our Financial Arrangements Our obligations in connection with the loan agreement with Pharmakon and requirements and restrictions in the loan agreement could adversely affect our financial condition and restrict our operations. We entered into the Loan Agreement with Pharmakon, pursuant to which the Term Loans were made available to us in two tranches. The first tranche of $80.0 million closed on November 25, 2019, and the second tranche of $20.0 million closed on December 10, 2020. See Note 10, Debt , to our condensed consolidated financial statements in Part I, Item 1. Financial Statements of this Quarterly Report on Form 10-Q for additional information regarding our obligations under the Loan Agreement. The Loan Agreement contains affirmative and negative covenants applicable to us and our subsidiaries, including maintaining, on a quarterly basis, a minimum net sales threshold for Auryxia and on an annual basis, in certain instances, a minimum liquidity threshold. In addition, the Loan Agreement contains covenants that our Annual Reports on Form 10-K, must not be subject to any qualification as to going concern. Failure to maintain compliance with these or other covenants would result in an event of default under the Loan Agreement, which could result in enforcement action, including acceleration of amounts due under the Loan Agreement. Additionally, the liabilities under the Loan Agreement will be accelerated, subject to certain exceptions, if we are required to repay to CSL Vifor all or more than a specified amount of the working capital facility established in connection with the Vifor Agreement, as a result of certain terminations of the Vifor Agreement or due to a reduction in the balance of the working capital facility by more than a prespecified amount. The Fourth Amendment to the Loan Agreement extended the maturity date of each Term Loan from November 11, 2024 to March 31, 2025, or the New Maturity Date , and delayed the payment of additional principal of each Term Loan until October 31, 2024, at which time we will make monthly payments of principal. However, if certain pre-specified events occur, we will be required to (a) make payments of principal of such Term Loans commencing on the Payment Date (as defined in the Loan Agreement) immediately following the occurrence of such event and continuing on a quarterly basis on each Payment Date thereafter through the New Maturity Date and (b) repay, on a specified date on or after July 1, 2024, all unpaid principal that would have been due and payable during the period commencing on the Payment Date immediately following the Fourth Amendment Effective Date and ending on the Payment Date immediately following such date (including all accrued and unpaid interest thereon, if any), as if we had been required to make equal quarterly payments of principal of such Term Loans commencing on the Payment Date immediately following the Fourth Amendment Effective Date. In the event there is an acceleration of our and certain of our subsidiaries’ liabilities under the Loan Agreement as a result of an event of default or otherwise, we may not have sufficient funds or may be unable to arrange for additional financing to repay the liabilities or to make any accelerated payments, and Pharmakon could seek to enforce security interests in the collateral securing the Loan Agreement and our guarantee of the Term Loans, which would have a material adverse effect on our business, financial condition and results of operations. The Loan Agreement permits voluntary prepayment at any time in whole or in part, subject to prepayment premiums and make-whole premiums prior to certain dates. We made a voluntary prepayment of $25.0 million, including $0.5 million of prepayment penalties on July 15, 2022, pursuant to the Second Amendment and Waiver. This represented the repayment of $5.0 million of the first tranche and the full $20.0 million of the second tranche. Upon a change of control, mandatory prepayment provisions require us to prepay the principal amount outstanding, the applicable prepayment premium and Akebia Therapeutics, Inc. | Form 10-Q | Page 46 Table of Contents make-whole premium and accrued and unpaid interest. In addition, our obligations in connection with the Loan Agreement could have additional significant adverse consequences, including, among other things: • restricting our activities, including limitations on transferring certain of our assets, engaging in certain transactions, terminating certain agreements, including the Vifor Agreement, incurring certain additional indebtedness, creating certain liens, paying dividends or making certain other distributions and investments; • limiting our flexibility in planning for, or reacting to, changes in our business and our industry; • placing us at a possible competitive disadvantage compared to our competitors who have a smaller amount of debt or competitors with comparable debt at more favorable interest rates; and • limiting our ability to borrow additional amounts for working capital, capital expenditures, research and development efforts, acquisitions, debt service requirements, execution of our business strategy and other purposes. Any of these factors could materially and adversely affect our business, financial condition and results of operations. Our Royalty Interest Acquisition Agreement with HealthCare Royalty Partners IV, L.P. contains various covenants and other provisions, which, if violated, could materially adversely affect our financial condition. On February 25, 2021, we entered into a royalty interest acquisition agreement, or the Royalty Agreement, with HealthCare Royalty Partners IV, L.P., or HCR , pursuant to which we sold to HCR our right to receive royalties and sales milestones for vadadustat, collectively the Royalty Interest Payments, in each case, payable to us under our Collaboration Agreement dated December 11, 2015, or the MTPC Agreement , with Mitsubishi Tanabe Pharma Corporation, or MTPC , 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 . Under the Royalty Agreement, we are required to comply with various covenants, including obligations to take certain actions, such as actions with respect to the Royalty Interest Payments, the MTPC Agreement, our agreement with MTPC for the commercial supply of vadadustat drug product, and our intellectual property. In addition, the Royalty Agreement includes customary events of default upon the occurrence of enumerated events, including failure to perform certain covenants and the occurrence of insolvency events. In the event we violate certain covenants and other provisions, we may not receive sales milestones from HCR even if the applicable sales thresholds are met. Upon the occurrence of an event of default, HCR would have the ability to exercise all available remedies in law and equity, which could have a material adverse effect on our financial condition. Risks Related to Commercialization Our business is substantially dependent on the commercial success of Auryxia and vadadustat, if approved. If we are unable to continue to successfully commercialize Auryxia, our results of operations and financial condition will be materially harmed. Our business and our ability to generate product revenue largely depend on our, and our collaborators’, ability to successfully commercialize Auryxia and vadadustat . Our ability to generate revenue depends on our ability to execute on our commercialization plans, and the size of the market for, and the level of market acceptance of, Auryxia, and vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired. If the size of any market for which a product or product candidate is approved decreases or is smaller than we anticipate, our revenue and results of operations could be materially adversely affected. For example, the phosphate binder market has declined since 2020, which we believe was partially a result of the recent COVID-19 pandemic. In addition, dialysis organizations continue to experience business continuity challenges that arise due to labor constraints and staffing shortages, facility closures and a decline in new patients, all of which could impact the phosphate binder market. If the phosphate binder market does not recover or continues to decline, our revenue from Auryxia could be materially adversely affected. Market acceptance is also critical to our ability to generate significant product revenue. Any product may achieve only limited market acceptance or none at all. If Auryxia, or any of our future products, including vadadustat, if approved , is not accepted by the market to the extent that we expect or market acceptance decreases, we may not be able to generate significant product revenue and our business would be materially harmed. Market acceptance of Auryxia or any other approved product depends on a number of factors, including: • the availability of adequate coverage and reimbursement by, and the availability of discounts, rebates and price concessions from third party payors, pharmacy benefit managers, or PBMs , and governmental authorities; • the safety and efficacy of the product, as demonstrated in clinical trials and in the post-marketing setting; • the prevalence and complications of the disease treated by the product; Akebia Therapeutics, Inc. | Form 10-Q | Page 47 Table of Contents • the clinical indications for which the product is approved and the product label approved by regulatory authorities, including any warnings or limitations that may be required on the label as a consequence of potential safety risks associated with the product; • the countries in which marketing approvals are obtained; • the claims we and our partners are able to make regarding the safety and efficacy of the product; • the success of our physician and patient communications and education programs; • acceptance by physicians and patients of the product as a safe and effective treatment and the willingness of the target patient population to try new therapies and of physicians to prescribe new therapies; • the cost, safety and efficacy of the product in relation to alternative treatments; • the timing of receipt of marketing approvals and product launch relative to competing products and potential generic entrants; • relative convenience and ease of administration; • the frequency and severity of adverse side effects; • favorable or adverse publicity about our products or favorable or adverse publicity about competing products; • the effectiveness of our and our partners’ sales, marketing, manufacturing and distribution strategies and operations; and • the restrictions on the use of the product together with other medications, if any. In addition, our ability to generate net product revenue depends on our ability to control the expenses associated with commercializing a product, including internal expenses, manufacturing costs, rebates, product returns and other adjustments. We do not have control over many of the expenses required to commercialize our products, and if we experience increased expenses, our net product revenue may decrease and we may incur additional expenses. In addition, our net product revenue requires judgement and includes estimates for rebates and product returns, which can fluctuate from quarter-to-quarter and year-over-year. If our net product revenue is lower than anticipated, including as a result of higher expenses, our business could be harmed. If we are unable to maintain or expand, or, if vadadustat is approved, initiate, sales and marketing capabilities or enter into additional agreements with third parties, we may not be successful in commercializing Auryxia, vadadustat, if approved, or any other product candidates that may be approved. In order to market Auryxia and any other approved product, we intend to continue to invest in sales and marketing, which will require substantial effort and significant management and financial resources. We have built a commercial infrastructure and sales force in the United States for Auryxia, our only commercial product. However, following receipt of the CRL, in April and May 2022, we implemented a reduction of our workforce by approximately 42% across all areas of the Company (47% inclusive of the closing of the majority of open positions), including several members of our sales and marketing team and management. In November 2022, we also implemented a reduction of our workforce, by approximately 14% consisting of individuals within our commercial organization as a result of our decision to shift to a strategic account management focused model for our commercial efforts. If the remaining sales and marketing team cannot successfully commercialize Auryxia, or if additional sales and marketing employees decide to leave as a result of the reduction in workforce or otherwise, it could have a material adverse effect on Auryxia revenue and our financial condition. If we obtain regulatory approval to market vadadustat in the U.S., we believe that we can leverage the current commercial foundation for vadadustat in the U.S., but if we are unable to do so successfully this would materially harm our business. Additionally, training a sales force to successfully sell and market a new commercial product is expensive and time-consuming and could delay any commercial launch of such product candidate or distract the sales force from promoting Auryxia. We may underestimate the size of the sales force required for a successful product launch and we may need to expand our sales force earlier and at a higher cost than we anticipated. In 2021 and early 2022, we incurred commercialization expenses for vadadustat that were premature or unnecessary as a result of the receipt of the CRL for vadadustat, and may in the future incur additional commercialization expenses prematurely or unnecessarily if we do not receive marketing approval in the timeframe we expect, or at all. We devote significant effort, in particular, to recruiting individuals with experience in the sales and marketing of pharmaceutical products. Competition for personnel with these skills is significant and retaining qualified personnel with experience in our industry is difficult. Further, our reductions in workforce may further exacerbate these conditions and interfere with our ability to find and retain qualified personnel. As a result, we may not be able to retain our existing Akebia Therapeutics, Inc. | Form 10-Q | Page 48 Table of Contents employees or hire new employees quickly enough to meet our needs. At the same time, we may face high turnover, requiring us to expend time and resources to source, train and integrate new employees. There are risks involved with maintaining our own sales and marketing capabilities, including the following: • potential inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; • potential lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines, especially as a result of the receipt of the CRL for vadadustat; and • costs and expenses associated with maintaining our own sales and marketing organization. I f we are unable to maintain our own sales and marketing capabilities, we will not be successful in commercializing Auryxia, vadadustat, if approved, and any other product candidate that may be approved. Furthermore, if we are unable to maintain our arrangements with third parties with respect to sales and marketing, if we are unsuccessful in entering into additional arrangements with third parties to sell and market our products or we are unable to do so on terms that are favorable to us, or if such third parties are unable to carry out their obligations under such arrangements, it will be difficult to successfully commercialize our product and product candidates, including vadadustat, if approved. For example, if in connection with the Vifor Agreement, we experience difficulties with CSL Vifor, or if CSL Vifor is not successful in commercializing vadadustat, if approved, in a timely manner, or at all, our revenue related to vadadustat will be impacted. Our, or our partners', failure to obtain or maintain adequate coverage, pricing and reimbursement for Auryxia, vadadustat, if approved, or any other future approved products, could have a material adverse effect on our or our collaboration partners’ ability to sell such approved products profitably and otherwise have a material adverse impact on our business. Market acceptance and sales of any approved products, including Auryxia and, if approved, vadadustat, depends significantly on the availability of adequate coverage and reimbursement from third party payors and may be affected by existing and future healthcare reform measures. Governmental authorities, third party payors, and PBMs decide which drugs they will cover, as well as establish formularies or implement other mechanisms to manage utilization of products and determine reimbursement levels. We cannot be sure that coverage or adequate reimbursement will be available for Auryxia, vadadustat, if approved, or any of our potential future products. Even if we obtain coverage for an approved product, third party payors may not establish adequate reimbursement amounts, which may reduce the demand for our product and prompt us to have to reduce pricing for the product. If reimbursement is not available or is limited, we may not be able to commercialize certain of our products. Coverage and reimbursement by a governmental authority, third-party payor or PBM may depend upon a number of factors, including the determination that use of a product is: • a covered benefit under the health plan; • safe, effective and medically necessary; • appropriate for the specific patient; and • cost effective. Obtaining coverage and reimbursement approval for a product from a governmental authority, PBM or a third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. In the United States, there are multiple governmental authorities, PBMs and third-party payors with varying coverage and reimbursement levels for pharmaceutical products, and the timing of commencement of reimbursement by a governmental payor can be dependent on the assignment of codes via the Healthcare Common Procedural Coding System, which codes are assigned on a quarterly basis. Within Medicare, for oral drugs dispensed by pharmacies and also administered in facilities, coverage and reimbursement may vary depending on the setting. CMS, local Medicare administrative contractors, Medicare Part D plans and/or PBMs operating on behalf of Medicare Part D plans, may have some responsibility for determining the medical necessity of such drugs, and therefore coverage, for different patients. Different reimbursement methodologies may apply, and CMS may have some discretion in interpreting their application in certain settings. As an oral drug, Auryxia is covered by Medicare under Part D. However, in September 2018, CMS decided that Auryxia would no longer be covered by Medicare for the treatment of iron deficiency anemia, or IDA, in adult patients with NDD-CKD, or the CMS Decision. While this decision does not impact CMS coverage for the control of serum phosphorus levels in adult patients with DD-CKD, or the Hyperphosphatemia Indication, it requires Part D plan sponsors to impose prior authorization or other steps to ensure that Auryxia is reimbursed only for the Hyperphosphatemia Indication. While we believe that the vast majority of the Medicare prescriptions written for Auryxia today are for the Hyperphosphatemia Indication and therefore will Akebia Therapeutics, Inc. | Form 10-Q | Page 49 Table of Contents continue to be covered by Medicare with prior authorization, the CMS Decision has had and will continue to have an adverse impact on the sales and future growth of Auryxia for the Hyperphosphatemia Indication and the IDA Indication. Medicaid reimbursement of drugs varies by state. Private third-party payor reimbursement policies also vary and may or may not be consistent with Medicare reimbursement methodologies. Manufacturers of outpatient prescription drugs may be required to provide discounts or rebates under government healthcare programs or to certain third-party payors in order to obtain coverage of such products. Additionally, we may be required to enter into contracts with third party payors and/or PBMs offering rebates or discounts on our products in order to obtain favorable formulary status and we may not be able to agree upon commercially reasonable terms with such third party payors or PBMs, or provide data sufficient to obtain favorable coverage and reimbursement for many reasons, including that we may be at a competitive disadvantage relative to companies with more extensive product lines. In addition, third party payors, PBMs and other entities that purchase our products may impose restrictions on our ability to raise prices for our products over time without incurring additional costs. Four distributors, Fresenius Medical Care Rx, McKesson Corporation, Cardinal Health, Inc. and Amerisource Bergen Drug Corporation, in the aggregate, accounted for a significant percentage of our gross revenue during the three months ended September 30, 2023. If we are not able to maintain our arrangements with these key distributors on favorable terms, on a timely basis or at all, or if there is any adverse change in one or more of these distributors’ business practices or financial condition, it would adversely impact the market opportunity for Auryxia, our product revenues and operating results. Furthermore, vadadustat was approved in Japan for the treatment of adult patients with anemia due to CKD and is being marketed by MTPC in Japan under the trade name Vafseo. Pricing and reimbursement strategy is a key component of MTPC’s commercialization plans for Vafseo in Japan. If coverage and reimbursement terms change, MTPC may not be able to, or may decide not to, continue commercialization of Vafseo in Japan. Furthermore, vadadustat was approved in Europe and Australia for the treatment of anemia due to CKD in DD-CKD patients. In Europe, reimbursement is obtained on a country-by-country basis and it is a time consuming process. Medice is working on securing pricing and reimbursement in key markets in Europe, but there is no guarantee of the timing or extent of reimbursement that they will receive, if at all. We currently believe it is likely that vadadustat, if approved, will be reimbursed using the Transitional Drug Add-on Payment Adjustment, or TDAPA , followed by inclusion in the bundled reimbursement model for Medicare beneficiaries, but reimbursement under TDAPA it is subject to review and approval by CMS. For those that obtain dialysis through commercial insurance during the 30-month coordination period or through Medicaid prior to Medicare becoming primary payer after 90 days, patients may access vadadustat through contracts we or CSL Vifor negotiate with third party payors for reimbursement of vadadustat, which would be subject to the risks and uncertainties described above. Additionally, applying for and obtaining reimbursement under the TDAPA is expected to take at least six months following approval, which will affect adoption, uptake and product revenue for vadadustat during that time, and if there are updates to the TDAPA rule that decrease the basis for reimbursement or eligibility criteria during the transition period or if the TDAPA is eliminated, then our profitability may be adversely affected. For example, the Medicare Payment Advisory Commission, or MedPAC, an independent legislative branch advisory body to Congress on issues related to the Medicare program, has recommended that TDAPA not be provided to newly approved drug products considered to fall within “functional categories” for which costs are already accounted for in the bundled reimbursement model, such as for anemia management drugs. Further, if vadadustat is approved in the United States and included in the fixed reimbursement model for a bundle of dialysis services, or the bundle, we would be required to enter into contracts to supply vadadustat to specific dialysis providers, instead of through distributors, which we believe could be challenging. The dialysis market is unique and is dominated by two providers: DaVita and Fresenius Medical Care, which account for a vast majority of the dialysis population in the United States. Under the Vifor Agreement, we granted CSL Vifor an exclusive license to sell vadadustat to Fresenius Medical Care North America and its affiliates, including Fresenius Kidney Care Group LLC, to certain third-party dialysis organizations approved by us, to independent dialysis organizations that are members of group purchase organizations, and to certain non-retail specialty pharmacies in the United States. We refer to Fresenius Medical Care North America and its affiliates, these organizations and specialty pharmacies collectively as the “Supply Group". See Note 4 to our consolidated financial statements in Part I, Item 1. Financial Statements of this Quarterly Report on Form 10-Q for additional information regarding the Vifor Agreement. If vadadustat is approved and we are not able to maintain the Vifor Agreement or enter into a supply agreement with DaVita or other dialysis clinics, or if Vifor is not able to successfully contract with the Supply Group, our business may be materially harmed. Similar to how payor coverage may affect the sales of a product, formulary status within dialysis organizations may affect what products are prescribed within that specific organization. Therefore, if a product is not on a formulary, the prescribers within that organization may be less likely to prescribe that product or may have a difficult time prescribing that product, resulting in less sales. Further, one dialysis organization’s determination to add a product to their formulary does not assure Akebia Therapeutics, Inc. | Form 10-Q | Page 50 Table of Contents that other dialysis organizations will also add the product to theirs. There is always a risk a dialysis organization will not contract with a drug manufacturer for a specific product, resulting in that product not being on that organization’s formulary. If any dialysis organization does not add vadadustat, if approved, to the formulary, our business may be materially harmed. In addition, we may be unable to sell Auryxia or vadadustat, if approved, to dialysis providers on a profitable basis if CMS significantly reduces the level of reimbursement for dialysis services and providers choose to use alternative therapies or look to re-negotiate their contracts with us. Our profitability may also be affected if our costs of production increase faster than increases in reimbursement levels. Adequate coverage and reimbursement of our products by government and private insurance plans are central to patient and provider acceptance of any products for which we receive marketing approval. Existing competitive products may enter into sole source agreements with dialysis providers that impact the ability for new product innovations and new competitors may face price pressure based on existing contracts with dialysis providers. Further, in many countries outside the United States, a drug must be approved for reimbursement before it can be marketed or sold in that country. In some cases, the prices that we intend to charge for our products are also subject to approval. Approval by the EMA or another regulatory authority does not ensure approval by reimbursement authorities in that jurisdiction, and approval by one reimbursement authority outside the United States does not ensure approval by any other reimbursement authorities. However, the failure to obtain reimbursement in one jurisdiction may negatively impact our ability to obtain reimbursement in another jurisdiction. In addition, we plan to rely on a partner to obtain approval by reimbursement authorities outside the United States. Our partners may not be able to obtain such reimbursement approvals on a timely basis, if at all, and favorable pricing in certain countries depends on a number of factors, some of which are outside of our partners' control. In May 2023, we entered into the license agreement with Medice, pursuant to which we granted Medice an exclusive license to develop and commercialize vadadustat for the treatment of anemia in patients with chronic kidney disease in the Medice Territory. If Medice is not able to obtain favorable pricing in the Medice Territory, or if such approvals are delayed, it will effect Medice’s sales of vadadustat in the Medice Territory, which could have an adverse affect on our results of operations. We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do. The development and commercialization of new drugs is highly competitive and subject to rapid and significant technological change. Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the development and commercialization of Auryxia, vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired. Our objective is to continue to commercialize Auryxia and develop and commercialize new products with clinically proven efficacy, convenience, tolerability and/or safety. In many cases, any approved products that we commercialize will compete with existing, market-leading products. Auryxia is competing in the hyperphosphatemia market in the United States with other FDA-approved phosphate binders such as Renagel® (sevelamer hydrochloride) and Renvela® (sevelamer carbonate), both marketed by Sanofi, PhosLo® and Phoslyra® (calcium acetate), marketed by Fresenius Medical Care North America, Fosrenol® (lanthanum carbonate), marketed by Shire Pharmaceuticals Group plc, and Velphoro® (sucroferric oxyhydroxide), marketed by Fresenius Medical Care North America, as well as over-the-counter calcium carbonate products such as TUMS® and metal-based options such as aluminum, lanthanum and magnesium. Most of the phosphate binders listed above are now also available in generic forms. In addition, other agents are in development, including OPKO Health Inc.’s Alpharen™ Tablets (fermagate tablets) and Unicycive’s RenazorbTM (lanthanum dioxycarbonate) or could otherwise enter the market, including Ardelyx, Inc.’s tenapanor (which is approved in the United States for the treatment of adults with irritable bowel syndrome with constipation, and with respect to the control of serum phosphorus in adult patients with CKD on dialysis), that may impact the market for Auryxia. Auryxia is competing in the IDA market in the United States with over-the-counter oral iron, ferrous sulfate, other prescription oral iron formulations, including ferrous gluconate, ferrous fumerate, and polysaccharide iron complex, and intravenous iron formulations, including Feraheme® (ferumoxytol injection), Venofer® (iron sucrose injection), Ferrlicit® (sodium ferric gluconate complex in sucrose injection), Injectafer® (ferric carboxymaltose injection), and Triferic® (ferric pyrophosphate citrate). In addition, other new therapies for the treatment of IDA may impact the market for Auryxia, such as Shield Therapeutics plc's Feraccru® (ferric maltol), which is available in Europe for the treatment of IDA and Accrufer® (ferric maltol), which was launched in the United States for the treatment of IDA in July 2021. Furthermore, Auryxia’s commercial opportunities may be reduced or eliminated if our competitors develop and market products that are less expensive, more effective, safer or offer greater patient convenience than Auryxia. Other companies have product candidates in various stages of preclinical or clinical development to treat diseases and complications of the diseases for which we are marketing Auryxia. In addition, we and Keryx’s licensors, Panion & BF Biotech, Inc., or Panion, and, as applicable, Dr. Hsu, entered into settlement agreements with all but one of the third parties who submitted Paragraph IV certification notice letters regarding Abbreviated New Drug Applications, or ANDAs , submitted to the FDA, pursuant to which Akebia Therapeutics, Inc. | Form 10-Q | Page 51 Table of Contents we granted licenses to market a generic version of Auryxia in the United States beginning in March 2025 (subject to FDA approval), or earlier under certain circumstances customary for settlement agreements of this nature, which may impact our business and results of operation. Drugs that may compete with vadadustat include Epogen® (epoetin alfa) and Aranesp® (darbepoetin alfa), both commercialized by Amgen, Procrit® (epoetin alfa) and Eprex® (epoetin alfa), commercialized by Johnson & Johnson in the United States and Europe, respectively, and Mircera® (methoxy PEG-epoetin beta), commercialized by CSL Vifor in the United States and Roche Holding Ltd. outside of the United States. Further, in February 2023 the FDA approved daprodustat, an oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH , inhibitor marketed as Jesduvroq by GlaxoSmithKline plc, or GSK , in the United States, as a once-a-day treatment of anemia due to CKD in adult patients who have been receiving dialysis for at least four months. We and our partners may also face competition from potential new anemia therapies. There are several other HIF-PH inhibitor product candidates in various stages of development for anemia indications that may be in direct competition with vadadustat if and when they are approved and launched commercially. These candidates are being developed by companies such as FibroGen Inc., or FibroGen, together with its collaboration partners, Astellas Pharma Inc. and AstraZeneca PLC, Japan Tobacco International, or JT, and Bayer HealthCare AG, or Bayer . For example, FibroGen filed an NDA for its product candidate, roxadustat, with the FDA, but the FDA issued a complete response letter indicating the FDA will not approve the NDA in its present form and requested that an additional clinical trial for roxadustat be conducted prior to resubmission of the NDA or additional response to the FDA's complete response letter. In Europe however, roxadustat is approved for the treatment of anemia in patients with CKD. If we obtain approval for vadadustat in the U.S., and roxadustat is also approved by the FDA, then roxadustat will compete with vadadustat. Furthermore, certain companies are developing potential new therapies for renal-related diseases that could potentially reduce injectable erythropoiesis stimulating agent, or ESA, utilization and thus limit the market potential for vadadustat if they are approved and launched commercially. Other new therapies are in development for the treatment of conditions inclusive of renal anemia that may impact the market for anemia-targeted treatment. In Japan, Vafseo, which is approved for both the DD and NDD indications, competes with roxadustat, daprodustat and enarodustat. Roxadustat is approved for the treatment of anemia due to CKD in patients on dialysis, or DD-CKD, and patients not on dialysis, or NDD-CKD. In addition, daprodustat, GSK’s product, and enarodustat, JT’s product, are approved in Japan for the treatment of anemia due to CKD, and molidustat, Bayer HealthCare AG's product, is approved in Japan for the treatment of renal anemia. In China, roxadustat is commercialized for the treatment of anemia of DD-CKD and for the treatment of anemia due to CKD in NDD-CKD patients. A biosimilar is a biologic product that is approved based on demonstrating that it is highly similar to an existing, FDA-approved branded biologic product. The patents for the existing, branded biologic product must expire in a given market before biosimilars may enter that market without risk of being sued for patent infringement. In addition, an application for a biosimilar product cannot be approved by the FDA until 12 years after the existing, branded product was approved under a Biologics License Application, or BLA. The patents for epoetin alfa, an injectable ESA, expired in 2004 in the EU, and the remaining patents expired between 2012 and 2016 in the United States. The introduction of biosimilars into the injectable ESA market in the United States will constitute additional competition for vadadustat if we are able to obtain approval for and commercially launch vadadustat. In the United States, Pfizer’s biosimilar version of injectable ESAs, Retacrit® (epoetin alfa-epbx), was approved by the FDA in May 2018 and launched in November 2018 and several biosimilar versions of injectable ESAs are available for sale in the EU. Many of our potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, recruiting patients and manufacturing pharmaceutical products. Large and established companies such as Amgen, Roche and GSK, among others, compete in the market for drug products to treat kidney disease. In particular, these companies have greater experience and expertise in conducting preclinical testing and clinical trials, obtaining marketing approvals, manufacturing such products on a broad scale and marketing approved products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development and have collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we are developing obsolete. Smaller and other early-stage companies may also prove to be significant competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or marketing approval, or discovering, developing and commercializing competitive products, before, or more effectively than, we do. If we are not able Akebia Therapeutics, Inc. | Form 10-Q | Page 52 Table of Contents to compete effectively against potential competitors, our business will not grow and our financial condition and operations will suffer. The commercialization of Riona and Vafseo in Japan, Vafseo in Europe and other territories where it is approved, and our current and potential future efforts with respect to the development and commercialization of our products and product candidates outside of the United States subject us to a variety of risks associated with international operations, which could materially adversely affect our business . Our Japanese sublicensee, JT, and its subsidiary, Torii Pharmaceutical Co., Ltd., or Torii , commercialize Riona, the trade name for ferric citrate hydrate in Japan, as an oral treatment for the improvement of hyperphosphatemia in patients with CKD, including DD-CKD and NDD-CKD, and for the treatment of adult patients with IDA in Japan. In Japan and certain other countries in Asia, we granted MTPC exclusive rights to commercialize vadadustat, which has been approved and is being marketed by MTPC in Japan under the trade name Vafseo. We also granted Averoa SAS, or Averoa , an exclusive license to develop and commercialize ferric citrate in the EEA, Turkey, Switzerland and the United Kingdom. In 2023, the marketing authorization for vadadustat was approved by the EMA, the United Kingdom Medicines and Healthcare Products Regulatory Agency, or the MHRA , the Swiss Agency for Therapeutic Products, or Swissmedic , and the Australian Therapeutic Goods Administration, or TGA . In May 2023, we entered into the license agreement with Medice, pursuant to which we granted Medice an exclusive license to develop and commercialize vadadustat for the treatment of anemia in patients with chronic kidney disease in the Medice Territory, and we will transfer the marketing authorizations for the Medice Territory to Medice. In addition, we have conducted and in the future plan to conduct clinical trials outside of the United States for Auryxia, vadadustat and any other product or product candidate that may be in-licensed or acquired. As a result of these and other activities, we are or may become subject to additional risks in developing and commercializing Auryxia and vadadustat outside the United States, including, among others: • political, regulatory, compliance and economic developments, weakness or instability that could restrict our ability to manufacture, market and sell our products; • changes in international medical reimbursement policies and programs; • changes in healthcare policies of foreign jurisdictions; • trade protection measures, including import or export licensing requirements and tariffs and our compliance therewith; • our ability to develop or manage relationships with qualified local distributors and trading companies; • diminished protection of intellectual property in some countries outside of the United States; • differing labor regulations and business practices; • compliance with laws, including the U.S. Foreign Corrupt Practices Act, or FCPA , the UK Bribery Act or similar local regulation, the EU General Data Protection Regulation, or GDPR , and similar data protection laws, and tax, employment, immigration and labor laws; • economic weakness, including inflation, increasing interest rates, or political instability in particular foreign economies and markets; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, global pandemics, or natural disasters including earthquakes, typhoons, floods and fires. In addition, we receive revenues from royalty payments converted to U.S. dollars based on net sales of Riona and Vafseo in Japanese yen. The exchange rates between the Japanese yen on the one hand, and the U.S. dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future. Our results of operations could be adversely affected over time by certain movements in exchange rates, particularly if the Japanese yen depreciates against the U.S. dollar. Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations. As and if we continue to expand our commercialization efforts, we may encounter new risks. Akebia Therapeutics, Inc. | Form 10-Q | Page 53 Table of Contents Risks Related to Product Development Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and we will incur additional costs in connection with, and may experience delays in completing, or ultimately be unable to complete, the development of vadadustat and any other product candidates. The risk of failure in drug development is high. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical studies and clinical trials are expensive, difficult to design and implement, can take several years to complete, and their outcomes are inherently uncertain. Failure can occur at any time during the process. We may be unable to successfully complete clinical trials of Auryxia, vadadustat and other product candidates or to successfully obtain approval of vadadustat or other product candidates, if the results of those trials and studies are not positive or are only modestly positive, or if there are concerns with the profile due to efficacy or safety. Further, the results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, interim results of a clinical trial do not necessarily predict final results, and results of Phase 3 clinical trials for one indication may not be predictive of results of Phase 3 clinical trials for another indication. For example, we announced positive top-line results from INNO2VATE and vadadustat achieved the primary and key secondary efficacy endpoint in each of the two PRO2TECT studies, but the PRO2TECT program did not meet the primary major adverse cardiovascular event, or MACE, safety endpoint. Many companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we may face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates. In addition, in March 2022, we received the CRL for vadadustat indicating that the FDA had determined that it could not approve the NDA in its present form, thus delaying any potential approval of vadadustat. In October 2022, we submitted the FDRR to the FDA. In May 2023, the 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 September 2023, we filed our resubmission to our NDA, and in October 2023, the FDA acknowledged that the resubmission was complete and set a PDUFA date of March 27, 2024. However, it is impossible to predict when or if vadadustat or any of our other product candidates will prove effective or safe in humans or will receive marketing approval or on what terms. If we are unsuccessful in obtaining approval for vadadustat in the U.S., it would have an adverse effect on our results of operations. We may experience numerous unforeseen events during, or as a result of, preclinical development or clinical trials that could delay, prevent or make more challenging our ability to receive or maintain marketing approval or commercialize our product candidates. We may be required to complete additional clinical trials for Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired, in order to obtain or maintain required regulatory approvals. Our preclinical studies and clinical trials may take longer to complete than currently anticipated, or may be delayed, suspended, required to be repeated, prematurely terminated or may not successfully demonstrate safety and/or efficacy needed to obtain or maintain regulatory approval for a variety of other reasons, such as: • the costs may be greater than we anticipate; • the number of patients required for clinical trials may be larger than we anticipate; • enrollment in our clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate; • our third party contractors, such as our CROs, may fail to comply with regulatory requirements, perform effectively, or meet their contractual obligations to us in a timely manner, or at all, or we may fail to communicate effectively or provide the appropriate level of oversight of such third party contractors; • the supply or quality of our starting materials, drug substance and drug product necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; • regulators, independent data monitoring committees, or IDMCs , institutional review boards, or IRBs , safety committees, or ethics committees, may require that we suspend or terminate our clinical trials for various reasons, including noncompliance with regulatory requirements, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using our product candidate, or a finding that the participants are being exposed to unacceptable health risks; Akebia Therapeutics, Inc. | Form 10-Q | Page 54 Table of Contents • clinical trials of our product candidates may produce negative or inconclusive results or results that may be interpreted in a manner different than we interpret them, and we may decide, or regulators may require us, to conduct additional clinical trials, repeat a clinical trial or abandon product development programs; • lack of adequate funding to continue a clinical trial, including unforeseen costs due to enrollment delays, requirements to conduct additional clinical trials or repeat a clinical trial and increased expenses associated with the services of our CROs and other third parties; • we may fail to initiate, delay of or failure to complete a clinical trial as a result of an Investigational New Drug application, or IND , being placed on clinical hold by the FDA, the EMA, the PMDA, or other regulatory authorities, or for other reasons, such as failure to recruit or enroll suitable patients or patients' failure to return for post-treatment follow up; • we may determine to change or expand a clinical trial, including after it has begun; • clinical trial sites and investigators deviating from the clinical protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial, or failure by us or our CROs to communicate effectively or provide the appropriate level of oversight of such clinical sites and investigators; • there may be an inability, delay, or failure in identifying and maintaining a sufficient number of clinical trial sites, many of which may already be engaged in other clinical programs; • there may be a delay or failure in reaching agreement with the FDA, the EMA, the PMDA or other regulatory authorities on a clinical trial design upon which we are able to execute; • there may be a delay or failure in obtaining authorization to commence a clinical trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial; • there may be delays in reaching, or failure to reach, agreement on acceptable terms with prospective clinical trial sites and prospective CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • the FDA, the EMA, the PMDA or other regulatory authorities may require us to submit additional data or impose further requirements before permitting us to initiate a clinical trial or during an ongoing clinical trial; • the FDA, the EMA, the PMDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials; • third parties with which we work may fail to comply with good practice quality guidelines and regulations, or GXP , including good laboratory practice, good clinical practice, or GCP , and current good manufacturing practice, or cGMP ; or • there may be changes in governmental regulations or administrative actions. If any of the foregoing occurs, the following may occur: • re gulators may require that we conduct additional clinical trials, repeat clinical trials or conduct other studies beyond those that we currently contemplate; • we may be delayed in obtaining marketing approval for vadadustat or other product candidates; • we may not obtain marketing approval for vadadustat or other product candidates at all; • we may obtain approval for indications or patient populations that are not as broad as intended or desired; • we may obtain approval with labeling that includes significant use or distribution restrictions or safety warnings that would reduce the potential market for any approved product or inhibit our ability to successfully commercialize any approved product; • a REMS or FDA-imposed risk management plan that use risk minimization strategies to ensure that the benefits of certain prescription drugs outweigh their risks, may be required; • we may be subject to additional post-marketing restrictions and/or requirements; or • the product may be removed from the market after obtaining marketing approval. Our product development costs may also increase if we experience development delays or delays in receiving the requisite marketing approvals. Our preclinical studies or clinical trials may need to be restructured or may not be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize vadadustat, if approved, or any other product candidate, including those that may be in- Akebia Therapeutics, Inc. | Form 10-Q | Page 55 Table of Contents licensed or acquired, or allow our competitors to bring products to market before we do. This could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired. Identifying and qualifying patients to participate in clinical trials is critical to our success. The timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate in our clinical trials. Patients may be unwilling to participate in our clinical trials because of concerns about investigational research studies, the time and commitment needed to participate in a study, adverse events observed with the product candidate under study, the current standard of care, competitor products and/or other investigational agents, in each case for the same indications and/or similar patient populations. In addition, in the case of clinical trials of any product candidate, patients currently receiving treatment with the current standard of care or a competitor product may be reluctant to participate in a clinical trial with an investigational drug. Additionally, it is often more difficult to enroll special or particular subpopulations of patients, such as pediatric or elderly patients, due to a number of factors including parental or other caregiver considerations, concerns and burdens. For example, we enrolled sites in a post-approval pediatric study for the Hypophosphatemia Indication of Auryxia in the second quarter of 2022, which began patient recruitment in the third quarter of 2022, but enrollment of eligible pediatric patients in study sites continues to be very slow despite efforts to do so. Furthermore, the recent COVID-19 pandemic resulted in temporary closures of, and may continue to impact, clinical trial sites on which we rely for the conduct of clinical trials and recent COVID-19 pandemic precautions and staffing shortages have caused moderate delays in enrolling new clinical trials and may cause delays in enrolling other new clinical trials. Finally, competition for clinical trial sites may limit our access to patients appropriate for our clinical trials. As a result, the timeline for recruiting patients and conducting studies may be delayed. These delays could result in increased costs, delays in advancing our development of any product or product candidate, or termination of the clinical trial altogether. We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical trials in a timely manner. Patient enrollment is affected by many factors, including: • severity of the disease under investigation; • design of the study protocol; • size and nature of the patient population; • eligibility criteria for, and design of, the study in question, including study complexity; • perceived risks and benefits of the product or product candidate under study, including as a result of adverse effects observed in similar or competing therapies; • proximity and availability of clinical trial sites for prospective patients; • availability of competing therapies and clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the product or product candidate being studied in relation to available therapies or other product candidates in development; • efforts to facilitate timely enrollment in clinical trials; • participation length and demands on patients and caregivers; • site staffing shortages and turnover; • clinical trial sites and investigators failing to perform effectively; and • patient referral practices of physicians. We may not be able to initiate or complete clinical trials in a timely manner, or at all, if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by regulatory agencies. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which may delay approval, or result in failure to maintain or obtain approval, of our products or product candidates, which would have a material adverse effect on our business. F urther, if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted. For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, Congress required sponsors to develop and submit a diversity action plan for each phase 3 clinical trial or any other “pivotal study” of a new drug or biological product. These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products. Akebia Therapeutics, Inc. | Form 10-Q | Page 56 Table of Contents Conducting clinical trials outside of the United States, as we have done historically and as we may decide to do in the future, presents additional risks and complexities and, if we decide to conduct a clinical trial outside of the United States in the future, we may not complete such trials successfully, in a timely manner, or at all, which could affect our ability to obtain regulatory approvals. Our ability to successfully initiate, enroll and complete a clinical trial in any country outside of the United States is subject to numerous additional risks unique to conducting business in jurisdictions outside the United States, including: • difficulty in establishing or managing relationships with qualified CROs, physicians and clinical trial sites; • difficulty in complying with different local standards for the conduct of clinical trials; • difficulty in complying with various and complex import laws and regulations when shipping drug to certain countries; and • the potential burden of complying with a variety of laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatments. Data obtained from studies conducted in the United States may not be accepted by the EMA, the PMDA and other regulatory authorities outside of the United States. Also, certain jurisdictions require data from studies conducted in their country in order to obtain approval in that country. Further, when a foreign clinical trial is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application for marketing approval. Specifically, the studies must be conducted in accordance with GCP, including undergoing review and receiving approval by an independent ethics committee, and seeking and receiving informed consent from subjects. Thus, to the extent that we rely on data from foreign clinical trials that are not the subject of an IND but are used to support of an NDA, there is a risk that FDA may not review such data in connection with its review of the NDA. If we or our collaboration partners have difficulty conducting future clinical trials in jurisdictions outside the United States as planned, we may need to delay, limit or terminate such clinical trials, any of which could have an adverse effect on our business. Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired, may cause undesirable side effects or have other properties that may delay or prevent marketing approval or limit their commercial potential. Undesirable effects caused by, or other undesirable properties of, Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired, or competing commercial products or product candidates in development that utilize a common mechanism of action could cause us or regulatory authorities to interrupt, delay or halt clinical trials, could result in a more restrictive label or the delay, denial or withdrawal of marketing approval by the FDA or other regulatory authorities, and could lead to potential product liability claims. In addition, results of our clinical trials could reveal a high frequency of undesirable effects or unexpected characteristics. For example, in March 2022, we received the CRL from the FDA for our NDA for vadadustat in which the FDA concluded that the data in the NDA do not support a favorable benefit-risk assessment of vadadustat for dialysis and non-dialysis patients. The FDA expressed safety concerns noting failure to meet non-inferiority in MACE in the non-dialysis patient population, the increased risk of thromboembolic events, driven by vascular access thrombosis in dialysis patients, and the risk of drug-induced liver injury. In October 2022, we submitted the FDRR to the FDA and focused on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult patients on dialysis in light of safety concerns expressed by the FDA in the CRL 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 May 2023, the 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 September 2023, we filed our resubmission to our NDA, and in October 2023, the FDA acknowledged that the resubmission was complete and set a PDUFA date of March 27, 2024. There can be no assurances that we will be successful in our NDA resubmission. If we are unable to overcome these concerns, vadadustat may not be approved by the FDA on favorable terms, or at all, and our financial condition could be materially harmed. If we or others identify undesirable effects caused by, or other undesirable properties of, Auryxia, vadadustat, or any other product or product candidate, including those that may be in-licensed or acquired, or if known undesirable effects are more frequent or severe than in the past, or if any of the foregoing are perceived to have occurred, either before or after receipt of marketing approval, a number of potentially significant negative consequences could result, including: • our product candidates may not be approved by regulatory authorities; • our clinical trials may be put on hold; • patient recruitment could be slowed, and enrolled patients may not want to complete the clinical trial; Akebia Therapeutics, Inc. | Form 10-Q | Page 57 Table of Contents • regulatory authorities may require warnings on the label, such as the warning on Auryxia’s label regarding iron overload; • REMS or FDA-imposed risk management plans that use restrictive risk minimization strategies may be required; • we may decide to, or be required to, send drug warnings or safety alerts to physicians, pharmacists and hospitals (or the FDA or other regulatory authorities may choose to issue such alerts), or we may decide to conduct a product recall or be requested to do so by the FDA or other regulatory authority; • reformulation of the product, additional non-clinical or clinical trials, restrictive changes in labeling or changes to or re-approvals of manufacturing facilities may be required; • we may be precluded from pursuing additional development opportunities to enhance the clinical profile of a product within its indicated populations, or studying the product or product candidate in additional indications and populations or in new formulations; and • we could be investigated by the government or sued and held liable for harm caused to patients, including in class action lawsuits; and • our reputation may suffer. Any of these events could prevent us from achieving or maintaining, whether on a restricted basis or at all, marketing approval and, ultimately, market acceptance or penetration of Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired. In addition, any of these events could substantially increase our costs, and could significantly impact our ability to successfully commercialize Auryxia, vadadustat or any other product and product candidate, including those that may be in-licensed or acquired, and generate product revenue. The patient populations treated with Auryxia and potential patient populations for vadadustat, if approved, have CKD, a serious disease that increases the risk of cardiovascular disease including heart attacks and stroke and, in its most severe form, results in, kidney failure and the need for dialysis or kidney transplant. Many patients with CKD are elderly with comorbidities making them susceptible to significant health risks. Therefore, the likelihood of these patients having adverse events, including serious adverse events is high. With respect to the global INNO 2 VATE Phase 3 program, the incidence of treatment emergent adverse events during the Correction and Conversion study in vadadustat treated patients was 83.8% and 85.5% in darbepoetin alfa treated patients. During the study, the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa treated patients were hypertension (16.2%/ 12.9%) and diarrhea (10.1%/ 9.7%). Serious treatment emergent adverse events were lower in vadadustat treated patients at 49.7% compared to 56.5% for darbepoetin alfa treated patients. The incidence of treatment emergent adverse events during the prevalent dialysis patient study ( Conversion ) in the vadadustat treated patients was 88.3%, and 89.3% in darbepoetin alfa treated patients. During the study, the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa treated patients were diarrhea (13.0%/ 10.1%), pneumonia (11.0%/ 9.7%), hypertension (10.6%/ 13.8%), and hyperkalemia (9.0%/ 10.8%). Serious treatment emergent adverse events were slightly lower for vadadustat treated patients at 55.0% and 58.3% for darbepoetin alfa-treated patients. Patients with DD-CKD experienced an increased risk of thromboembolic events compared to darbepoetin alfa with a time to first event HR of 1.20 (95% CI 0.96 - 1.50) driven by thrombosis of vascular access. With respect to the global PRO2TECT Phase 3 program, the incidence of treatment emergent adverse events during the erythropoiesis stimulating agent, or ESA , untreated patients study (Correction) in the vadadustat-treated patients was 90.9%, and 91.6% in darbepoetin alfa-treated patients. During the study, the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa-treated patients were end-stage renal disease (34.7%/ 35.2%), hypertension (17.7%/ 22.1.%), hyperkalemia (12.3.%/ 15.6%), urinary tract infection (12.9%/ 12.0%), diarrhea (13.9%/ 10.0%), peripheral oedema (12.5%/ 10.5%), fall (9.6%/ 10%) and nausea (10%/ 8.2%). Serious treatment emergent adverse events were 65.3% for vadadustat-treated patients and 64.5% for darbepoetin alfa-treated patients. The incidence of treatment emergent adverse events during the ESA-treated patients study (Conversion) in vadadustat treated patients was 89.1% and 87.7% in darbepoetin alfa-treated patients. During the study, the most common treatment emergent adverse events reported in vadadustat/darbepoetin alfa-treated patients were end-stage renal disease (27.5%/ 28.4%), hypertension (14.4%/ 14.8%), urinary tract infection (12.2%/ 14.5%), diarrhea (13.8.%/ 8.8.%), peripheral oedema (9.9%/ 10.1%) and pneumonia (10.0%/ 9.7%). Serious treatment emergent adverse events were 58.5% for vadadustat-treated patients and 56.6% for darbepoetin alfa-treated patients. For example, during the conduct of our Phase 3 program our team and hepatic experts analyzed hepatic cases (unblinded to treatment) and, following the completion of our global Phase 3 clinical program for vadadustat, there was a review of hepatic safety across the vadadustat clinical program, which included eight completed Phase 2 and 3 studies in NDD-CKD patients, 10 completed Phase 1, 2, and 3 studies, and two then-ongoing Phase 3b studies in DD-CKD patients, and 18 completed studies in healthy subjects (17 Phase 1 and one Phase 3). This review consisted of a blinded re-assessment of hepatic events conducted Akebia Therapeutics, Inc. | Form 10-Q | Page 58 Table of Contents by a separate panel of hepatic experts. While hepatocellular injury attributed to vadadustat was reported in less than 1% of patients, there was one case of severe hepatocellular injury with jaundice, and we cannot guarantee that similar events will not happen in the future. Additionally, the FDA expressed safety concerns related to the risk of drug-induced liver injury in the CRL that it issued in March 2022. Serious adverse events considered related to vadadustat, including those noted in the CRL, and any other product candidates could have material adverse consequences on the development and potential approval of vadadustat or our other product candidates and our business as a whole. Our understanding of adverse events in prior clinical trials of our product candidates may change as we gather more information, the FDA may not agree with our assessment of adverse events and additional unexpected adverse events may be observed in future clinical trials or in the market. Any of the above safety data or other occurrences could delay or prevent us from achieving or maintaining marketing approval, harm or prevent sales of Auryxia or, if approved, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired, increase our expenses and impair or prevent our ability to successfully commercialize Auryxia, vadadustat or any other products or product candidates. In addition, any post-marketing clinical trials conducted, if successful, may expand the patient populations treated with Auryxia, vadadustat or any other product we acquire or for which we receive marketing approval, within or outside of their current indications or patient populations, which could result in the identification of previously unknown undesirable effects, increased frequency or severity of known undesirable effects, or result in the identification of unexpected safety signals. In addition, as vadadustat, if approved, and any other products are commercialized, they will be used in significantly larger patient populations, in less rigorously controlled environments and, in some cases, by less experienced and less expert treating practitioners, than in clinical trials, which could result in increased or more serious adverse effects being reported. As a result, regulatory authorities, healthcare practitioners, third party payors or patients may perceive or conclude that the use of Auryxia, vadadustat, if approved, or any other products are associated with serious adverse effects, undermining our commercialization efforts. Risks Related to Regulatory Approval We may not be able to obtain marketing approval for vadadustat or any other product candidate, or we may experience significant delays in doing so, any of which would materially harm our business. Clinical trials, manufacturing and marketing of any product or product candidate are subject to extensive and rigorous review and regulation by numerous governmental authorities in the United States and other jurisdictions. Before obtaining marketing approval for the commercial sale of any product candidate, we must demonstrate through extensive preclinical testing and clinical trials that the product candidate is safe and effective for use in each target indication. This process can take many years and marketing approval may never be achieved. Of the large number of drugs in development in the United States and in other jurisdictions, only a small percentage successfully complete the FDA’s and other jurisdictions’ marketing approval processes and are commercialized. Accordingly, even if we are able to obtain the requisite capital to continue to fund our development efforts, we may be unable to successfully obtain regulatory approval for vadadustat or any other product or product candidate, including those that may be in-licensed or acquired. We are not permitted to market vadadustat in the United States until we receive approval from the FDA or in any other jurisdiction until the requisite approval from regulatory authorities in such jurisdiction is received. As a condition to receiving marketing approval for vadadustat, we may be required by the FDA or other regulatory authorities to conduct additional preclinical studies or clinical trials. In March 2022, we received the CRL from the FDA regarding our NDA for vadadustat for the treatment of anemia due to CKD. The FDA concluded that the data in the NDA do not support a favorable benefit-risk assessment of vadadustat for dialysis and non-dialysis patients. In October 2022, we submitted the FDRR to the FDA and focused on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult patients on dialysis in light of safety concerns expressed by the FDA in the CRL 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 May 2023, the 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 September 2023, we filed our resubmission to our NDA, and in October 2023, the FDA acknowledged that the resubmission was complete and set a PDUFA date of March 27, 2024. There can be no assurances that we will obtain approval for vadadustat in a timely manner, on favorable terms, or at all. As a result, the regulatory approval process for vadadustat in the U.S. is highly uncertain. Even if we are able to obtain approval, it will only be for patients with DD-CKD and, in any event, the expense and time to do so could adversely impact our ability to successfully commercialize vadadustat, and our financial condition could be materially harmed. Akebia Therapeutics, Inc. | Form 10-Q | Page 59 Table of Contents Further, vadadustat and any other product candidate may not receive marketing approval in the United States even if it is approved in other countries. For example, although vadadustat is approved in Japan for the treatment of anemia due to CKD in DD-CKD and NDD-CKD adult patients and in Europe for the treatment of anemia due to CKD in DD-CKD patients, such approval does not guarantee approval in the United States by the FDA for these indications or at all. In addition, while each regulatory authority makes their own assessment as to the safety and efficacy of a drug, FDA’s concern about the safety or efficacy of vadadustat or any other product candidate could impact the regulatory authority’s decision in another country. Obtaining marketing approval in the United States and other jurisdictions for any product candidate depends upon numerous factors, many of which are subject to the substantial discretion of the regulatory authorities, including that regulatory agencies may not complete their review processes in a timely manner and, following completion of the review process, may not grant marketing approval or such marketing approval may be limited. Furthermore, approval of a drug does not ensure successful commercialization. For example, on September 23, 2015, the European Commission, or EC, approved Fexeric for the control of hyperphosphatemia in adult patients with CKD. Pursuant to the sunset clause under EU law, the EC’s approval of Fexeric in the EU was contingent on, among other things, our commencing marketing of Fexeric within three years; although we successfully negotiated an extension to December 23, 2019, we did not commence marketing Fexeric by such date and therefore the Fexeric approval in the EU has ceased to be valid. In addition, the safety concerns associated with the current standard of care for the indications for which we are seeking marketing approval for vadadustat may affect the FDA’s or other regulatory authorities’ review of the safety results of vadadustat. Additionally, these regulatory authorities may not agree with our assessment of adverse events. Further, the policies or regulations, or the type and amount of clinical data necessary to gain approval, may change during the course of a product candidate’s clinical development and may vary among jurisdictions. It is possible that vadadustat will never obtain marketing approval in the United States or certain other jurisdictions or for some or all of the indications for which we seek approval. The FDA or other regulatory authorities may delay, limit or deny approval of vadadustat for many reasons including, among others: • we may not be able to demonstrate that vadadustat is safe and effective in treating adult patients with anemia due to CKD to the satisfaction of the relevant regulatory authority; • the results of our clinical trials may only be modestly positive, or there may be concerns with the profile due to efficacy or safety; • the results of our clinical trials may not meet the level of statistical or clinical significance required by the relevant regulatory authority for review and/or marketing approval; • the relevant regulatory authority may disagree with our interpretation of data from our preclinical studies and clinical trials; • the relevant regulatory authority may disagree with the number, design, size, conduct or implementation of our clinical trials; • the relevant regulatory authority may not approve the formulation, labeling or specifications we request for vadadustat; • the relevant regulatory authority may approve vadadustat or any other product candidate for use only in a small patient population or for fewer or more limited indications than we request; • the relevant regulatory authority may require that we conduct additional clinical trials or repeat one or more clinical trials; • the FDA or other relevant regulatory authority may require development of a REMS as a condition of approval or post-approval; • the relevant regulatory authority may grant approval contingent on the performance of costly post-marketing clinical trials; • the relevant regulatory authority 's onsite inspections may be delayed due to the recent COVID-19 pandemic or otherwise; • we, or our CROs or other vendors, may fail to comply with GXP or fail to pass any regulatory inspections or audits; • we or our third party manufacturers may fail to perform in accordance with the FDA’s or other relevant regulatory authority's cGMP requirements and guidance; • the FDA may disagree with inclusion of data obtained from certain regions outside the United States to support the NDA for potential reasons such as differences in clinical practice from United States standards; Akebia Therapeutics, Inc. | Form 10-Q | Page 60 Table of Contents • the relevant regulatory authority could deem that our financial relationships with certain pr incipal investigators constitute a conflict of interest, such that the data from those principal investigators may not be used to support our applications; • as part of any future regulatory process, the FDA may ask an Advisory Committee to review portions of the NDA, the FDA may have difficulty scheduling an Advisory Committee meeting in a timely manner or, if convened, an FDA Advisory Committee could recommend non-approval, conditions of approval or restrictions on approval, and the FDA may ultimately agree with the recommendations; • the relevant regulatory authority’s review process and decision-making regarding vadadustat and any other product candidate may be impacted by the results of our and our competitors’ clinical trials and safety concerns of marketed products used to treat the same indications as the indications for which vadadustat and any other product candidate are being developed; • the relevant regulatory authority may not approve the manufacturing processes or facilities of third party manufacturers with whom we contract; or • the policies or regulations of the relevant regulatory authority may significantly change in a manner that renders our clinical data insufficient for approval or requires us to amend or submit new clinical protocols. If we experience further delays in obtaining approval, or if we fail to obtain approval of vadadustat for some or all of the indications for which we have sought approval, the commercial prospects for vadadustat may be harmed and our ability to generate revenues will be materially impaired, which could have a material adverse effect on our business. For example, the FDRR we submitted to the FDA in October 2022 focused on the favorable balance between the benefits and risks of vadadustat for the treatment of anemia due to CKD in adult patients on dialysis. Finally, our ability to develop and market new drug products may be threatened by ongoing litigation challenging the FDA’s approval of mifepristone. Specifically, on April 7, 2023, the U.S. District Court for the Northern District of Texas invalidated the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various measures adopted under a REMS. In reaching that decision, the district court made a number of findings that numerous representatives of the pharmaceutical and biotechnology industry believe will chill the development, approval and distribution of new drug products in the United States. Among other determinations, the district court substituted its scientific judgement for that of the FDA and it held that FDA must provide a special justification for any differences between an approved drug’s labeling and the conditions that existed in the drug’s clinical trials. Further, the district court read the jurisdictional requirements governing litigation in federal court so as to potentially allow virtually any party to bring a lawsuit against the FDA in connection with its decision to approve an NDA or establish requirements under a REMS. On April 13, 2023, the district court decision was stayed, in part, by the U.S. Court of Appeals for the Fifth Circuit. Thereafter, on April 21, 2023, the U.S. Supreme Court entered a stay pending disposition of the appeal of the district court decision in the Court of Appeals for the Fifth Circuit or the Supreme Court. The Court of Appeals for the Fifth Circuit held oral arguments in the case on May 17, 2023 and, on August 16, 2023, issued its decision. The court declined to order the removal of mifepristone from the market, finding that a challenge to the FDA’s initial approval in 2000 is barred by the statute of limitations. But the court did hold that changes allowing for expanded access of mifepristone that FDA authorized in 2016 and 2021 were arbitrary and capricious in violation of federal law. On September 8, 2023, the Justice Department and a manufacturer of mifepristone asked the U.S. Supreme Court to review the court’s decision. Depending on the outcome of this litigation and the regulatory uncertainty it has engendered, our ability to develop new drug product candidates and to maintain approval of existing drug products and measures adopted under a REMS is at risk and could be delayed, undermined or subject to protracted litigation. Products approved for marketing are subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties, including withdrawal of marketing approval, if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, or product candidates, when and if any of them is approved. Marketing approvals may be subject to limitations on the approved indicated uses for which the product may be marketed or other conditions of approval, or contain requirements or commitments for potentially costly post-marketing studies and surveillance to monitor the safety and efficacy of the product, including REMS, or registries or observational studies. For example, in connection with the FDA approvals of Auryxia, we initially committed to the FDA to conduct certain post-approval pediatric studies of Auryxia under the Pediatric Research Equity Act of 2003, or PREA. With regard to the Hyperphosphatemia Indication for Auryxia, we initially committed to completing the original post-approval pediatric study and submitting a final report to the FDA by December 31, 2019. However, we did not complete the study according to the original schedule and therefore did not submit the required final report by December 31, 2019. Consequently, we received a notification of noncompliance with PREA. However, we have since been released from the original post marketing requirement, or PMR, and a new PMR was issued that provided that the final report is due in April 2024. Therefore, this PMR trial is no longer considered delayed and is open and actively enrolling patients. In June 2023 we requested an extension of time for the submission of the final report and such request was denied by the FDA in August 2023. Therefore, the final report for this PMR trial is still due in Akebia Therapeutics, Inc. | Form 10-Q | Page 61 Table of Contents April 2024, and we are unlikely to complete the trial by that time. With regard to our IDA Indication, we initially committed to completing the post-approval pediatric study and submitting a final report to the FDA by January 2023. We did not meet a milestone relating to this post-approval pediatric study of Auryxia in a timely manner and received a notification from the FDA. Subsequently, the FDA agreed to extend the pediatric clinical trial timelines for the IDA Indication. We subsequently communicated to the FDA that we would be delaying the start of the clinical trial in the IDA Indication while we work to produce smaller size tablets. In response, the FDA issued a partial clinical hold until we manufacture the smaller tablets and provide the FDA with relevant information regarding the smaller sized tablets for review. The FDA lifted the partial clinical hold in June 2022, however, we have not commenced start up of this study pending resolution of the manufacturing of the smaller size tablets. If we are unable to complete these studies successfully by the applicable deadline, or have further delays in completing these studies, we will need to inform the FDA, have further discussions and, if the FDA finds that we failed to comply with pediatric study requirements, in violation of applicable law, it could institute enforcement proceedings to seize or enjoin the sale of Auryxia or seek civil penalties, which would have a material adverse impact on our ability to commercialize Auryxia and our ability to generate revenues from Auryxia. In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for Auryxia, vadadustat, if approved, and any other product for which we receive regulatory approval will be subject to extensive and ongoing regulatory requirements and guidance. These requirements and guidance include manufacturing processes and procedures (including record keeping), the implementation and operation of quality systems to control and assure the quality of the product, submissions of safety and other post-marketing information and reports, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval. If we, our CMOs or other third parties we engage fail to adhere to such regulatory requirements and guidance, we could suffer significant consequences, including product seizures or recalls, loss of product approval, fines and sanctions, reputational damage, loss of customer confidence, shipment delays, inventory shortages, inventory write-offs and other product-related charges and increased manufacturing costs, and our development or commercialization efforts may be materially harmed. Moreover, the FDA and other regulatory authorities closely regulate the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other regulatory authorities impose stringent restrictions on companies’ communications regarding use of their products, and if we promote any approved product beyond its approved indications or inconsistent with the approved label, we may be subject to enforcement actions or prosecution arising from such activities. Violations of the U.S. Federal Food, Drug, and Cosmetic Act, or the FDCA , relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state consumer protection laws, insurance fraud laws, third party payor actions, stockholder actions and other lawsuits. Post-approval discovery of previously unknown problems with an approved product, including adverse events of unanticipated severity or frequency or relating to manufacturing operations or processes, or failure to comply with regulatory requirements, may result in, among other things: • restrictions on the marketing, distribution, use or manufacturing of the product; • withdrawal of the product from the market, or product recalls; • restrictions on the labeling or marketing of a product; • fines, restitution or disgorgement of profits or revenues; • warning or untitled letters or clinical holds; • refusal by the FDA or other regulatory authorities to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; • REMS; and • injunctions or the imposition of civil or criminal penalties. For example, we previously had three limited, voluntary recalls of Auryxia. These and any other recalls or any supply, quality or manufacturing issues in the future could result in significant negative consequences, including reputational harm, loss of customer confidence, and a negative impact on our financials, any of which could have a material adverse effect on our business and results of operations, and may impact our ability to supply Auryxia in Japan, Vafseo in Japan and Europe or vadadustat, if approved in other countries, for commercial and clinical use. Non-compliance with the FDA, the EMA, the PMDA and other regulatory authorities’ requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Akebia Therapeutics, Inc. | Form 10-Q | Page 62 Table of Contents The FDA’s policies and those of other regulatory authorities may change, and additional government regulations may be enacted. We cannot predict the likelihood, nature or extent of government regulations that may arise from future legislation or administrative action, either in the United States or in other jurisdictions. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would materially adversely affect our business. Risks Related to Governmental Regulation and Compliance We are subject to a complex regulatory scheme that requires significant resources to ensure compliance and our failure to comply with applicable laws could subject us to government scrutiny or enforcement, potentially resulting in costly investigations, fines, penalties or sanctions, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings. In general, a variety of laws apply to us or may otherwise restrict our activities, including the following: • l aws and regulations governing the conduct of preclinical studies and clinical trials in the United States and other countries in which we are conducting such studies; • anti-corruption and anti-bribery laws, including the FCPA, the UK Bribery Act and various other anti-corruption laws in countries outside of the United States; • data privacy laws existing in the United States, the EU, the UK and other countries in which we operate, including the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA , as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH , state privacy and data protection laws, such as the California Consumer Privacy Act, or CCPA , and the California Privacy Rights Act of 2020, or CPRA , as well as other state consumer protection laws, GDPR, any additional applicable EU member state data protection laws in force from time to time, the retained EU law version of the General Data Protection Regulation as saved into United Kingdom law by virtue of section 3 of the United Kingdom's European Union (Withdrawal) Act 2018, or the EU GDPR ; • federal and state laws requiring the submission of accurate product prices and notifications of price increases; • federal and state securities laws; • environmental, health and safety laws and regulations; and • international trade laws, which are laws that regulate the sale, purchase, import, export, re-export, transfer and shipment of goods, products, materials, services and technology. In addition, our relationships with healthcare providers, physicians and third party payors expose us to broadly applicable fraud and abuse laws that may constrain the business or financial arrangements and relationships through which we market, sell and distribute Auryxia and vadadustat, if approved, and any other products for which we may obtain marketing approval. As such, these arrangements are subject to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations at federal, state and international levels. These restrictions include, but are not limited to, the following: • the FDCA which among other things, strictly regulates drug product marketing and promotion and prohibits manufacturers from marketing such products for off-label use; • federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs, and laws requiring notification of price increases; • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; • the federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, and violations of the FDCA, the federal government pricing laws, and the federal Anti-Kickback Statute trigger liability under the federal False Claims Act; Akebia Therapeutics, Inc. | Form 10-Q | Page 63 Table of Contents • HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • HIPAA, as amended by the HITECH, and their respective implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • the federal Open Payments Act (the former Physician Payments Sunshine Act) requires applicable manufacturers of covered drugs to report payments and other transfers of value to physicians, other healthcare providers and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and gift ban and transparency statutes, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by state Medicaid or other programs, or non-governmental third party payors, including private insurers, and which are not preempted by federal laws and often differ from state to state, thus complicating compliance efforts; and • U.S. state laws restricting interactions with healthcare providers and other members of the healthcare community or requiring pharmaceutical manufacturers to implement certain compliance standards, which vary from state to state. Because of the breadth of these U.S. laws, and their non-U.S. equivalents, and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent healthcare reforms have strengthened these laws. For example, the Health Care Reform Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate the law. The Health Care Reform Act also amended the False Claims Act, such that violations of the Anti-Kickback Statute are now deemed violations of the False Claims Act. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, such as the Pharmaceutical Research and Manufacturers of America Code on Interactions with Health Care Professionals, known as the PhRMA Code. Additionally, some state and local laws require the registration of pharmaceutical sales representatives in the jurisdiction. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA. Efforts to ensure that our business complies with applicable healthcare laws and regulations involves substantial costs and requires us to expend significant resources. One of the potential areas for governmental scrutiny involves federal and state requirements for pharmaceutical manufacturers to submit accurate price reports to the government. Because our processes for calculating applicable government prices and the judgments involved in making these calculations involve subjective decisions and complex methodologies, these calculations are subject to risk of errors and differing interpretations. In addition, they are subject to review and challenge by the applicable governmental agencies, or potential qui tam complaints, and it is possible that such reviews could result in changes, recalculations, or defense costs that may have adverse legal or financial consequences. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, any of which could materially adversely affect our business and would result in increased costs and diversion of management attention and could negatively impact the development, regulatory approval and commercialization of Auryxia or vadadustat, any of which could have a material adverse effect on our business. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs. We will incur significant liability if it is determined that we are promoting any “off-label” use of Auryxia or any other product we may develop, in-license or acquire or if it is determined that any of our activities violates the federal Anti-Kickback Statute. Physicians are permitted to prescribe drug products for uses that differ from those approved by the FDA or other applicable regulatory agencies. Although the FDA and other regulatory agencies do not regulate a physician’s choice of treatments, the FDA and other regulatory agencies do restrict manufacturer communications regarding unapproved uses of an approved drug. Companies are not permitted to promote drugs for unapproved uses or in a manner that is inconsistent with the FDA-approved labeling. There are also restrictions about making comparative or superiority claims based on safety or efficacy that are not supported by substantial evidence. Accordingly, we may not promote Auryxia in the United States for use in any Akebia Therapeutics, Inc. | Form 10-Q | Page 64 Table of Contents indications other than the Hyperphosphatemia Indication and the IDA Indication, and all promotional claims must be consistent with the FDA-approved labeling for Auryxia. Promoting a drug off-label is a violation of the FDCA and can give rise to liability under the federal False Claims Act, as well as under additional federal and state laws and insurance statutes. The FDA, the Department of Justice and other regulatory and enforcement authorities enforce laws and regulations prohibiting promotion of off-label uses and the promotion of products for which marketing approval has not been obtained, as well as the false advertising or misleading promotion of drugs. In September 2021, the FDA published final regulations which describe the types of evidence that the agency will consider in determining the intended use of a drug product. In addition, laws and regulations govern the distribution and tracing of prescription drugs and prescription drug samples, including the Prescription Drug Marketing Act of 1976 and the Drug Supply Chain Security Act, which regulate the distribution and tracing of prescription drugs and prescription drug samples at the federal level and set minimum standards for the regulation of drug distributors by the states. A company that is found to have improperly promoted off-label uses or to have otherwise engaged in false or misleading promotion or improper distribution of drugs will be subject to significant liability, potentially including civil and administrative remedies as well as criminal sanctions. It may also be subject to exclusion and debarment from federal healthcare reimbursement programs. Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional scientific communications concerning their products in certain circumstances. In addition, under some relatively recent guidance from the FDA, companies may also promote information that is consistent with the prescribing information and proactively speak to formulary committee members of payors regarding data for an unapproved drug or unapproved uses of an approved drug. We intend to engage in these discussions and communicate with healthcare providers, payors and other constituencies in compliance with all applicable laws, regulatory guidance and industry best practices. Although we believe we have put in place a robust compliance program and processes designed to ensure that all such activities are performed in a legal and compliant manner, such program and processes may not be sufficient to deter or detect all violations. In addition, if a company’s activities are determined to have violated the federal Anti-Kickback Statute, this can also give rise to liability under the federal False Claims Act and such violations can result in significant fines, criminal and civil remedies, and exclusion from Medicare and Medicaid. There is increased government focus on relationships between the pharmaceutical industry and physicians, pharmacies (especially specialty pharmacies), and other sources of referrals. Common industry activities, such as speaker programs, insurance assistance and support, relationships with foundations providing copayment assistance, and relationships with patient organizations and patients are receiving increased governmental attention. If any of our relationships or activities is determined to violate applicable federal and state anti-kickback laws, false claims laws, or other laws or regulations, the company and/or company executives, employees, and other representatives could be subject to significant fines and criminal sanctions, imprisonment, and potential exclusion from Medicare and Medicaid, and could harm our reputation or result in significant legal expenses and distraction of management. Disruptions in the FDA, regulatory authorities outside the U.S. and other government agencies caused by global health concerns or funding shortages could prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business. The ability of the FDA and regulatory authorities outside the U.S. to review and approve new products can be affected by a variety of factors, including global health concerns, government budget and funding levels, staffing shortages, statutory, regulatory, and policy changes and other events that may otherwise affect the FDA’s or other regulatory authorities' ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result of certain of these factors. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may increase the time necessary for new drugs to be reviewed or approved by necessary government agencies, which would adversely affect our business. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our, or our collaboration partners', regulatory submissions, which could have a material adverse effect on our business. Disruptions may still result also from the recent COVID-19 pandemic or any similar event that may occur in the future. During the recent COVID-19 pandemic, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. The FDA has now indicated that it can and will conduct timely reviews of applications for medical in line with its user fee performance goals, including conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards. However, in the event of a resurgence of the recent COVID-19 pandemic or a similar public health emergency in the future, the FDA may not be able to continue its current pace and review timelines could be extended. Regulatory authorities outside the United States facing Akebia Therapeutics, Inc. | Form 10-Q | Page 65 Table of Contents similar circumstances may adopt similar restrictions or other policy measures in response to the recent COVID-19 pandemic or a similar public health emergency and may also experience delays in their regulatory activities. If a prolonged government shutdown occurs, or if global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Compliance with privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations. The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the GDPR, which took effect across all member states of the EEA, in May 2018. Following the withdrawal of the U.K. from the EU, the U.K. Data Protection Act 2018 applies to the processing of personal data that takes place in the U.K. and includes parallel obligations to those set forth by GDPR. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data when required, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, when required, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third party processors. The GDPR increases our obligations as a sponsor in clinical trials in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial patients and investigators. The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal information and/or impose substantial fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is greater, and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that EU member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data and permits EU member states to adopt further penalties for violations that are not subject to the administrative fines outlined in the GDPR. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States and, as a result, increases the scrutiny that we should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States. There is ongoing uncertainty about the transfer mechanisms that companies rely upon to enable the legal transfer of personal data from the EU to other countries. For example, in July 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-U.S. Privacy Shield, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the U.S. As court decisions and regulatory guidance evolves, challenges remain with respect to GDPR compliance. Companies must continue to monitor the regulatory landscape and implement necessary changes, all of which may be costly and may put the company out of compliance while any changes are being implemented. Following the withdrawal of the UK from the EU, the UK Data Protection Act 2018 applies to the processing of personal data that takes place in the UK and includes parallel obligations to those set forth by GDPR. In relation to data transfers, both the UK and the EU have determined, through separate “adequacy” decisions, that data transfers between the two jurisdictions are in compliance with the UK Data Protection Act and the GDPR, respectively. The UK and the U.S. have also agreed to a U.S.-UK “Data Bridge”, which functions similarly to the EU-U.S. Data Privacy Framework and provides an additional legal mechanism for companies to transfer data from the UK to the United States. In addition to the UK, Switzerland is also in the process of approving an adequacy decision in relation to the Swiss-U.S. Data Privacy Framework (which would function similarly to the EU-U.S. Data Privacy Framework and the U.S.-UK Data Bridge in relation to data transfers from Switzerland to the United States). Any changes or updates to these developments have the potential to impact our business. Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S. Data Privacy Framework, which serves as a replacement to the EU-U.S. Privacy Shield. The European Union initiated the process to adopt an adequacy decision for the EU-U.S. Data Privacy Framework in December 2022, and the EC adopted the adequacy decision on July 10, 2023. The adequacy decision permits U.S. companies who self-certify to the EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the EU to the U.S. However, some privacy advocacy groups have already challenged or suggested that they will be challenging the EU-U.S. Data Privacy Framework. If these challenges are Akebia Therapeutics, Inc. | Form 10-Q | Page 66 Table of Contents successful, they may not only impact the EU-U.S. Data Privacy Framework, but also further limit the viability of the standard contractual clauses and other data transfer mechanisms. The uncertainty around this issue has the potential to impact our business internationally. Given the breadth and depth of changes in data protection obligations, complying with the GDPR’s requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the EU. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices and put in place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties against us and could have a material adverse effect on our business, financial condition or results of operations. Similar privacy and data security requirements are either in place or underway in the United States. There are a broad variety of data protection laws that may be applicable to our activities, and a range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns. The Federal Trade Commission, or the FTC, and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers. For example, the FTC has been particularly focused on the unpermitted processing of health and genetic data through its recent enforcement actions and is expanding the types of privacy violations that it interprets to be “unfair” under Section 5 of the Federal Trade Commission Act, as well as the types of activities it views to trigger the Health Breach Notification Rule (which the FTC also has the authority to enforce). The agency is also in the process of developing rules related to commercial surveillance and data security that may impact our business. We will need to account for the FTC’s evolving rules and guidance for proper privacy and data security practices in order to mitigate our risk for a potential enforcement action, which may be costly. If we are subject to a potential FTC enforcement action, we may be subject to a settlement order that requires us to adhere to very specific privacy and data security practices, which may impact our business. We may also be required to pay fines as part of a settlement (depending on the nature of the alleged violations). If we violate any consent order that we reach with the FTC, we may be subject to additional fines and compliance requirements. New laws also are being considered at both the state and federal levels. For example, the CCPA, which went into effect on January 1, 2020, and the CPRA, which amends CCPA by expanding the scope and applicability, while also introducing new privacy protections, is creating similar risks and obligations as those created by GDPR. In November 2020, California voters passed a ballot initiative for the CPRA, which went into effect on January 1, 2023 and significantly expanded the CCPA to incorporate additional GDPR-like provisions including requiring that the use, retention and sharing of personal information of California residents be reasonably necessary and proportionate to the purposes of collection or processing, granting additional protections for sensitive personal information, and requiring greater disclosures related to notice to residents regarding retention of information. The CPRA also creates a new agency that is specifically responsible for enforcing the new law and other California privacy laws. Because of this, we may need to engage in additional activities (e.g., data mapping) to identify the personal information we are collecting and the purposes for which such information is collected. In addition, we will need to ensure that our policies recognize the rights granted to consumers (as that phrase is broadly defined in the CCPA and can include business contact information). In addition to California, at least eleven other states have passed comprehensive privacy laws similar to the CCPA and CPRA. These laws are either in effect or will go into effect sometime before the end of 2026. Like the CCPA and CPRA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data (which includes health data in some cases). Some of the provisions of these laws may apply to our business activities. There are also states that are strongly considering or have already passed comprehensive privacy laws during the 2023 legislative sessions that will go into effect in 2024 and beyond, including New York and New Jersey. Other states will be considering these laws in the future, and Congress has also been debating passing a federal privacy law. There are also states that are specifically regulating health information that may affect our business. For example, Washington state recently passed a health privacy law that will regulate the collection and sharing of health information, and the law also has a private right of action, which further increases the relevant compliance risk. Connecticut and Nevada have also passed similar laws regulating consumer health data. These laws may impact our business activities, including our identification of research subjects, relationships with business partners and ultimately the marketing and distribution of our products. A broad range of legislative measures also have been introduced at the federal level. Accordingly, failure to comply with current and any future federal and state laws regarding privacy and security of personal information could expose us to fines and penalties. We also face a threat of potential consumer class actions related to these laws and the overall protection of personal data. Even if we are not determined to have violated these laws, investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our reputation and our business. Akebia Therapeutics, Inc. | Form 10-Q | Page 67 Table of Contents Legislative and regulatory healthcare reform may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain for any products that are approved in the United States or foreign jurisdictions. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of vadadustat, or any other product candidate, restrict or regulate post-approval activities and affect our ability to profitably sell Auryxia and vadadustat, if approved. The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by legislative initiatives. Current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we receive for any FDA approved product, such as Auryxia or vadadustat, if approved, or any reimbursement that physicians receive for administering any approved product. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA , changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for Auryxia and any other approved products. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors. In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the ACA . In addition, other legislative and regulatory changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which will remain in effect through 2031. However, pursuant to the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act , and subsequent legislation, these Medicare sequester reductions were suspended and reduced through the end of June 2022, but the full 2% cut resumed as of July 1, 2022. The American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, other legislative and regulatory changes have been proposed, but not yet adopted. For example, in July 2019, the U.S. Department of Health and Human Services, or HHS , proposed regulatory changes in kidney health policy and reimbursement. Any new legislative or regulatory changes may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for Auryxia or vadadustat, if approved, or the frequency with which Auryxia and vadadustat, if approved, is prescribed or used. The costs and prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States. To date, there have been several recent U.S. congressional inquiries and proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the current administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, the former administration issued several executive orders intended to lower the costs of prescription products and certain provisions in these orders have been incorporated into regulations. These regulations include an interim final rule implementing a most favored nation model for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021. That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate value into payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to evidence-based care. At the same time, the administration may seek to limit Medicare Part D and public option drug prices through a tax penalty on manufacturers for increases in the cost of drugs and biologics above the general inflation rate. The American Rescue Plan Act of 2021, comprehensive COVID-19 pandemic relief legislation recently enacted under the current administration, includes a number of healthcare-related provisions, such as support to rural health care providers, increased tax subsidies for health insurance purchased through insurance exchange marketplaces, financial incentives to states to expand Medicaid programs and elimination of the Medicaid drug rebate cap effective in 2024. Further, on July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price of pharmaceuticals. The Order directs HHS to create a plan within 45 days to combat “excessive pricing of prescription pharmaceuticals and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the federal government for such pharmaceuticals, and to address the recurrent problem of price gouging.” On September 9, 2021, HHS released its Akebia Therapeutics, Inc. | Form 10-Q | Page 68 Table of Contents plan to reduce pharmaceutical prices. The key features of that plan are to: (a) make pharmaceutical prices more affordable and equitable for all consumers and throughout the health care system by supporting pharmaceutical price negotiations with manufacturers; (b) improve and promote competition throughout the prescription pharmaceutical industry by supporting market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase transparency; and (c) foster scientific innovation to promote better healthcare and improve health by supporting public and private research and making sure that market incentives promote discovery of valuable and accessible new treatments. M ore recently, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law by President Biden. The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage. Among other things, the IRA imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. We consider many factors when we implement a price increase for a product, including historical and potential future inflation rates. However, there are many variables that are outside of our control and if we increase the price of Auryxia or vadadustat, if approved, faster than the pace of inflation, we would be subject to additional rebates under Medicare, which could have a material adverse effect on our product revenues. Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition. Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation. The legislation also requires manufacturers to pay rebates for drugs in Medicare Part D whose price increases exceed inflation. The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year. On June 6, 2023, Merck & Co. Inc., or Merck , filed a lawsuit against HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the Constitution. Subsequently, a number of other parties, including the U.S. Chamber of Commerce, the Chamber , Bristol Myers Squibb Company, the Pharmaceutical Research and Manufacturers of America, Astellas, Novo Nordisk, Janssen Pharmaceuticals, Novartis, AstraZeneca and Boehringer Ingelheim, also filed lawsuits in various courts with similar constitutional claims against HHS and CMS. On July 12, 2023, the Chamber moved for preliminary injunctive relief seeking to halt implementation of the drug pricing provisions of the IRA. On September 29, 2023, in the first substantive ruling in this litigation, the district court denied the Chamber’s motion, finding that the Chamber did not show, among other things, a strong likelihood of success on its constitutional arguments because Medicare is voluntary. The court also denied the government’s motion to dismiss, indicating that it needs more information from the parties before ruling on that motion. We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results. Accordingly, while it is currently unclear how the IRA will be effectuated, we cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition. At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. A number of states, for example, require drug manufacturers and other entities in the drug supply chain, including health carriers, pharmacy benefit managers, wholesale distributors, to disclose information about pricing of pharmaceuticals. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products or put pressure on our product pricing. It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for Auryxia and any product candidates for which we receive marketing approval or additional pricing pressures. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, Akebia Therapeutics, Inc. | Form 10-Q | Page 69 Table of Contents insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect: • the demand for Auryxia and any products candidates for which we receive marketing approval; • our ability to set a price that we believe is fair for our products; • our ability to obtain and maintain coverage and reimbursement approval for Auryxia or any other approved product; • our ability to generate revenues and achieve or maintain profitability; and • the level of taxes that we are required to pay. In addition, in some countries, including member states of the EU the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take a significant amount of time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory devel