Akebia Therapeutics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 126 Consolidated Balance Sheets 128 Consolidated Statements of Operations and Comprehensive Loss 129 Consolidated Statements of Stockholders’ (De ficit) Equity 130 Consolidated Statements of Cash Flows 131 Notes to Consolidated Financial Statements 132 All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes. Akebia Therapeutics, Inc. | Form 10-K | Page 125 Table of Content s Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Akebia Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Akebia Therapeutics, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders' (deficit) equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 14, 2024 expressed a qualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Akebia Therapeutics, Inc. | Form 10-K | Page 126 Table of Content s Revenue Recognition - Payor Mix Impact on Measuring Variable Consideration, Specifically Payor Rebates Description of the Matter As of December 31, 2023, the Company recorded accrued product revenue allowances of $29.9 million, which includes payor rebates. As discussed in Note 2 to the Company’s consolidated financial statements, the Company recognizes revenue from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. The Company contracts with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates the rebates for payors based upon (i) its contracts with the payors and (ii) information obtained from its customers and other third parties regarding the payor mix. The Company estimates these payor rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of an accrued liability. Auditing the measurement of the Company’s net product revenues was complex and judgmental due to the significant estimation required in determining the amount of consideration that will be collected net of estimates for payor rebates. In particular, the payor rebate is affected by assumptions in payor behavior such as changes in payor mix, payor collections and current customer contractual requirements. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue recognition process, including controls over the underlying assumptions and inputs used by management to estimate the payor rebates. Specifically, this included controls to assess the completeness and accuracy of the current and historical data used in calculating the estimate. Our audit procedures to test the Company’s recognition of net product revenues and specifically the variable consideration component of payor rebates included, among others, assessing the methodology used to determine the estimate and testing the significant assumptions and the underlying data used by the Company in its analysis. This included testing the reasonableness of management’s estimates to other inputs into their calculations such as contract terms, product in the distribution channel, and actual invoices received. We assessed the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performed analytical procedures to evaluate the completeness of the payor rebate reserves. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2013. Boston, Massachusetts March 14, 2024 Akebia Therapeutics, Inc. | Form 10-K | Page 127 Table of Content s AKEBIA THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS December 31, (dollars in thousands, except per share amounts) 2023 2022 Assets Current assets: Cash and cash equivalents $ 42,925 $ 90,466 Inventories 15,691 21,568 Accounts receivable, net 39,290 40,284 Prepaid expenses and other current assets 20,243 32,864 Total current assets 118,149 185,182 Property and equipment, net 3,629 5,214 Operating right-of-use assets 12,416 29,158 Intangible asset, net 36,042 72,084 Goodwill 59,044 59,044 Other long-term assets 12,423 5,372 Total assets $ 241,703 $ 356,054 Liabilities and stockholders' (deficit) equity Current liabilities: Accounts payable $ 14,635 $ 18,021 Accrued expenses and other current liabilities 67,735 75,777 Short-term deferred revenue — 3,738 Current portion of long-term debt 17,500 32,000 Total current liabilities 99,870 129,536 Deferred revenue, net of current portion 43,296 43,296 Long-term operating lease liabilities 8,947 28,961 Embedded debt derivative — 760 Long-term debt, net 17,183 34,078 Liability related to sale of future royalties 54,013 57,484 Refund liability to customer 40,093 40,992 Other long-term liabilities 8,885 15,717 Total liabilities 272,287 350,824 Commitments and contingencies (Note 10) Stockholders' (deficit) equity: Preferred stock $ 0.00001 par value, 25,000,000 shares authorized; no shares issued and outstanding at December 31, 2023 and 2022 — — Common stock: $ 0.00001 par value; 350,000,000 shares authorized at December 31, 2023 and 2022; 194,582,539 and 184,135,714 shares issued and outstanding at December 31, 2023 and 2022, respectively 2 2 Additional paid-in capital 1,578,358 1,562,247 Accumulated other comprehensive income 6 6 Accumulated deficit ( 1,608,950 ) ( 1,557,025 ) Total stockholders' (deficit) equity ( 30,584 ) 5,230 Total liabilities and stockholders' (deficit) equity $ 241,703 $ 356,054 The accompanying notes are an integral part of these consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-K | Page 128 Table of Content s AKEBIA THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Years Ended December 31, (dollars in thousands, except per share amounts) 2023 2022 Revenues: Product revenue, net $ 170,301 $ 176,949 License, collaboration and other revenue 24,322 115,535 Total revenues 194,623 292,484 Cost of goods sold: Cost of product and other revenue 38,107 49,526 Amortization of intangible asset 36,042 36,042 Total cost of goods sold 74,149 85,568 Operating expenses: Research and development 63,079 129,986 Selling, general and administrative 100,233 138,601 License 3,237 3,175 Restructuring 181 15,933 Total operating expenses 166,730 287,695 Loss from operations ( 46,256 ) ( 80,779 ) Other income (expense): Interest expense ( 6,032 ) ( 15,687 ) Other income 887 3,146 Loss on extinguishment of debt — ( 906 ) Loss on termination of lease ( 524 ) — Net loss before income taxes ( 51,925 ) ( 94,226 ) Net loss $ ( 51,925 ) $ ( 94,226 ) Comprehensive loss $ ( 51,925 ) $ ( 94,226 ) Net loss per share: Basic and diluted $( 0.28 ) $( 0.52 ) Weighted average number of common shares outstanding: Basic and diluted 187,465,448 182,782,680 The accompanying notes are an integral part of these consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-K | Page 129 Table of Content s Akebia Therapeutics, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' (Deficit) Equity (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 7,121 — — 7,122 Proceeds from sale of stock under employee stock purchase plan 335,146 — 410 — — 410 Stock-based compensation expense — — 17,849 — — 17,849 Restricted stock unit vesting 2,252,565 — — — — — Exercise of options 142,440 — 67 — — 67 Net loss — — — — ( 94,226 ) ( 94,226 ) Balance at December 31, 2022 184,135,714 $ 2 $ 1,562,247 $ 6 $ ( 1,557,025 ) $ 5,230 Issuance of common stock, net of issuance costs 6,189,974 — 6,708 — — 6,708 Proceeds from sale of stock under employee stock purchase plan 200,194 — 85 — — 85 Stock-based compensation expense — — 9,317 — — 9,317 Restricted stock unit vesting 4,054,407 — — — — — Exercise of options 2,250 — 1 — — 1 Net loss — — — — ( 51,925 ) ( 51,925 ) Balance at December 31, 2023 194,582,539 $ 2 $ 1,578,358 $ 6 $ ( 1,608,950 ) $ ( 30,584 ) The accompanying notes are an integral part of these consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-K | Page 130 Table of Content s Akebia Therapeutics, Inc. CONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, (dollars in thousands) 2023 2022 Operating Activities: Net loss $ ( 51,925 ) $ ( 94,226 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 1,585 1,654 Amortization of intangible asset 36,042 36,043 Interest expense related to sale of future royalties (non-cash) — 6,182 Accretion of interest expense and amortization of refund liability ( 2,228 ) 2,121 Royalty revenue from MTPC (non-cash) ( 1,977 ) ( 1,777 ) Collaboration revenue in connection with the termination of the Otsuka Agreement (non-cash) — ( 9,550 ) R&D expense in connection with the termination of the Otsuka Agreement (non-cash) 782 8,768 Amortization of right-of-use assets 4,219 ( 2,417 ) Write-off on termination of Boston Lease (non-cash) ( 825 ) — Loss on extinguishment of debt — 406 Provision of inventories 1,580 30,242 Change in firm purchase commitments 1,533 ( 65,946 ) Stock-based compensation expense 9,317 17,849 Change in fair value of embedded debt derivative ( 760 ) ( 1,060 ) Changes in operating assets and liabilities: Accounts receivable 994 11,297 Inventories ( 2,542 ) 19,087 Prepaid expenses and other current assets 11,839 1,058 Other long-term assets ( 1,361 ) ( 5,623 ) Accounts payable ( 5,244 ) 1,501 Accrued expense and other current liabilities ( 10,021 ) ( 38,005 ) Lease liabilities ( 4,963 ) 2,311 Deferred revenue ( 3,738 ) 4,654 Other long-term liabilities ( 5,691 ) 2,277 Net cash used in operating activities ( 23,384 ) ( 73,154 ) Investing Activities: Purchase of property and equipment — ( 114 ) Net cash provided by (used in) investing activities — ( 114 ) Financing Activities: Proceeds from refund liability to customer — 40,000 Proceeds from the issuance of common stock, net of issuance costs 6,708 7,121 Proceeds from the sale of stock under employee stock purchase plan 85 410 Proceeds from the exercise of common stock options 1 67 Principal payments on debt ( 32,000 ) ( 33,000 ) Net cash (used in) provided by financing activities ( 25,206 ) 14,598 Decrease in cash, cash equivalents and restricted cash ( 48,590 ) ( 58,670 ) Cash, cash equivalents and restricted cash at beginning of the period 93,169 151,839 Cash, cash equivalents and restricted cash at end of the period $ 44,579 $ 93,169 Supplemental disclosure of cash flow information: Cash paid for interest $ 6,059 $ 6,755 The accompanying notes are an integral part of these consolidated financial statements. Akebia Therapeutics, Inc. | Form 10-K | Page 131 Table of Content s Akebia Therapeutics, Inc. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Organization Akebia Therapeutics, Inc., referred to as Akebia or the Company , was incorporated in the State of Delaware in 2007 and became a public company in 2014. Akebia is a fully integrated commercial-stage biopharmaceutical company committed to addressing patients’ unmet needs. Our purpose is to better the life of each person impacted by kidney disease. The Company has one commercial product in the United States, or U.S , Auryxia ® (ferric citrate), which is approved by the U.S. Food and Drug Administration, or FDA , and marketed for two indications: (i) the control of serum phosphorus levels in adult patients with dialysis dependent chronic kidney disease, or DD-CKD , and (ii) the treatment of iron deficiency anemia, or IDA, in adult patients with non-dialysis chronic kidney disease, or NDD-CKD . Auryxia will lose exclusivity in the U.S. in March 2025. Ferric citrate is also approved in Japan, and is marketed and sold by the Company's collaboration partner, as an oral treatment for the improvement of hyperphosphatemia in patients with chronic kidney disease, or CKD , including DD-CKD and NDD-CKD and for the treatment of adult patients with IDA under the trade name Riona (ferric citrate hydrate). The Company has early to late-stage clinical programs, including vadadustat, the Company’s lead investigational product candidate. Vadadustat is an investigational oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH , inhibitor. In October 2023, the FDA acknowledged the Company's New Drug Application, or NDA , resubmission for vadadustat was complete, classified it as a Class 2 response and set a user fee goal date, or PDUFA date , of March 27, 2024. Vadadustat is approved for the treatment of symptomatic anemia associated with CKD under the trade name Vafseo in the European Economic Area, or EEA , the United Kingdom, or UK , Switzerland, Australia and Taiwan in adult patients on chronic maintenance dialysis, in Korea for adult patients with CKD on hemodialysis and in Japan for adult dialysis-dependent and non-dialysis patients. The Company will continue to support its partners in preparation to launch vadadustat in Europe, Taiwan and potentially other countries to pursue our goal of enabling broad access to vadadustat for patients globally. Since its inception, the Company has devoted most of its resources to research and development, or R&D , including its preclinical and clinical development activities, commercializing Auryxia and providing general and administrative support for these operations. The Company began recording revenue from the U.S. sales of Auryxia and revenue from sublicensing rights to Auryxia in Japan from the Company’s Japanese partners, Japan Tobacco, Inc. and its subsidiary Torii Pharmaceutical Co., Ltd., collectively, JT and Torii, in 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 in the U.S., if approved, or any other potential product candidate, it may be unable to achieve profitability. As of December 31, 2023, the Company had cash and cash equivalents of approximately $ 42.9 million. Based on its current operating plan, the Company believes that its cash resources and the cash the Company expects to generate from product, royalty, supply and license revenues will be sufficient to allow the Company to fund its current operating plan through at least twelve months from the filing of this Annual Report on Form 10-K, or Form 10-K . 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 product and collaboration, license and other revenue, including royalties and revenue from supply agreements. If the Company believes its resources are insufficient to satisfy its liquidity requirements, we may seek to sell public or private equity, enter into new debt transactions, explore potential strategic transactions, consider other cash-generating or saving measures or a combination of these approaches or other strategic alternatives. 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 Basis of Presentation and Principles of Consolidation The accompanying 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 Accounting Standards Codification, or ASC , and Accounting Standards Update, or ASU , of the Financial Accounting Standards Board, or FASB . Akebia Therapeutics, Inc. | Form 10-K | Page 132 Table of Content s The accompanying 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 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, classification of the expenses, assets and liabilities 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 these processes. 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, we regularly assesses these estimates, actual results may differ materially from those estimates and changes in estimates are recorded in the period they become known. Significant estimates and judgments reflected in these consolidated financial statements include, but are not limited to: accrued expenses, other long-term liabilities, product revenues, including various rebates, returns and reserves related to product sales, inventories, classification of expenses between cost of goods sold, R&D and selling, general and administrative, long-term assets, including the Company's right-of-use assets, intangible asset and goodwill. Cash, Cash Equivalents and Restricted Cash In determining cash, cash equivalents and restricted cash, the Company considers only those highly liquid investments, readily convertible to cash within 90 days from the date of purchase to be cash equivalents. As of December 31, 2023, cash and cash equivalents primarily included cash on hand and funds invested in money market funds. Restricted cash represents amounts required to secure the outstanding letter of credit in connection with the Company’s office and laboratory space in Cambridge, Massachusetts, or the Cambridge Lease . Restricted cash is included in “other long-term assets” in the consolidated balance sheets. The following table reconciles cash, cash equivalents and restricted cash reported within the Company's consolidated balance sheets to the total amounts reported in the consolidated statements of cash flows: December 31, Reconciliation of cash, cash equivalents and restricted cash (in thousands) 2023 2022 Cash and cash equivalents $ 42,925 $ 90,466 Restricted cash included in other long-term assets 1,654 2,703 Total cash, cash equivalents and restricted cash $ 44,579 $ 93,169 Fair Value of Financial Instruments Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, management considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. ASC Topic 820, Fair Value Measurement , establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. To the extent the valuation is based on models or inputs that are less observable in the market, the determination of fair values requires more judgment. A financial instrument categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value are: • Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities to the reporting entity at the measurement date. • Level 2 – quoted prices for similar assets or liabilities in markets that are not active, or for which all significant inputs are observable, either directly or indirectly, for substantially the full term of the asset or liability. Akebia Therapeutics, Inc. | Form 10-K | Page 133 Table of Content s • Level 3 – unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. Accounts Receivable The Company’s accounts receivable represent amounts due to the Company from product sales (see Note 11) and from its collaboration, license and other agreements (see Note 12). Reimbursable costs that have not been invoiced as of the balance sheet date are recorded as unbilled accounts receivable. Accounts receivable arising from product sales primarily represent amounts due from the Company's customers, net of allowances for customer discounts and chargebacks. The Company deducts trade allowances for prompt payment, among other certain discounts or chargebacks, from its accounts receivable based on its experience that the Company’s customers will earn these discounts and fees. The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding receivables and the overall quality and age of those invoices not specifically reviewed as well as historical payment patterns and existing economic factors. The Company believes that credit risks associated with its customers and collaboration partners are not significant. The Company's allowance for credit losses was $ 1.0 million and $ 1.1 million as of December 31, 2023 and 2022, respectively. The write-offs for the year ended December 31, 2023 and 2022 were $ 0.1 million and $ 0.4 million, respectively. Concentrations of Risk and Off-Balance Sheet Risk Credit Risk Cash, cash equivalents and accounts receivable are the only financial instruments that potentially subject the Company to concentrations of credit risk. The Company maintains cash accounts principally at three financial institutions in the U.S., which at times, may exceed the Federal Deposit Insurance Corporation's limits. The Company has not experienced any losses from cash balances in excess of the insurance limit. The Company's management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institutions where its cash is held. Gross revenues and accounts receivable from each of the Company’s customers or collaboration partners who individually accounted for 10% or more of total gross revenues and/or 10% or more of total gross accounts receivable consisted of the following: % of Total Gross Revenues Years Ended December 31, Customer 2023 2022 Fresenius Medical Care Rx 40 % 34 % Cencora, Inc., formerly known as AmerisourceBergen Drug Corporation 21 % 15 % McKesson Corporation 11 % — % Cardinal Health, Inc. 10 % — % Otsuka Pharmaceutical Co. Ltd. — % 20 % % of Gross Accounts Receivable December 31, Customer 2023 2022 Fresenius Medical Care Rx 31 % 44 % Cencora, Inc., formerly known as AmerisourceBergen Drug Corporation 25 % 16 % Cardinal Health, Inc. 16 % 13 % McKesson Corporation 12 % 10 % Off-Balance Sheet Accounts The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangement. See Note 9, Leases, for further details. Manufacturing and Distribution Risk. The Company is dependent on third-party manufacturers, logistics company and distributors to supply products for commercial activities associated with its product and product candidates, as applicable. In particular, the Company relies and Akebia Therapeutics, Inc. | Form 10-K | Page 134 Table of Content s expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to the Company's product and product candidate activities. These activities, including the commercialization of Auryxia, could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs or distribution of finished product to the market. Inventories, including Pre-Launch Inventories The Company values its inventories at the lower-of-actual cost or net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. When the Company expects to utilize the inventory beyond one year we record it in inventories, long-term on its consolidated balance sheets. Prior to obtaining initial regulatory approval for an investigational product candidate the Company expenses costs relating to production of pre-launch inventory as R&D expense in its consolidated statements of operations and comprehensive loss in the period incurred. After regulatory approval has been received, the Company capitalizes such inventory costs. Products used in clinical trials are expensed as R&D expense in the statement of operations and comprehensive loss. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess or obsolete inventory to its net realizable value in the period in which the impairment is identified through cost of product and other revenue in the consolidated statements of operations and comprehensive loss. Additionally, the Company’s product is subject to strict quality control and monitoring that is performed throughout the manufacturing process, including release of work-in-process to finished goods. In the event that certain batches or units of product do not meet quality specifications, the Company will record a write-down of any potential unmarketable inventory to its estimated net realizable value and record the expense as cost of product and other revenue in the consolidated statements of operations and comprehensive loss. The Company prepays for certain manufacturing costs, including the raw materials to its CMOs which are included in prepaid manufacturing on the consolidated balance sheet. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for repairs and maintenance are expensed as incurred. Depreciation expense is recognized using the straight-line method over the estimated useful lives, which are typically: Asset Category Estimated Useful Life Computer equipment and software 3 years Furniture and fixtures 5 years - 7 years Laboratory and other equipment 7 years Leasehold improvements Shorter of the useful life or remaining lease term Maintenance and repairs to an asset that do not improve or extend its life are charged to operations. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the Company's consolidated statements of operations and comprehensive loss. Intangible Asset The Company maintains a definite-lived intangible asset related to developed product rights for Auryxia. The intangible asset was initially recorded at fair value and is stated net of accumulated amortization. The Company amortizes its intangible asset that has a finite life using the straight-line method. Amortization for the Company’s intangible asset is recorded over its remaining estimated useful life, which as of December 31, 2023 is estimated to be six years . Goodwill Goodwill reflects the excess purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is evaluated for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The Company compares the fair value of its reporting unit to its carrying value. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of its reporting unit, the Company would record an impairment loss equal to the difference. As described above, the Company operates in one operating segment which the Company considers to be the only reporting unit. Akebia Therapeutics, Inc. | Form 10-K | Page 135 Table of Content s Impairment of Long-Lived Assets and Intangible Assets Subject to Amortization Long-lived assets primarily include property and equipment, intangible assets. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company did not recognize any impairment losses on long-lived assets for the years ended December 31, 2023 and 2022, respectively. Leases The Company made an accounting policy election not to recognize leases with an initial term of twelve months or less within its consolidated balance sheets and to recognize those lease payments as an expense on a straight-line basis in its consolidated statements of operations and comprehensive loss. The Company also made the accounting policy election not to separate the non-lease components from the lease components for its building leases and, rather, account for each non-lease component and lease component as a single component. The Company determines if an arrangement is a lease at inception. An arrangement is determined to contain a lease if the contract conveys the right to control the use of an identified property, plant or equipment for a period of time in exchange for consideration. If the Company can benefit from the various underlying assets of a lease on their own or together with other resources that are readily available, or if the various underlying assets are neither highly dependent on nor highly interrelated with other underlying assets in the arrangement, they are considered to be a separate lease component. In the event multiple underlying assets are identified, the lease consideration is allocated to the various components based on each of the component’s relative fair value. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the leasing arrangement. The right-of-use asset and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when readily determinable and uses an estimate of its incremental borrowing rate when the implicit rate is not readily determinable based upon the available information at the commencement date of lease inception. The incremental borrowing rate is determined using a credit rating scoring model to estimate the Company’s credit rating, adjusted for collateralization. The calculation of the right-of-use asset includes any lease payments made and excludes any lease incentives. If a lease includes an option to extend or terminate the lease, the Company reflects the option in the lease term if it is reasonably certain the Company will exercise the option. The Company’s operating leases are reflected in operating right-of-use assets, accrued expenses and other current liabilities and long-term operating lease liabilities in its consolidated balance sheets. Derivative Financial Instruments The Company accounts for derivative financial instruments as either equity or liabilities in accordance with ASC Topic 815, Derivatives and Hedging , or ASC 815, based on the characteristics and provisions of each instrument. Embedded derivatives are required to be bifurcated from the host instruments and recorded at fair value if the derivatives are not clearly and closely related to the host instruments on the date of issuance. Derivative instrument liabilities are classified in the consolidated balance sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The embedded derivatives are revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense in the consolidated statements of operations and comprehensive loss. The derivative liability recorded in connection with the Company’s prior Loan Agreement with Pharmakon was classified as a liability in the Company’s consolidated balance sheets. See Note 3, Fair Value Measurements , and Note 7, Indebtedness , for more information. Liability Related to Sale of Future Royalties The Company accounts for the liability related to sale of future royalties as a debt financing, amortized under the effective interest rate method over the estimated life of the related expected royalty stream. The liability related to sale of future royalties and the debt amortization are based on the Company’s current estimates of future royalties expected to be paid over the life of the arrangement. The Company will periodically assess the expected royalty payments. To the extent the Company’s estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis. In the event the Company's estimates of future royalties are less Akebia Therapeutics, Inc. | Form 10-K | Page 136 Table of Content s than the proceeds from the sale of future royalties, the Company will not recognize related non-cash interest expense. Non-cash royalty revenue is reflected as royalty revenue within License, collaboration and other revenue, and non-cash amortization of debt is reflected as interest expense in the consolidated statements of operations and comprehensive loss. See Note 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties , for more information. Refund Liability to Customer The Company accounts for the refund liability as a debt arrangement, which is recorded at net present value. When the funds were received from the customer, the Company recorded an initial discount on the refund liability and a corresponding deferred gain to the refund liability. The discount on the refund liability is being amortized to interest expense on the consolidated statement of operations and comprehensive loss and the deferred gain is being amortized to other income on the consolidated statement of operations and comprehensive loss over the expected term of the arrangement . See Note 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties , for more information. Excess Firm Purchase Commitment Liabilities At each reporting period, the Company assesses whether there are excess firm non-cancelable purchase commitment liabilities, resulting from supply agreements with third-party CMOs. The determination of excess firm purchase commitment liabilities requires judgment, including consideration of many factors, such as estimates of future product demand, current and future market conditions, impact of our loss of exclusivity, expiration and utilization of drug substance under firm purchase commitments, and contractual minimums. Inventory receipts, if any, that have been previously identified as excess are recorded as a reduction to the firm purchase commitment liability. Any changes in the firm purchase commitment liability are recorded in cost of product and other revenue in the consolidated statements of operations and comprehensive loss. Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers , or ASC 606 , which applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when, or as, the performance obligation is satisfied. The Company does not include a financing component to its estimated transaction price at contract inception unless it estimates that certain performance obligations will not be satisfied within one year. Additionally, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. Product Revenue, Net The Company recognizes product revenues on sales of Auryxia primarily attributable to a limited number of customers, including wholesale distributors as well as certain specialty pharmacy providers, in the U.S., which accounts for the largest portion of the Company's total revenue. These customers resell the Company’s product to health care providers and patients. In addition to distribution agreements with customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s product. The Company’s payment terms are consistent with prevailing practice in the respective markets in which the Company does business. Most of the Company’s customers make payments based on contract terms, which are not affected by contingent events that could impact the transaction price. Payment terms fall within the one-year guidance for the practical expedient, which allows the Company to forgo adjustment of the contractual payment amount of consideration for the effects of a significant financing component. Akebia Therapeutics, Inc. | Form 10-K | Page 137 Table of Content s The Company recognizes revenue on product sales when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon receipt of the product by the Company's customer. The Company expenses incremental costs of obtaining a contract, such as sales commissions, as and when incurred, if the expected amortization period of the asset that it would have recognized is one year or less. Sales commissions are recorded in selling, general and administrative expense in the statements of operations and comprehensive loss. Revenue from product sales is recorded at the net sales price, or Transaction Price , which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, co-pay assistance and other allowances offered within contracts between the Company and its customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products. When appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the Transaction Price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. The reserves are classified as reductions to accounts receivable, net of payable, if the trade discount and/or allowance will be credited to the customer or accrued expenses and other current liabilities or other long-term liabilities, if payable to a third-party in the consolidated balance sheets. Trade Discounts and Allowances— The Company generally provides customers with prompt pay discounts and pay fees for distribution services, such as fees for certain data that customer's provide to the Company. Trade discounts and allowances are recorded as a reduction of revenue within the consolidated statements of operations and comprehensive loss in the period the related product revenue is recognized. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and the Company will deduct the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized. Product Returns— Consistent with industry practice, subject to certain caps for certain customers, the Company generally offers customers a limited right of return which allows for the product to be returned when the product expiry is within an allowable window, when the quantity delivered is different than quantity ordered, the product is damaged in transit prior to receipt by the customer or is subject to a recall. This right of return generally lapses once the product is provided to a patient or generally, if the bottle has been opened. The Company estimates the amount of its product sales that may be returned and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return reserve using available industry data and its own historical return information, including its visibility into the estimated inventory remaining in the distribution channel. Provider Chargebacks and Discounts— Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by customers, and the Company generally issues credits for such amounts within a few weeks of the customer’s resale of the product. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel at each reporting period end that the Company expects will be sold to qualified healthcare providers, and chargebacks that customers have claimed but for which the Company has not yet issued a credit. Commercial and Medicare Part D Rebates— The Company contracts with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates the rebates for commercial and Medicare Part D payors based upon (i) its contracts with the payors and (ii) information obtained from its customers and other third parties regarding the payor mix for Auryxia. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of an accrued liability. Other Government Rebates— The Company is subject to discount obligations under state Medicaid programs and other government programs. The Company estimates its Medicaid and other government programs rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment Akebia Therapeutics, Inc. | Form 10-K | Page 138 Table of Content s of a current liability which is included in accrued expenses and other current liabilities in the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period. Other Incentives— The Company offers a voluntary patient co-pay assistance program, which provides financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on actual claims processed during a given period plus an estimate of the amount the Company expects to pay based on historical utilization rates for the product that has been recognized as revenue but is estimated to be remaining in in the distribution channel at the end of each reporting period. License, Collaboration and Other Revenues The Company enters into license and collaboration agreements within the scope of ASC 606, under which it licenses certain rights to its product candidates to third parties. The terms of these arrangements typically include the following: (i) non-refundable, up front licenses fees associated with the licensing of intellectual property; (ii) development, regulatory and commercial milestone payments; (iii) drug product the Company supplies in connection with certain license and collaboration agreements and (iv) royalties earned on net sales of licensed products. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company implements the five-step model noted above. As part of the accounting for these arrangements, the Company develops assumptions that require judgment to determine whether the individual promises should be accounted for as separate performance obligations or as a combined performance obligation, and to determine the stand-alone selling price for each performance obligation identified in the contract. A deliverable represents a separate performance obligation if both of the following criteria are met: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Licenses of Intellectual Property If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Milestone Payments At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to assess the milestone as probable of being achieved. There is considerable judgement involved in determining whether a milestone is probable of being reached at each specific reporting period. Milestone payments that are not within the control of the Company or the customer, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenues as, or when, the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment. Akebia Therapeutics, Inc. | Form 10-K | Page 139 Table of Content s Drug Product Supply Collaboration and license arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as a separate performance obligation. If the Company is entitled to additional payments when the licensee exercises these options, any payments are recorded in license, collaboration and other revenues when the licensee obtains control of the goods, which is generally upon delivery. Royalties The Company will recognize sales-based royalties, including milestone payments based on the level of net sales, at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Collaborative Arrangements The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements, or ASC 808 . Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements. The Company considers the guidance in ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions , in determining the appropriate treatment for the transactions between the Company and its collaborative partners and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. To the extent product revenue is generated from the collaboration, the Company recognizes its share of the net sales on a gross basis if the Company is deemed to be the principal in the transactions with customers, or on a net basis if the Company is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 606. Cost of Goods Sold Cost of goods sold, or COGS , includes costs closely correlated or directly related to the costs to manufacture commercial drug product for Auryxia, including costs paid to the Company's contract manufacturing organizations, or CMOs , as well as indirect costs. Direct and indirect costs include fees for packaging, shipping, insurance and quality assurance, idle capacity charges, routine testing costs, routine ongoing efforts to improve existing commercial products, reserves for excess inventory, write-offs for inventory that fails to meet specifications or is otherwise no longer suitable for commercial sale, including scrap, changes in firm purchase commitment liability and royalties due to the licensor of Auryxia related to U.S. and Japan product sales recognized during the period. In addition, COGS includes the amortization of development product rights for the Auryxia intangible asset. The Company also includes personnel-related costs, including salaries and bonuses, employee benefits and stock-based compensation attributable to employees in particular functions and associated directly with the manufacturing of our commercial products. Further, the Company includes in COGS costs to manufacture drug product provided to customers for which we have a license agreement. Cost of goods sold for a newly launched product may not include the full cost of manufacturing until the initial pre-launch inventory is depleted, and additional inventory is manufactured and sold. Until the Company receives regulatory approval for vadadustat, the Company records expenses incurred for the manufacture of pre-launch inventory that could potentially support a U.S. launch as R&D expense. The costs associated with the pre-launch inventory for the Medice Territory was expensed to R&D through April 2023 when marketing authorization was received. The costs incurred to manufacturer vadadustat for the Medice Territory after the marketing approval in the Medice Territory is capitalized in inventory. Therefore, the pre-launch inventory costs are not included in COGS. Research and Development Expenses R&D costs are expensed as incurred. Internal R&D expenses are comprised of costs incurred in providing R&D activities, including salaries and bonuses, employee benefits, stock-based compensation for personnel engaged in R&D activities. In addition, they include facility costs, including the laboratory and an allocation of office space for utilization by R&D staff, depreciation expense on the laboratory equipment as well as other direct costs such as lab supplies and equipment. External R&D costs include development of potential new manufacturing processes and methods for both commercial and non-commercial products, conceptual formulation and design of possible product and process alternatives, research compounds and clinical manufacturing costs, costs incurred for consultants and other outside services, such as data Akebia Therapeutics, Inc. | Form 10-K | Page 140 Table of Content s management and statistical analysis support and materials and supplies used in support of the clinical and preclinical programs and costs paid to clinical resource organizations, or CRO , including investigative sites that conduct the Company's clinical trials. Non-refundable advance payments for goods and services for both Auryxia and vadadustat are recorded in prepaid and other current assets in the consolidated balance sheets and expensed when the activity is performed or when the goods are received. In addition, the costs associated with pre-launch inventory, including the cost of raw materials, costs paid to contract manufacturers for inventory manufacturing, freight and custom charges for vadadustat are expensed as R&D prior to regulatory approval. For the years ended December 31, 2023 and 2022, material and production related costs of pre-approval inventory recorded to R&D was $ 6.4 million and $ 7.6 million, respectively. Selling, General and Administrative Expenses Selling, general and administrative, or SG&A , expenses consist primarily of compensation for personnel, including stock-based compensation related to commercial, marketing, executive, finance and accounting, information technology, corporate and business development and human resource functions. Other SG&A expenses include costs for marketing initiatives for the Company's commercial products, market research and analysis on the Company's commercial and product and potential product candidates, conferences and trade shows, travel expenses, professional services fees (including legal, patent, accounting, audit, tax, and consulting fees), insurance costs, general corporate expenses and allocated facilities-related expenses, including rent and maintenance of facilities. Costs associated with advertising are expensed in the period incurred and are included in selling, general and administrative expenses. For the years ended December 31, 2023 and 2022, advertising expenses totaled $ 1.0 million and $ 6.7 million, respectively, all related to the Company's U.S. sales of its commercial product Auryxia. Patent Costs All patent-related costs incurred in connection with the filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Such amounts incurred are classified as SG&A expenses in the accompanying consolidated statements of operations and comprehensive loss. Stock-Based Compensation The Company’s stock-based compensation program allows for grants of common stock options, restricted stock awards, performance-based restricted stock units, or PSUs, stock appreciation rights, or SARs and restricted stock units. Grants are awarded to employees and non-employees, including directors. The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation , or ASC 718 . ASC 718 requires all stock-based payments to employees and non-employees, including modifications to existing stock awards, to be recognized in the statements of operations and comprehensive loss based on their fair values. The Company estimates the fair value of options granted using the Black-Scholes option pricing model, or Black-Scholes . The Company uses the market price at the time of grant to determine the fair value of restricted stock awards and performance-based restricted stock awards. The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Prior to 2017, due to the lack of company-specific historical and implied volatility data for trading the Company’s stock in the public market, the Company had based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility was calculated based on a period of time commensurate with the expected term assumption. The Company uses the simplified method as prescribed by the Securities and Exchange Commission, or SEC , Staff Accounting Bulletin No. 107, Share-Based Payment , to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to non-employees, the Company utilizes the contractual term of the arrangement as the basis for the expected term assumption. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company recognizes forfeitures as they occur. The Company’s stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards to employees and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term, and is adjusted for pre-vesting forfeitures in the period in which the forfeitures occur. Compensation expense related to awards to employees and non-employees with performance-based vesting conditions is recognized based on the grant date Akebia Therapeutics, Inc. | Form 10-K | Page 141 Table of Content s fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable. For awards with performance conditions in which the award does not vest unless the performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that achievement of the performance condition is probable. If the Company concludes that vesting is probable, it recognizes expense from the date it reaches this conclusion through the estimated vesting date. Income Taxes Income taxes are recorded in accordance with FASB Topic 740, Income Taxes , or ASC 740 , which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. All deferred taxes as of December 31, 2023 and 2022 are classified as non-current within the income tax provision. See Note 15, Income Taxes , for further information. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances. As of December 31, 2023 and 2022, the Company does no t have any significant uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Net Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation common stock options, stock appreciation rights, warrants and RSUs as well as restricted stock, if the Company was to issue any, are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented. Diluted net income per share is calculated by dividing the net income by the weighted-average common shares outstanding for the period, including any dilutive effect from outstanding options, warrants, restricted stock and RSUs using the treasury stock method. Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or CODM , or decision-making group, in deciding how to allocate resources and in assessing performance. The Company operates its business in a single segment and as one reporting unit, which is how its chief operating decision maker (who is the Company's president and chief executive officer) reviews financial performance and allocates resources. The Company views its operations as and manages its business in one operating segment. Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . ASU 2023-09 requires public companies to annually (i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for the annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating ASU 2023-09 and does not expect it to have a material effect on the Company’s consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures . ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the CODM and included within the segment measure of profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. The Company is currently reviewing the impact that the adoption of ASU 2023-07 may have on its consolidated financial statements and disclosure. Akebia Therapeutics, Inc. | Form 10-K | Page 142 Table of Content s 3. FAIR VALUE MEASUREMENTS 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): December 31, 2023 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 1,504 — — $ 1,504 December 31, 2022 Level 1 Level 2 Level 3 Total 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 7, Indebtedness , the Company’s prior Loan Agreement with Pharmakon contained certain provisions that change the underlying cash flows of the debt instrument, including the acceleration of the obligations under the Pharmakon 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. The Company concluded that these features of the Pharmakon Loan Agreement represent a single compound embedded debt derivative required to be bifurcated from the debt host instrument and re-measured at fair value on a quarterly basis. The Company classified the embedded debt derivative as a non-current liability in its consolidated balance sheets. The estimated fair value of the derivative liability on both December 31, 2023 and 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 Pharmakon Loan Agreement by Pharmakon under certain events of default. The following table reconciles the fair value of the embedded debt derivative (in thousands): Balance at December 31, 2022 $ 760 Change in fair value, recorded as other income ( 760 ) Balance at December 31, 2023 $ — 4. INVENTORIES AND PREPAID MANUFACTURING Akebia Therapeutics, Inc. | Form 10-K | Page 143 Table of Content s Inventories consists of the following (in thousands): December 31, Inventories, current: 2023 2022 Work-in-process $ 4,297 $ 7,892 Finished goods 11,394 13,676 Inventories, current $ 15,691 $ 21,568 Long-term inventories included in other long-term assets: Raw materials 1,143 610 Work-in-process 8,260 — Inventories, long-term $ 9,403 $ 610 Total inventories $ 25,094 $ 22,178 For the period ended December 31, 2023 and 2022, inventories consisted primarily of inventories related to the Company's commercial product, Auryxia. As of December 31, 2023, the Company had $ 0.5 million of prepaid manufacturing costs for Auryxia drug substance and manufacturing costs. The Company did not have any prepaid manufacturing related to Auryxia as of December 31, 2022. Inventory written down for Auryxia as a result of excess, obsolescence, scrap or other reasons charged to cost of product and other revenue in the consolidated statements of operations and comprehensive loss totaled approximately $ 1.6 million and $ 30.2 million during the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, the Company recorded $ 4.3 million of lowered cost of product and other revenue due to the Company's ability to commercially sell inventory previously written down to zero, its then net realizable value. As of December 31, 2023, the Company has an additional $ 12.3 million of inventory previously written down inventory to its then net realizable value of zero for drug product that may be salable in future periods. Pre-Launch Inventory The Company records advance payments for vadadustat active pharmaceutical ingredient, or API , or drug substance (raw materials) it expects to use for the potential U.S. launch and Medice Territory as prepaid manufacturing costs. Upon the quality release of the vadadustat batches and transfer of title to the Company from the CMO, the cost of the pre-launch inventory, including the manufacturing costs is expensed to R&D. As of December 31, 2023, the Company had $ 14.0 million of prepaid manufacturing costs for vadadustat drug substance expected to be used in the potential U.S. launch of vadadustat included in prepaid expenses and other current assets on the consolidated balance sheet. See Note 6, Additional Balance Sheet Detail , for further information. 5. INTANGIBLE ASSET AND GOODWILL Intangible Asset Intangible asset, net of accumulated amortization, prior impairments and adjustments as of December 31, 2023 and 2022 consisted of the following (in thousands): December 31, 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 $ ( 178,663 ) $ 36,042 $ 72,084 6 years The Company recorded $ 36.0 million in amortization expense during each of the years ended December 31, 2023 and 2022 related to the developed product rights for Auryxia. Goodwill As of December 31, 2023 and 2022, the Company had goodwill of $ 59.0 million recorded in connection with the December 2018 merger with Keryx. The Company has not identified any goodwill impairment to date. 6. ADDITIONAL BALANCE SHEET DETAIL Prepaid expenses and other current assets are as follows (in thousands): Akebia Therapeutics, Inc. | Form 10-K | Page 144 Table of Content s December 31, Description 2023 2022 Prepaid manufacturing $ 14,489 $ 15,615 Other 5,754 17,249 Total prepaid expenses and other current assets $ 20,243 $ 32,864 See Note 4, Inventories, for further information on prepaid manufacturing expenses. Accrued expenses and other current liabilities are as follows (in thousands): December 31, Description 2023 2022 Product revenue allowances $ 22,940 $ 26,268 Product return reserves, current portion 5,420 7,789 Compensation and related benefits 8,216 11,894 Accrued manufacturing costs 5,555 4,310 BioVectra termination fees, current portion 7,500 — Operating lease liabilities, current portion 4,491 4,744 Royalties due to Panion 3,989 3,804 Liability related to sale of future royalties, current portion 2,048 — Professional fees 1,909 1,886 Clinical trial costs 328 5,755 Restructuring costs, current portion 737 2,751 Other 4,602 6,576 Total accrued expenses and other current liabilities $ 67,735 $ 75,777 Other long-term assets are as follows (in thousands): December 31, Description 2023 2022 Long-term inventories $ 9,403 $ 610 Restricted cash 1,654 2,703 Other 1,366 2,059 Total other long-term assets $ 12,423 $ 5,372 See Note 4, Inventories, for further information on long-term inventories. 7. INDEBTEDNESS Entry into BlackRock Loan Facility On January 29, 2024, the Closing Date, the Company entered into the Agreement for the Provision of a Loan Facility, or the BlackRock Credit Agreement, with Kreos Capital VII (UK) Limited , or Kreos , which are funds and accounts managed by BlackRock Inc., collectively, BlackRock , and provides for a senior secured term loan facility in the aggregate principal amount of up to $ 55.0 million, or the Term Loan Facility . The Term Loan Facility is available in three tranches (i) Tranche A — $ 37.0 million was funded on the Closing Date and used to repay the Pharmakon Term Loans; (ii) Tranche B — $ 8.0 million is available in a single draw through December 31, 2024, and (ii) Tranche C — $ 10.0 million is available in a single draw through December 31, 2024, collective the Term Loans . Tranche B and C are available subject to certain conditions, including the Company's receipt of marketing approval for vadadustat from the FDA and in the case of Tranche C, receipt of a certain amount of cumulative gross cash proceeds after the Closing Date in the form of equity or equity linked securities in one or more series of transactions. The BlackRock Term Loan Facility has an initial maturity date of March 31, 2025, which will be automatically extended to January 29, 2028, if Company receives FDA approval for vadadustat on or prior to June 30, 2024, or the BlackRock Maturity Date . The Company is required to make interest-only payments until December 31, 2026, after which the Company will begin paying equal monthly principal on the first calendar day of each month, or the BlackRock Interest Only Period . In the event of certain prespecified events, the repayment schedule will be accelerated. For example, if FDA approval of vadadustat is not Akebia Therapeutics, Inc. | Form 10-K | Page 145 Table of Content s obtained on or prior to June 30, 2024, the BlackRock Interest Only Period will automatically terminate on October 1, 2024, and the Company will be required to repay the Term Loans in seven equal monthly payments (comprised of principal and interest), commencing on October 1, 2024 and ending on the BlackRock Maturity Date. The Term Loan Facility will accrue interest at a floating annual rate equal to the sum of (i) term Secured Overnight Financing Rate, or SOFR , for a tenor of one month (subject to a floor of 4.25 % per annum) plus (ii) a margin of 6.75 % per annum (subject to an overall cap of 15.00 % per annum on the all-in interest rate). During the continuance of any payment event of default under the BlackRock Credit Agreement, the interest rate on such overdue sum will automatically increase by an additional 3.0 % per annum, and may be subject to an additional late fee of 2.0 % of such overdue sum. The Term Loan Facility also includes transaction fees ranging from 1.00 % to 1.25 % of the draw down amount as well exit fees of 0.75 % of the amount funded to the relevant tranche. If the Company prepays the outstanding loan prior to maturity, it will be required to pay a prepayment fee ranging from 1.0 % to 4.0 % of the amount prepaid. If prepayment is made during the first year, the Company also is required to pay the amount of otherwise due interest payments for the twelve-month period following prepayment. The BlackRock Term Loan Facility is secured by substantially all of the existing and after-acquired assets of the Company, including intellectual property. The BlackRock Credit Agreement requires the Company to (i) maintain a minimum aggregate cash balance of $ 15.0 million in one or more controlled accounts or (ii) trailing twelve-month revenue of $ 150.0 million, both of which are measured monthly. The BlackRock Credit Agreement contains various affirmative and negative covenants that limit the Company's ability to enter into certain transactions. On the Closing Date, Kreos Capital VII Aggregator SCSp, an affiliate of Kreos, or the Warrant Holder , received a warrant to purchase 3,076,923 shares of the Company’s common stock, at an exercise price per share of $ 1.30 , and upon borrowing of Tranche C, the Company will become obligated to issue additional warrants to purchase 1,153,846 shares of the Company’s common stock at an exercise price per share of $ 1.30 . Each warrant shall be exercisable for eight years from the date of issuance. The Company's net proceeds from the Tranche A Loan were approximately $ 34.5 million, after deducting debt issuance costs, fees and expenses. The amounts classified on the consolidated balance sheet as of December 31, 2023, are reflective of the current and long-term portions due under the repayment schedule due to Blackrock. Other Agreements Accounted for as Debt The Company has a liability related to the sale of future liabilities which is accounted for as a debt arrangement. See Note 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties , for further information. The Company has a refund liability with Vifor (International) Ltd. (now a part of CSL Limited), or CSL Vifor, which is also accounted for as a debt arrangement. See Note 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties , for further information. Pharmakon Term Loan (Extinguished January 29, 2024) On November 11, 2019, the Company, with Keryx as guarantor, entered into a loan agreement, or the Pharmakon Loan Agreement , with BioPharma Credit PLC as collateral agent and a lender, or the Collateral Agent , and BioPharma Credit Investments V (Master) LP as a lender, 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 Pharmakon Loan Agreement, as amended, consisted of a secured term loan facility in an aggregate amount of up to $ 100.0 million, or Pharmakon Term Loans , which was made available under two tranches: (i) Tranche A — $ 80.0 million and (ii) Tranche B — the second tranche of $ 20.0 million. 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 $ 20.0 million on Tranche B as well as a $ 0.5 million prepayment fee under the terms of the Pharmakon Loan Agreement. During the year ended December 31, 2022, the Company recorded a debt extinguishment loss of $ 0.9 million. As of December 31, 2023, the Company had $ 35.0 million of principal outstanding. The Pharmakon Term Loans, as amended, bore interest through maturity at a variable rate based on the three month 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 Pharmakon Loan Agreement, or Fourth Amendment . As of December 31, 2023, the three-month SOFR rate was no longer subject to the SOFR cap, therefore, the Company's interest rate was 13.13 %. The Company recognized approximately $ 6.0 million and $ 9.5 million of interest expense related to the Pharmakon Loan Agreement during Akebia Therapeutics, Inc. | Form 10-K | Page 146 Table of Content s the years ended December 31, 2023 and 2022, respectively. Unamortized discount and issuance costs were $ 0.3 million as of December 31, 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 year ended December 31, 2023, the Company made quarterly principal payments totaling $ 32.0 million under the Pharmakon Term Loans. The Pharmakon Loan Agreement was secured by a first priority lien on certain assets of the Company, including Auryxia and certain related assets, cash and certain equity interests held by the Company. The Pharmakon Loan Agreement contained 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 Pharmakon Loan Agreement, as amended, required 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 occurred, including a qualification as a going concern, and was continuing under the Pharmakon Loan Agreement, the Collateral Agent would have been entitled to take enforcement action, including acceleration of amounts due under the Pharmakon Loan Agreement. Under certain circumstances, a default interest rate would have applied on all outstanding obligations during the occurrence and continuance of an event of default. As of December 31, 2023 and 2022, the Company was in compliance with the covenants under the Pharmakon Loan Agreement. Future principal payments pursuant to the contractual terms of the Pharmakon Loan Agreement, as amended, as of December 31, 2023 were as follows (in thousands): Years ended December 31, Amounts 2024 $ 17,500 2025 17,500 Total before unamortized discount and issuance costs 35,000 Less: unamortized discount and issuance costs ( 317 ) Total term loans $ 34,683 As it relates to 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 derivative liability related to the Company’s Pharmakon Loan Agreement was $ 0 and $ 0.8 million as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company recognized a $ 0.8 million and $ 1.1 million gain, respectively, in other income in the consolidated statements of operations and comprehensive loss related to the decrease in the fair value of the embedded debt derivative. On January 29, 2024, using the proceeds from the BlackRock Credit Agreement, the Company paid the then current outstanding principal balance under the Pharmakon Term Loan of $ 35.0 million, plus the outstanding interest and a prepayment fee of $ 0.2 million. 8. DEFERRED REVENUE, REFUND LIABILITY AND LIABILITY RELATED TO SALE OF FUTURE ROYALTIES CSL Vifor License Agreement Summary of Agreement On February 18, 2022, the Company entered into a Second Amended and Restated License Agreement, or the Vifor Agreement , with CSL Vifor which amended and restated the License Agreement dated as of May 12, 2017, or the Original License Agreement . The Vifor Agreement 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 U.S., or Vifor Territory . The Company plans to market vadadustat in the U.S., if approved, including to the Supply Group, and sell vadadustat directly to organizations outside the Supply Group. CSL Vifor has agreed that it would not sell or otherwise supply vadadustat until the FDA has granted regulatory approval for vadadustat for the treatment of anemia due to Akebia Therapeutics, Inc. | Form 10-K | Page 147 Table of Content s 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 profit, 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 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 thirty 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 Agreements In connection with the Original License Agreement, in May 2017, 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. In February 2022, in connection with the Vifor Agreement, the Company sold an aggregate of 4,000,000 shares of its common stock, or 2022 Shares , to CSL Vifor for a price per share of $ 5.00 for a total of $ 20.0 million. The $ 18.3 million representing the premium over the closing stock price, or $ 4.7 million for the 2017 Shares and $ 13.6 million for the 2022 Shares, represent consideration related to the Vifor Agreement. CSL Vifor agreed to a lock-up restriction to not sell or otherwise dispose of the 2017 Shares or the 2022 Shares for a period of time, which restrictions have expired with respect to both the 2017 Shares and the 2022 Shares. The 2017 Shares and 2022 Shares are subject to standstill agreement and are subject to voting agreements. 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. Deferred Revenue Recognition The Company evaluated the elements of the Vifor Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, CSL Vifor, is a customer. The Company identified one performance obligation under the Vifor Agreement at inception, which is the non-sublicensable, non-transferrable license under certain of the Company’s intellectual property to (i) sell vadadustat solely to the Supply Group, (ii) sell vadadustat to Designated Wholesalers solely for resale to members of the Supply Group, (iii) conduct medical affairs with respect to vadadustat in the Vifor Territory in the field during the term of the Vifor Agreement and (iv) use the Akebia Trademark solely in connection with the sale of vadadustat. The transaction price of $ 43.3 million was 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. Pursuant to the Vifor Agreement, these payments are non-refundable and non-creditable against any other amount due to the Company. However, 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 and the premiums paid by CSL Vifor on the First Investment Agreement and the Second Investment Agreement. Given the uncertainty associated with a potential future approval of vadadustat by the FDA, and whether, if approved, vadadustat would be included in certain reimbursement bundles by CMS, the Company constrained the entire transaction price at inception. Until the license is delivered, the transaction price of $ 43.3 million will remain in long-term deferred revenue in the accompanying consolidated balance sheets. (see Note 12, License, collaboration and other revenue for further information) Refund Liability to Customer/Working Capital Fund Pursuant to the Vifor Agreement, CSL Vifor contributed $ 40.0 million to a working capital fund, or Working Capital Fund , established to fund approximately 50 % of the Company’s costs of purchasing vadadustat from its contract manufacturers 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 will be reviewed at specified intervals and is adjusted based on a number of factors including outstanding supply commitments for vadadustat for the Vifor Territory 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 Akebia Therapeutics, Inc. | Form 10-K | Page 148 Table of Content s 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 that the working capital fund 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 to the customer and a corresponding deferred gain to the refund liability to customer in the consolidated balance sheet. The discount on the note payable 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 $ 3.1 million and $ 3.4 million for the years ended December 31, 2023 and 2022, respectively. The amortization of the deferred gain was $ 4.0 million and $ 2.4 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the $ 40.1 million total 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. Liability Related to Sale of Future Royalties In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or HCR , or Royalty Agreement , 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. The Royalty Interest Payments are subject to an annual maximum “cap” of $ 13.0 million, after which the Company will receive 85 % of the Royalty Interest Payments for the remainder of that year. The Royalty Interest Payments are also subject to an aggregate maximum “cap” of $ 150.0 million, after which the Royalty Interest Payments will revert back to the Company. The Company was eligible to receive an additional $ 5.0 million in each year from 2021 through 2023 under the Royalty Agreement if specified annual sales milestones were achieved for vadadustat in the MTPC Territory, subject to the satisfaction of certain customary conditions. The sales milestones for vadadustat in the MTPC Territory were not achieved for 2023, 2022 or 2021. The Company retains the right to receive all potential future regulatory milestones for vadadustat under the MTPC Agreement. The Royalty Agreement will terminate on the earlier of the date on which HCR has received (i) the last Royalty Interest Payment or (ii) payment by the Company of an amount equal to the Aggregate Cap minus the aggregate amount of all Royalty Interest Payments actually received by HCR. At the transaction date, the Company recognized the proceeds received from HCR of $ 44.8 million (net of certain transaction expenses) as a liability and is amortizing it using the effective interest method over the life of the arrangement. The liability related to sale of future royalties and the debt amortization are based on the Company’s current estimates of future royalties expected to be paid over the life of the arrangement. To the extent the Company’s estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis. In the event the Company's estimates of future royalties are less than the proceeds from the sale of future royalties, the Company will not recognize related non-cash interest expense. On a quarterly basis, the Company assesses the expected royalty payments. The annual effective interest rate as of December 31, 2023 was 0 % and, therefore the Company did not recognize any non-cash interest expense in the consolidated statements of operations and comprehensive loss. As a result of the Company's ongoing involvement in the cash flows related to the royalties and sales milestones in the MTPC Territory, the Company will continue to account for the royalties received as non-cash royalty revenue which is reflected within license, collaboration and other revenue in the consolidated statements of operations and comprehensive loss. During the year ended December 31, 2023 and 2022, the Company paid $ 2.0 million and $ 1.8 million of royalties to HCR and as of year end the balances were is as follows (in thousands): December 31, Liability related to the sale of future royalties: 2023 2022 Current portion (included in accrued expenses and other current liabilities) $ 2,048 $ — Long-term portion 54,013 57,484 Total liability related to sale of future royalties $ 56,061 $ 57,484 The Royalty Agreement requires the Company to take certain actions, including actions with respect to the Royalty Interest Payments, the MTPC Agreement, and the Company's intellectual property. The Royalty Agreement also contains certain representations and warranties, covenants, indemnification obligations, events of default and other provisions that are Akebia Therapeutics, Inc. | Form 10-K | Page 149 Table of Content s customary for a royalty monetization transaction of this nature. In addition, the Company granted HCR a precautionary security interest in connection with the Royalty Interest Payments. MTPC Supply Agreement See Note 12, License, Collaboration and Other Revenues , for further information on short-term deferred revenue as of December 31, 2022 that was recognized during the year ended December 31, 2023. 9. LEASES Cambridge Leases Under the Cambridge Lease, the Company leases approximately 65,167 square feet of office, storage and laboratory space in Cambridge, Massachusetts, which are non-cancelable operating leases. 5,951 square feet of the laboratory space is set to expire on January 31, 2025, with an extension option for one additional period through September 11, 2026 and 59,216 office and storage space are set to expire on September 11, 2026, with one five-year extension option available. In addition to rent, certain leases require the Company to pay additional amounts for taxes, insurance, maintenance, and other operating expenses. All of the Company's leases are classified as operating leases. The renewal option in this real estate lease was not included in the calculation of the operating lease asset and operating lease liability as the renewal is not reasonably certain. The lease agreements do not contain residual value guarantees. The components of lease right-of-use assets and lease liabilities are included in the consolidated balance sheets. Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate when measuring operating lease liabilities. 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, Leases , or the effective date of any subsequent lease term extensions. As of December 31, 2023, the remaining lease term for the Cambridge Leases was 2.70 years. Operating lease costs were $ 5.7 million and $ 7.1 million for the years ended December 31, 2023 and 2022, respectively. Cash paid for amounts included in the measurement of operating lease liabilities were $ 5.9 million and $ 7.2 million for the years ended December 31, 2023 and 2022, respectively. The security deposit in connection with the Cambridge Lease is $ 1.7 million in the form of a letter of credit, which is included as restricted cash in other long-term assets in the Company's consolidated balance sheet as of December 31, 2023. Sublease and Former Boston Lease Previously, the Company leased 27,924 square feet of office space in Boston, Massachusetts, or the Boston Lease , under a non-cancelable operating lease that was set to expire in July 2031. The Company subleased the entire Boston Lease, effective October 2019 through February 2023. The Company recorded $ 0.3 million and $ 1.8 million in rental income as other income in the consolidated statements of operations and comprehensive loss during the years ended December 31, 2023 and 2022, respectively. In May 2023, pursuant to a Lease Assignment Agreement, or the Lease Assignment Agreement , the Company assigned all of its rights, title, and interest in, to, and under the Boston Lease to LG Chem Life Sciences Innovation Center, Inc., or LG Chem , and made a payment to LG Chem of $ 1.3 million. As of May 2023, LG Chem assumed all of the rights and obligations of the Company under the Boston Lease and 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 $ 1.3 million payment as a loss on lease termination in the consolidated statements of operations and comprehensive loss of $ 0.5 million. Under the terms of the Lease Assignment Agreement the Company was entitled to, and received back, its security deposit of $ 1.0 million which had been recorded as restricted cash in other long-term assets in the Company's consolidated balance sheet as of December 31, 2022. Akebia Therapeutics, Inc. | Form 10-K | Page 150 Table of Content s Future Lease Commitments Future commitments under non-cancelable Cambridge Leases are as follows (in thousands): Operating Leases 2024 $ 5,261 2025 5,819 2026 3,613 Total lease commitments $ 14,693 Less: present value adjustment ( 1,255 ) Current and long-term operating lease liabilities $ 13,438 10. COMMITMENTS AND CONTINGENCIES Manufacturing and Unconditional Purchase Commitment Agreements Siegfried Manufacturing The Company's contractual obligations include a commercial supply agreement with Siegfried Evionnaz, or Siegfried , to supply commercial drug substance for Auryxia. The Company and Siegfried entered into a Master Manufacturing Services and Supply Agreement, most recently amended in February 2023, or the Siegfried Agreement , under which the Company has agreed to purchase a minimum quantity of drug substance of Auryxia, annually at a predetermined price. As of December 31, 2023, the Company had a minimum total commitment of approximately $ 29.6 million through the end of 2026. The term of the Siegfried Agreement was set to expire on December 31, 2024, subject to the Company’s option to extend the term through December 31, 2026. The Company provided Siegfried with written notice of its election to extend the term of the Siegfried Agreement through December 31, 2026. The Siegfried Agreement provides the Company and Siegfried with certain early termination rights. In connection with the extension of the Siegfried Agreement and the related increase in contractual purchase commitments, the Company recorded an excess firm purchase commitment liability in other long-term liabilities of $ 1.5 million and corresponding expense to cost of product and other revenue during the year ended December 31, 2023. Patheon Manufacturing In March 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. Under the Patheon Agreement, the Company 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 December 31, 2023, the Company had no minimum commitment with Patheon, however, as estimated global demand fluctuates, the Company may have future obligations under the Patheon Agreement. WuXi STA Manufacturing In April 2020, the Company entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec, or WuXi STA , or, as amended, the WuXi STA DS Agreement . Under the WuXi STA DS Agreement, WuXi STA will manufacture vadadustat drug substance for commercial use under a volume-based pricing structure through April 2, 2024. Pursuant to the WuXi STA DS Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA. As of December 31, 2023, the Company has committed to purchase $ 13.4 million of vadadustat drug substance from WuXi STA through the end of 2024. On February 10, 2021, the Company entered into a Supply Agreement with WuXi STA, or the WuXi STA DP Agreement, under which WuXi STA will manufacture and supply vadadustat drug product for commercial purposes under a volume-based pricing structure through February 10, 2025. The vadadustat drug product price is reviewed annually by the Company and WuXi STA. The Company also reimburses WuXi STA for certain reasonable expenses. 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 WuXi STA DP Agreement may be renewed or extended by mutual agreement of the Company and WuXi STA with at least eighteen 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. Akebia Therapeutics, Inc. | Form 10-K | Page 151 Table of Content s Esteve - Assigned Supply Agreement On April 9, 2019, the Company and Esteve Química, S.A., or Esteve, entered into a Supply Agreement, or the Esteve Agreement, which included the terms and conditions under which Esteve would manufacture vadadustat drug substance for commercial use under a volume-based pricing structure. On December 16, 2022, the Company, MTPC, and Esteve executed the Esteve Assignment Agreement, pursuant to which the Esteve Agreement was assigned to MTPC. The Esteve Assignment Agreement transferred the rights and obligations of the Esteve 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. BioVectra - Former Manufacturing and Unconditional Purchase Commitments Under 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, under 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. In the termination agreement, the Company and BioVectra released one another from all existing and future claims and liabilities and the return of certain materials and documents. 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 recorded in cost of product and other revenue. 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. 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 in the consolidated balance sheet on the date of the termination. 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 $ 1.9 million for the year ended December 31, 2023. In-Licensing - Panion License Agreement On April 17, 2019, the Company and Panion & BF Biotech, Inc., or Panion , entered into a second amended and restated license agreement, or Panion Amended License Agreement , which amended and restated in full the license agreement between the Company and Panion. The Panion Amended License Agreement provides the Company with an exclusive license under Panion-owned know-how and patents covering the rights to sublicense, develop, make, use, sell, offer for sale, import and export ferric citrate worldwide, excluding certain Asian-Pacific countries, or the Licensor Territory . The Panion Amended License Agreement also provides Panion with an exclusive license under Company-owned patents covering the rights to sublicense (with the Company’s written consent), develop, make, use, sell, offer for sale, import and export ferric citrate in certain countries in the Licensor Territory. Under the Panion Amended License Agreement, Panion is eligible to receive from the Company or any sublicensee royalty payments based on a mid-single digit percentage of sales of ferric citrate in the Company’s licensed territories. The Company is eligible to receive from Panion or any sublicensee royalty payments based on a mid-single digit percentage of net sales of ferric citrate in Panion’s licensed territories. The Panion Amended License Agreement terminates upon the expiration of each of the Company’s and Panion’s obligations to pay royalties thereunder. In addition, the Company may terminate the Panion Amended License Agreement (i) in its entirety or (ii) with respect to one or more countries in the Company’s licensed territory, in either case upon ninety days ’ notice. The Company and Panion also each have the right to terminate the Panion Amended License Agreement upon the occurrence of a material breach of the Panion Amended License Agreement by the other party, subject to certain cure provisions, or certain insolvency events. The Panion Amended License Agreement also provides that, on a country-by-country basis, until the second anniversary of the expiration of the obligation of the Company or Panion, as applicable, to pay royalties in a country in which such party has ferric citrate for sale on the date of such expiration, neither the other party nor its affiliates will, directly or indirectly, sell, distribute or otherwise commercialize or supply or cause to supply ferric citrate to a third party for sale or distribution in such country. The Panion Amended License Agreement includes customary terms relating to, among others, indemnification, confidentiality, remedies, and representations and warranties. In addition, the Panion Amended License Agreement provides that each of the Company and Panion has the right, but not the obligation, to conduct litigation against any infringer of certain patent rights under the Panion Amended License Agreement in certain territories. Akebia Therapeutics, Inc. | Form 10-K | Page 152 Table of Content s During the years ended December 31, 2023 and 2022, the Company incurred approximately $ 10.0 million and $ 13.8 million, respectively, in royalty payments due to Panion relating to the Company’s sales of Auryxia in the U.S. and JT and Torii’s net sales of Riona in Japan. Other Third Party Contracts The Company contracts with various organizations to conduct R&D activities with remaining contract costs to the Company of approximately $ 44.7 million at December 31, 2023. The scope of the services under these R&D 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. Loss contingency provisions are recorded for probable and estimable losses at our best estimate of a loss or, when a best estimate cannot be made, at our estimate of the minimum loss. These estimates are often developed prior to knowing the amount of the ultimate loss, require the application of significant judgment and are refined as additional information becomes known. Accordingly, we are often initially unable to develop a best estimate of loss and therefore the estimated minimum loss amount, which could be zero, is recorded. Changes in the Company’s estimates could have a material impact. Although the outcomes of potential legal proceedings are inherently difficult to predict, the Company does not expect the resolution of current legal proceedings to have a material adverse effect on its financial position, results of operations or cash flows of the Company. 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 years ended December 31, 2023 and 2022, the Company did not experience any losses related to these indemnification obligations, and no claims were outstanding as of December 31, 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. 11. 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 $ 170.3 million and $ 176.9 million for the years ended December 31, 2023 and 2022, respectively. Product revenue allowance and reserve categories were as follows: (in thousands) Chargebacks and Discounts Rebates, Fees and other Deductions Returns Total Balance at December 31, 2021 $ 1,047 $ 24,478 $ 10,065 $ 35,590 Current provisions related to sales in current year 11,412 89,095 5,603 106,110 Adjustments related to prior year sales ( 9 ) 401 ( 26 ) 366 Credits/payments made ( 11,191 ) ( 87,722 ) ( 4,719 ) ( 103,632 ) Balance at December 31, 2022 $ 1,259 $ 26,252 $ 10,923 $ 38,434 Current provisions related to sales in current year 11,138 79,648 6,181 96,967 Adjustments related to prior year sales ( 304 ) ( 1,506 ) 1,648 ( 162 ) Credits/payments made ( 10,486 ) ( 81,403 ) ( 11,836 ) ( 103,725 ) Balance at December 31, 2023 $ 1,607 $ 22,991 $ 6,916 $ 31,514 Chargebacks, discounts and estimated product returns are recorded as a reduction of revenue in the period the related product revenue is recognized in the consolidated statements 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 in the consolidated balance sheets. Estimated product returns on product sales that are not expected to be returned within one year are recorded as other long-term liabilities in the consolidated balance sheets. Akebia Therapeutics, Inc. | Form 10-K | Page 153 Table of Content s Accounts receivable, net related to product sales was approximately $ 35.9 million and $ 37.3 million as of December 31, 2023 and 2022, respectively. 12. LICENSE, COLLABORATION AND OTHER REVENUE The Company recognized the following revenues from its license, collaboration and other revenue agreements (in thousands): Years Ended December 31, Entity Description 2023 2022 Medice License and Product Supply of Vadadustat in EU $ 10,968 $ — MTPC License and Product Supply of Vadadustat in Japan 5,735 17,968 JT and Torii License and royalties related to the sale of Riona in Japan 5,394 5,291 Otsuka Terminated U.S. and International Agreements 2,225 92,276 Total License, Collaboration and Other Revenue $ 24,322 $ 115,535 The following table presents changes in the Company’s contract assets and liabilities related to license, collaboration and other revenue agreements (in thousands): Twelve Months Ended December 31, 2023 Balance at Beginning of Period Additions Deductions Balance at End of Period Contract assets: Accounts receivable (1) $ 1,901 $ 10,088 $ ( 8,656 ) $ 3,333 Prepaid expenses and other current assets $ 781 $ — $ ( 781 ) $ — Contract liability: Deferred revenue (current and long-term) $ 47,034 $ — $ (3,738) $ 43,296 Twelve Months Ended December 31, 2022 Balance at Beginning of Period Additions Deductions Balance at End of Period Contract assets: Accounts receivable (1) $ 19,094 $ 94,515 $ ( 111,708 ) $ 1,901 Prepaid expenses and other current assets $ 4,309 $ 9,550 $ ( 13,078 ) $ 781 Contract liabilities: Deferred revenue (current and long-term) $ 42,380 $ 70,044 $ ( 65,390 ) $ 47,034 Accounts payable $ 3,171 $ — $ ( 3,171 ) $ — (1) Excludes accounts receivable from product sales of Auryxia which are included in the accompanying consolidated balance sheets as of December 31, 2023 and 2022. During the years ended December 31, 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): Years Ended December 31, Revenue Recognized in the Period from: 2023 2022 Deferred revenue - beginning of the period $ 3,738 $ 29,574 Performance obligations satisfied in previous periods $ — $ — Medice License Agreement On May 24, 2023, or Medice Effective Date , the Company and MEDICE Arzneimittel Pütter GmbH & Co. KG, or Medice , entered into a License Agreement, or the Medice License Agreement , pursuant to which the Company granted to Medice an exclusive license to develop and commercialize vadadustat for the treatment of anemia in adult patients with chronic kidney disease in European Economic Area, the UK, Switzerland and Australia, or the Medice Territory . Akebia Therapeutics, Inc. | Form 10-K | Page 154 Table of Content s Under the Medice License Agreement, the Company received an up-front payment of $ 10.0 million and is eligible 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 vadadustat 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 vadadustat in such country in the Medice Territory, (b) the date of expiration of data or regulatory exclusivity for vadadustat in such country in the Medice Territory and (c) the date that is twelve years from first commercial sale of vadadustat in such country in the Medice Territory. Under the Medice License Agreement, the Company retains the right to develop vadadustat for non-dialysis patients with anemia due to chronic kidney disease in the Medice Territory. If the Company develops vadadustat for non-dialysis patients and vadadustat receives marketing approval in the Medice Territory, Medice will commercialize vadadustat for both indications in the Medice Territory. In this instance, the Company would receive 70 % of the net product margin of any sales of vadadustat in the non-dialysis patient population, unless Medice requests to share the cost of the development necessary to gain approval to market vadadustat for non-dialysis patients in the Medice Territory and the parties agree on alternative financial terms. If the Company develops vadadustat 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 vadadustat 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 context of the development of vadadustat 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 vadadustat for non-dialysis patients will be accounted for as a component of the related expense in the period incurred. The Medice License Agreement expires on the date of expiration of all payment obligations due thereunder with respect to vadadustat 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 twelve months ' prior written notice delivered on or after the date that is twelve months after the Medice Effective Date. The Medice License Agreement provides that the Company and Medice will enter into a supply agreement pursuant to which the Company will supply vadadustat to Medice for commercial use in the Medice Territory. As of December 31, 2023, the Company and Medice have not yet entered into a supply agreement. 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 identified one performance obligation in connection with its obligations under the Medice License Agreement, which is the license, 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 in the consolidated balance sheet as of December 31, 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 consolidated statement of operations and comprehensive loss during the year ended December 31, 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. Medice Letter Agreement On December 6, 2023, the Company and Medice entered into a letter agreement, or the Medice Letter Agreement , pursuant to which the Company agreed to sell to Medice a partial batch of vadadustat in order to achieve packaging validation for the Medice Territory. The Company recognizes revenue under this arrangement when risk of loss passes to Medice and delivery has occurred. During the year ended December 31, 2023, the Company recognized $ 1.0 million in collaboration revenue under the Medice Side Letter. As of December 31, 2023, there was $ 0.9 million in accounts receivable and no contract assets, payables or deferred revenue recorded in connection with the Medice Letter Agreement. Akebia Therapeutics, Inc. | Form 10-K | Page 155 Table of Content s MTPC Collaboration Agreement On December 11, 2015, the Company and Mitsubishi Tanabe Pharma Corporation, or 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 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties, for more information. Unless earlier terminated, the MTPC Agreement will continue in effect on a country-by-country basis until the later of the following: expiration of the last-to-expire patent covering vadadustat in such country in the MTPC Territory; expiration of marketing or regulatory exclusivity in such country in the MTPC Territory; or ten years after the first commercial sale of vadadustat in such country in the MTPC Territory. MTPC may terminate the MTPC Agreement upon twelve months ’ notice at any time after the second anniversary of the effective date of the MTPC Agreement. Either party may terminate the MTPC Agreement upon the material breach of the other party that is not cured within a specified time period or upon the insolvency of the other party. Under the MTPC Agreement, MTPC is required to make certain milestone payments to the Company aggregating up to approximately $ 225.0 million upon the achievement of specified development, regulatory and commercial events. The Company has received $ 10.0 million in development milestone payments. Of the $ 40.0 million in regulatory milestone payments the Company is eligible for, the Company received $ 10.0 million in relation to the Japanese NDA filing in the third quarter of 2019 and $ 15.0 million following regulatory approval of vadadustat in Japan in the third quarter of 2020. The Company is also entitled to receive up to $ 175.0 million in commercial milestone payments associated with aggregate sales of all products. In consideration for the exclusive license and other rights contained in the MTPC Agreement, MTPC made a $ 20.0 million upfront payment as well as a $ 20.5 million payment for Phase 2 studies in Japanese patients completed by the Company and reimbursed by MTPC. Additionally, the Company is entitled to receive tiered royalty payments ranging from 13 % to 20 % on annual net sales of vadadustat in the MTPC Territory, subject to reduction in certain circumstances. The Company evaluated the elements of the MTPC Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, MTPC, is a customer. The Company 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 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 and (vi) $ 5.0 million in royalties from net sales of Vafseo. The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. As of December 31, 2023, all development milestones and $ 25.0 million in regulatory milestones have been achieved. No other regulatory milestones or commercial milestones have been assessed as probable and have been fully constrained until the period in which they are achieved. 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. 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. The Company recognizes any revenue from MTPC royalties in the period in which the sales occur. The Company recognized $ 2.0 million and $ 1.8 million of revenue for royalties from the net sales of Vafseo during the years ended December 31, 2023 and 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 conditions. See Note 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties , for more information. The revenue is classified as collaboration revenue in the accompanying consolidated statements of operations and comprehensive loss. As of December 31, 2023, there were no accounts receivable, contract assets, payables or deferred revenue recorded in connection with the MTPC Agreement. Akebia Therapeutics, Inc. | Form 10-K | Page 156 Table of Content s Supply of Drug Product to MTPC On July 15, 2020, the Company and MTPC entered into a supply agreement, or the 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. The term of the MTPC Supply Agreement extends throughout the term of the MTPC Agreement, and the termination provisions of the MTPC Agreement govern termination of the MTPC Supply Agreement. The Company does not recognize revenue under this arrangement until risk of loss on the drug product passes to MTPC and delivery has occurred and MTPC has accepted the product. 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 was assigned to MTPC. The Esteve Assignment Agreement transferred the rights and obligations of the Company under the Esteve Agreement to MTPC. The Company has no further obligation to take delivery of, or pay for, product delivered by Esteve. See Note 10, Commitments and Contingencies, for more information. During the years ended December 31, 2023 and 2022, the Company recognized $ 3.7 million and $ 16.2 million, respectively, of revenue under the MTPC Supply Agreement. Due to the Esteve Agreement, the Company no longer records accounts receivable, deferred revenue or other current liabilities relating to the MTPC Supply Agreement. 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 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. The Company is eligible to receive royalty payments based on a tiered low double-digit percentage of net sales of Riona in Japan inclusive of amounts that the Company must pay to Panion on JT and Torii's net sales of Riona under the Panion License Agreement subject to certain reductions upon expiration or termination of the Amended and Restated License Agreement between the Company and Panion, pursuant to which Company in-licensed the exclusive worldwide rights, excluding certain Asian-Pacific countries, for the development and commercialization of ferric citrate. The Company is entitled to receive up to an additional $ 55.0 million upon the achievement of certain annual net sales milestones. The sublicense under the JT and Torii Sublicense Agreement terminates upon the expiration of all underlying patent rights. Also, JT and Torii may terminate the JT and Torii Sublicense Agreement with or without cause upon at least six months ' prior written notice to the Company. Additionally, either party may terminate the JT and Torii Sublicense Agreement for cause upon 60 days’ prior written notice after the breach of any uncured material provision of the JT and Torii Sublicense Agreement, or after certain insolvency events. The Company evaluated the elements of the JT and Torii Sublicense Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, JT and Torii, is a customer. The Company 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 developed a best estimate of the standalone selling price for the Rights to Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement and determined it immaterial. As such, the Company did not develop a best estimate of standalone selling price for the License and Supply Performance Obligation and allocated the entire transaction price to this performance obligation. Additionally, as of the consummation of the Merger, the services associated with the License and Supply Performance Obligation were completed and JT and Torii had secured their own source to manufacture ferric citrate hydrate. As such, any initial license fees as well as any development-based milestones and manufacturing fee revenue were received and recognized prior to the Merger. The Company determined that the remaining consideration that may be payable to the Company under the terms of the sublicense agreement are either quarterly royalties on net sales or payments due upon the achievement of sales-based milestones. In accordance with ASC 606, the Company recognizes sales-based royalties and milestone payments based on the level of sales, when the related sales occur as these amounts have been determined to relate predominantly to the license granted to JT and Torii and therefore are recognized at the later of when the performance obligation is satisfied, or the related sales occur. During the years ended December 31, 2023 and 2022, the Company recognized $ 5.4 million and $ 5.3 million, respectively, in license revenue related to royalties earned on net sales of Riona in Japan. The Company records the associated mid-single digit percentage of net sales royalty expense due to Panion, the licensor of Riona, in the same period as the royalty revenue from JT and Torii is recorded. Akebia Therapeutics, Inc. | Form 10-K | Page 157 Table of Content s Prior 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 U.S. 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. Under the terms of the Otsuka U.S. Agreement, the Company granted to Otsuka a co-exclusive, non-sublicensable license under certain intellectual property controlled by the Company solely to perform medical affairs activities and to conduct non-promotional and commercialization activities related to vadadustat in accordance with the associated plans. The co-exclusive license related to activities that would be jointly conducted by the Company and Otsuka under the Otsuka U.S. Agreement. The Company evaluated the elements of the Otsuka U.S. Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, Otsuka, was a customer. The Company identified three performance obligations in connection with its obligations under the Otsuka U.S. Agreement as follows: (i) License and Development Services Combined (License Performance Obligation); (ii) Rights to Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation). The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. No amounts were allocated to the Future IP Performance Obligation because the associated best estimate of standalone selling price was determined to be immaterial. Due to the similar performance period and recognition pattern between the License Performance Obligation and the Committee Performance Obligation, the transaction price was allocated to the License Performance Obligation and the Committee Performance Obligation on a combined basis. The Company recognized revenue on a proportional performance basis as the underlying services were performed. Pursuant to the Otsuka U.S. Agreement, the Company received: (i) the up-front payment of $ 125.0 million, (ii) the cost share payment with respect to amounts incurred by the Company through December 31, 2016 of $ 33.8 million, and (iii) the net cost share consideration received with respect to amounts incurred by the Company under the global development plan of approximately $ 319.2 million with respect to amounts incurred by the Company subsequent to December 31, 2016. 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 Otsuka 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. During the year ended December 31, 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. Under the Packaging Validation Transfer Agreement, the parties agreed that responsibility for all remaining packaging validation activities would be transferred from Otsuka to the Company in consideration of payments made by Otsuka to the Company. The Company evaluated the agreement under ASC 606 and concluded it was closely tied to the prior collaboration revenue agreements and under ASC 606 recognized collaboration revenue in the current year. During the year ended December 31, 2022, the Company recognized collaboration revenue totaling approximately $ 86.8 million with respect to the Otsuka U.S. Agreement. The Company accounted for the joint medical affairs, commercialization and non-promotional activities elements of the Otsuka U.S. Agreement in accordance with ASC No. 808, Collaborative Arrangements (ASC 808). Furthermore, these activities were recognized for as a component of the related expense in the period incurred. During the year ended December 31, 2023, the Company incurred no costs related to the cost-sharing provisions of the Otsuka U.S. Agreement. During the year ended December 31, 2022, the Company incurred approximately $ 7.6 million of costs related to the cost-sharing provisions of the Otsuka U.S. Agreement of which approximately $ 3.8 million were reimbursable by Otsuka and recorded as a reduction to R&D expense during the year ended December 31, 2022. International Collaboration and License Agreement with Otsuka Pharmaceutical Co. Ltd. On April 25, 2017, the Company entered into a collaboration and license agreement with Otsuka, or the Otsuka International Agreement . The collaboration was focused on the development and commercialization of vadadustat in Europe, Russia, China, Canada, Australia, the Middle East and certain other territories, collectively, the Otsuka International Territory . As discussed above, the Otsuka International Agreement was terminated on June 30, 2022 pursuant to the Otsuka Termination Agreement. The Company has accounted for the Otsuka International Agreement separately from the collaboration arrangement with Otsuka with respect to the U.S. due to the lack of interrelationship and interdependence of the elements and payment terms within each of the contracts as they related to the respective territories. Accordingly, the Company applied the guidance in ASC 606 solely in reference to the terms and conditions of the Otsuka International Agreement, while the Otsuka U.S. Akebia Therapeutics, Inc. | Form 10-K | Page 158 Table of Content s Agreement continued to be accounted for as a discrete agreement in its own right. The Company evaluated the Otsuka International Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, Otsuka, was a customer. The Company identified three performance obligations in connection with its obligations under the Otsuka International Agreement as follows: (i) License and Development Services Combined (License Performance Obligation); (ii) Rights to Future Intellectual Property (Future IP Performance Obligation) and (iii) Joint Committee Services (Committee Performance Obligation). The Company allocated the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. No amounts were allocated to the Future IP Performance Obligation because the associated best estimate of standalone selling price was determined to be immaterial. Due to the similar performance period and recognition pattern between the License Performance Obligation and the Committee Performance Obligation, the transaction price was allocated to the License Performance Obligation and the Committee Performance Obligation on a combined basis. The Company recognized revenue on a proportional performance basis as the underlying services were performed. Pursuant to the Otsuka International Agreement, the Company received: (i) the up-front payment of $ 73.0 million, (ii) the cost share payment with respect to amounts incurred by the Company during the quarter ended March 31, 2017 of $ 0.2 million, and (iii) the net cost share consideration received with respect to amounts incurred by the Company subsequent to March 31, 2017 of $ 216.7 million. During the year ended December 31, 2023, the Company recognized no revenue with respect to the Otsuka International Agreement. During the year ended December 31, 2022, the Company recognized revenue totaling approximately $ 5.5 million with respect to the Otsuka International Agreement. The revenue is classified as collaboration revenue in the accompanying consolidated statements of operations and comprehensive loss. 13. CAPITAL STOCK Authorized and Outstanding Capital Stock On June 5, 2020, the Company filed a Certificate of Amendment to its Ninth Amended and Restated Certificate of Incorporation, or its Charter , to increase the number of authorized shares of common stock from 175,000,000 to 350,000,000 . As of December 31, 2023, the authorized capital stock of the Company included 350,000,000 shares of common stock, par value $ 0.00001 per share, of which 194,582,539 and 184,135,714 shares were issued and outstanding at December 31, 2023 and 2022, respectively; and 25,000,000 shares of undesignated preferred stock, par value $ 0.00001 per share, of which no shares were issued and outstanding at December 31, 2023 and 2022. At-the-Market Facility On April 7, 2022, the Company entered into an at-the-market, or ATM, sales agreement with Jefferies LLC, or Jefferies , as the Company's sales agent, under which the Company may offer and sell from time to time up to $ 26.0 million of shares of the Company's common stock in negotiated transactions or transactions that are deemed to be an ATM offering. During the year ended December 31, 2023, the Company sold 6,189,974 shares of common stock under this program for gross proceeds of $ 6.8 million ($ 6.7 million, net of offering expenses). During January and February 2024, the Company sold 13,261,311 shares of its common stock under the ATM sales agreement with gross proceeds of $ 19.2 million, ($ 18.7 million, net of offering expenses). The Company paid the Agent commissions for its services of acting as agent of up to 3.0 % of the gross proceeds from the sale of the common stock pursuant to the ATM. Prior At-the-Market Facility On March 1, 2022, 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 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 year ended December 31, 2022, the Company sold 404,600 shares of common stock under this program with net proceeds (after deducting commissions and other offering expenses) of $ 0.8 million. Unregistered Common Stock In connection with the Vifor Agreement, CSL Vifor owns 7,571,429 shares of common stock that are unregistered under the Securities Act. See Note 8, Deferred Revenue, Refund Liability and Liability Related to Sale of Future Royalties , for more information. Warrants to Purchase Common Stock In connection with the BlackRock Credit Agreement, described in more detail in Note 7, Indebtedness , the Company issued a warrant to purchase 3,076,923 shares of the Company’s common stock, at an exercise price per share of $ 1.30 , and upon borrowing of Tranche C, the Company will become obligated to issue additional warrants to purchase 1,153,846 shares of the Company’s common stock at an exercise price per share of $ 1.30 . Each warrant shall be exercisable for eight years from date Akebia Therapeutics, Inc. | Form 10-K | Page 159 Table of Content s of issuance. The warrants and the common stock issuable upon the exercise of such warrants were not registered under the Securities Act of 1933. Accordingly, the holder thereof may only sell common stock issued upon exercise of such warrants pursuant to an effective registration statement under the Securities Act covering the resale of those shares, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act. 14. STOCK-BASED COMPENSATION AND EMPLOYEE RETIREMENT PLANS Stock-Based Compensation Plans The Company incurred stock-based compensation expenses of $ 9.3 million and $ 17.8 million for the years ended December 31, 2023 and 2022, respectively. Equity Incentive Plans The following table contains information about the Company's equity incentive plans: December 31, 2023 December 31, 2022 Title of Plan Group Eligible Type of Award Granted (or to be Granted) Awards Outstanding Additional Awards Available for Grant Awards Outstanding Additional Awards Available for Grant Keryx Equity Plans (1)(2) Employees, directors and consultants Common stock options and RSUs 232,203 — 387,976 — Akebia Therapeutics, Inc. Amended and Restated 2008 Equity Incentive Plan ( the 2008 Plan ) (2) Employees, directors and consultants Common 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 Common stock options, RSUs, SARs and performance awards 15,311,501 — 17,018,832 5,498,984 Akebia Therapeutics, Inc. 2023 Stock Incentive Plan (3) ( the 2023 Plan ) (replaces 2014 Plan) Employees, officers, directors, consultants and advisors Common stock options, SARs, restricted stock, unrestricted stock, RSUs, performance awards, other share-based awards and dividend equivalents 1,712,400 17,382,722 — — (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) New awards are no longer being granted under these plans. (3) This table includes the following 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) and not under the applicable plan: 1,616,019 options outstanding under the 2014 Plan and 794,000 options outstanding under the 2023 Plan as of December 31, 2023 and 2,513,512 options outstanding under the 2014 Plan as of December 31, 2022. Common Stock Options and Stock Appreciation Rights During the year ended December 31, 2023, the Company granted 2,489,500 options to employees under the 2014 Plan and 315,000 options to directors under the 2023 Plan. During the year ended December 31, 2023, the Company granted 635,313 stock appreciate rights, or SARs , to one executive under the 2014 Plan. 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 ten 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 year ended December 31, 2023, the Company granted 845,000 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 842,000 options remained outstanding at December 31, 2023. Akebia Therapeutics, Inc. | Form 10-K | Page 160 Table of Content s 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 common stock options to directors, new hires and occasionally to other employees not in connection with the annual grant process. Finally, the Company grants performance-based stock options which 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 did not grant any performance-based stock options under the 2023 Plan or the 2014 Plan during the year ended December 31, 2023. The Company granted 400,000 performance-based options during the year ended December 31, 2022. The Company had 400,000 performance-based options outstanding at December 31, 2023 and 2022. The combined stock option activity for the year ended December 31, 2023, is as follows: Stock Options Weighted-Average Exercise Price Weighted-Average Contractual Life (years) Aggregate Intrinsic Value (in thousands) Outstanding, December 31, 2022 11,775,411 $ 5.82 7.26 years $ 180 Granted 4,284,813 $ 0.84 Exercised ( 2,250 ) $ 0.37 Expired ( 528,099 ) $ 5.16 Canceled and forfeited ( 2,217,040 ) $ 6.06 Outstanding at December 31, 2023 13,312,835 $ 4.20 7.27 years $ 2,680 Exercisable at December 31, 2023 7,354,561 $ 6.37 6.05 years $ 792 Vested and expected to vest at December 31, 2023 13,312,835 $ 4.20 $ 2,680 There was immaterial intrinsic value of options exercised during the years ended December 31, 2023 and 2022, as the value of options exercised in 2023 and 2022 was immaterial. The fair value of options that vested during the years ended December 31, 2023 and 2022 were $ 6.4 million and $ 8.4 million, respectively. As of December 31, 2023, there was approximately $ 5.2 million of unrecognized compensation cost related to common stock options outstanding under the Company’s 2023 Plan or the 2014 Plan or made pursuant to the Company's inducement award program, which is expected to be recognized over a weighted average period of 2.19 years. Restricted Stock Units Generally, RSUs, granted by the Company vest in one of the following ways: (i) 100 % of each RSU grant vests on the first anniversary of the grant date, (ii) one third of each RSU grant vests on the first, second and third anniversaries of the grant date, (iii) 50 % of each RSU grant vests on the first anniversary and 25 % of each RSU grant vests every six months after the one year anniversary of the grant date, or (iv) one third of each RSU grant vests on the first anniversary of the grant date and the remaining two thirds vests in eight substantially equal quarterly installments beginning after the one year anniversary, subject, in each case, to the individual’s continued service through the applicable vesting date. The 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. The Company also periodically grants performance-based restricted stock units, or PSUs , to employees under the 2023 Plan and previously granted PSUs under 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 grant any PSUs under the 2023 Plan or the 2014 Plan during the year ended December 31, 2023. The Company granted 400,000 PSUs during the year ended December 31, 2022. RSU and PSU activity is as follows: Akebia Therapeutics, Inc. | Form 10-K | Page 161 Table of Content s 2014 Plan 2023 Plan Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Unvested as of December 31, 2022 5,674,406 $ 2.10 — $ — Granted 2,759,675 $ 0.68 603,400 $ 1.48 Vested ( 4,047,676 ) $ 2.06 — $ — Forfeited and canceled ( 1,046,536 ) $ 1.06 — $ — Unvested as of December 31, 2023 3,339,869 $ 1.30 603,400 $ 1.48 The total fair value of RSUs and PSUs that vested during 2023 and 2022 (measured on the date of vesting) was $ 8.4 million and $ 11.2 million, respectively. As of December 31, 2023, there was approximately $ 3.0 million of unrecognized compensation cost related to RSUs and PSUs, which is expected to be recognized over a weighted average period of 1.65 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 six-month offering period. As of December 31, 2023 and 2022, a total of 4,637,801 and 4,837,995 shares of the Company's common stock were available for future issuance under the ESPP, respectively. The Company issued 200,194 shares during the year ended December 31, 2023. Stock-Based Compensation Expense The Black-Scholes option pricing model is used to estimate the fair value of the common 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: Years ended December 31, Common Stock Options 2023 2022 Risk-free interest rate 3.54 % - 4.81 % 1.69 % - 4.17 % Expected volatility 100.97 % - 111.71 % 79.77 % - 91.57 % Expected term (years) 5.51 - 6.25 5.51 - 6.25 Expected dividend yield — % — % Weighted average grant date fair value $ 0.69 $ 1.27 The Company has classified stock-based compensation in its consolidated statements of operations and comprehensive loss as follows (in thousands): Years ended December 31, 2023 2022 Cost of goods sold $ 267 $ 448 Research and development 1,964 3,378 Selling, general and administrative 6,456 10,826 Restructuring 630 3,197 Total $ 9,317 $ 17,849 Stock-based compensation by type of award was as follows (in thousands): Akebia Therapeutics, Inc. | Form 10-K | Page 162 Table of Content s Years ended December 31, 2023 2022 Stock options $ 5,310 $ 8,968 Restricted stock units 3,637 8,619 Performance RSUs 297 116 Employee stock purchase plan 73 146 Total $ 9,317 $ 17,849 Employee Retirement Plan In 2008, the Company established a retirement plan, or the Plan , authorized by Section 401(k) of the Internal Revenue Code, or IRC . In accordance with the Plan, all employees who have attained the age of 21 are eligible to participate in the Plan as of the first Entry Date, as defined, following their date of employment. Each employee can contribute a percentage of compensation up to a maximum of the statutory limits per year. Company contributions are discretionary and contributions in the amount of approximately $ 1.7 million and $ 2.6 million were made during the years ended December 31, 2023 and 2022, respectively. 15. INCOME TAXES The Company’s income tax provision was computed based on the federal statutory rate and the state statutory rates, net of the related federal benefit. There was no current or deferred income tax expense or benefit for the years ended December 31, 2023 and 2022 due to the Company’s net losses and increases in its valuation allowance against its deferred tax assets. The Company's effective income tax rate differs from the statutory federal income tax rate as follows for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Federal tax at statutory rate 21.0 % 21.0 % State and local tax at statutory rate 2.7 2.5 Research and development tax credits 0.3 — Change in valuation allowance ( 9.1 ) ( 19.3 ) Other permanent differences ( 2.0 ) ( 1.0 ) Stock option cancellations ( 3.7 ) ( 2.5 ) Stock option shortfalls ( 1.7 ) ( 1.6 ) Effect of rate changes ( 7.7 ) 0.6 Provision to return adjustment ( 0.3 ) 0.3 Other 0.5 — Effective tax rate — % — % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets. Accordingly, the Company has recorded a valuation allowance against the Company’s otherwise recognizable net deferred tax assets. The Company continues to maintain the underlying tax benefits to offset future taxable income and to monitor the need for a valuation allowance based on the profitability of its future operations. The valuation allowance increased by approximately $ 4.7 million and $ 18.2 million during the years ended December 31, 2023 and 2022, respectively. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): Akebia Therapeutics, Inc. | Form 10-K | Page 163 Table of Content s December 31, 2023 2022 Deferred tax assets: Accrued expenses and other current liabilities $ 1,411 $ 2,924 Deferred revenue 9,534 1,250 Sale of royalty 12,346 13,291 Stock-based compensation 6,183 8,317 R&D credits 4,843 4,827 Capitalized R&D costs 18,295 13,825 Other non-current liabilities 3,434 2,754 Net operating loss carryforward 288,939 288,842 ASC 842 lease liability 2,959 8,032 Inventories reserve 4,537 17,411 Return reserve 1,624 — Refund liability 8,829 9,478 Other 14,036 13,159 Total deferred tax assets 376,970 384,110 Less valuation allowance ( 365,330 ) ( 360,621 ) Total deferred tax assets, net of valuation allowance 11,640 23,489 Deferred tax liabilities: Intangible assets ( 6,868 ) ( 15,981 ) 481(a) adjustments ( 1,924 ) — ROU asset (ASC 842) ( 2,734 ) ( 7,426 ) Other ( 114 ) ( 82 ) Total deferred tax liabilities ( 11,640 ) ( 23,489 ) Net deferred tax liability $ — $ — At December 31, 2023 and 2022, the Company had no start-up expenses capitalized for income tax purposes (after amortization of $ 1.9 million) and $ 0.1 million of start-up expenses capitalized for income tax purposes (after amortization of $ 1.7 million), respectively, with amortization available to offset future federal, state and local income tax. As of December 31, 2023 and 2022, the Company had approximately $ 1,230.4 million and $ 1,230.7 million, respectively, of federal net operating losses, or NOLs , carry-forwards which expire through 2037. Included in the $ 1,230.4 million of federal NOLs are losses of $ 648.3 million that will carry forward indefinitely as a result of the Tax Cuts and Jobs Act. Additionally, at December 31, 2023 and 2022, the Company had approximately $ 1,807.8 million and $ 1,808.5 million, respectively, of state NOL carry-forwards, which expire through 2043. The Company also has approximately $ 2.7 million of federal research and development tax credit carryforwards which expire through 2040 and $ 2.7 million of state R&D tax credit carryforwards which expire through 2036. Under the provisions of the IRC, the NOLs and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOLs and tax credit carryforwards may become subject to an annual limitation under IRC Sections 382 and 383 if there is more than a 50% change in ownership of the stockholders that own 5% or more of the Company’s outstanding stock over a three-year period. The Company completed an evaluation of its ownership changes and concluded that an ownership change did occur on December 12, 2018 for both Akebia and Keryx in connection with the Merger. As a consequence of this ownership change, the Company’s NOLs and tax credit carryforwards allocable to the tax periods preceding the ownership change became subject to limitation under Section 382 of the IRC. The Company reduced its associated deferred tax assets by $ 44.9 million as a result of the limitation. The Company completed an evaluation of its ownership changes as of March 31, 2022 and concluded that an ownership change had not occur since the previous evaluation done through December 12, 2018. The Company may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside the Company’s control. As a result, the Company’s ability to utilize these attributes to offset taxable income may be subject to limitations. The Company has not conducted a full study of it’s research and development credit carryforwards. A study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts will be presented as an uncertain tax position. A full valuation allowance has been provided Akebia Therapeutics, Inc. | Form 10-K | Page 164 Table of Content s against the Company’s research and development credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations at this time, if an adjustment were required. The Company files income tax returns in the U.S. federal and various state and local jurisdictions. For federal and state income tax purposes, the 2022, 2021 and 2020 tax years remain open for examination under the normal three-year statute of limitations. The statute of limitations for income tax audits in the U.S. will commence upon utilization of NOLs and will expire three years from the filing of the tax return the loss was utilized on. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ending December 31, 2023 and 2022 are as follows (in thousands): Balance at December 31, 2021 $ 2,513 Additions based on tax positions of current years 184 Balance at December 31, 2022 2,697 Reductions based on tax positions of current years ( 2,697 ) Balance at December 31, 2023 $ — The Company does not believe there will be a material change in its unrecognized tax positions over the next twelve months. All of the unrecognized tax benefits, if recognized, would be offset by the valuation allowance. 16. 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. 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: Years Ended December 31, 2023 2022 Outstanding common stock options 12,690,624 11,726,090 Unvested restricted stock units 3,930,167 5,681,137 Stock appreciation rights 635,313 — Total 17,256,104 17,407,227 17. RESTRUCTURING On April 4, 2022, the Company restructured its operations and executed a Board approved reduction of workforce by approximately 42 % across all areas of the Company ( 47 % inclusive of the closing of the majority of open positions) following the receipt of the CRL from the FDA to the Company’s NDA for vadadustat for the treatment of anemia due to CKD in adult patients. On May 5, 2022, the Company laid off several members of management. As a result of the restructuring, during the year ended December 31, 2022, the Company recognized $ 14.5 million of restructuring charges in the consolidated statement of operations and comprehensive loss, including $ 11.3 million of one-time termination benefits and contractual termination benefits for severance, healthcare and related benefits and $ 3.2 million of non-cash stock-based compensation expense. On November 7, 2022, the Company further reduced its workforce by approximately 14 % of the then current headcount primarily focused on the commercial organization as a result of the Company’s decision to shift to a strategic account management focused model for its commercial efforts. This shift in approach supported the Company’s strategic pillars to drive Auryxia revenue while also continuing to decrease operating costs. During the year ended December 31, 2022, the Company recognized $ 1.4 million of restructuring charges in the consolidated statement of operations and comprehensive loss, including one-time termination benefits and contractual termination benefits for severance, healthcare and related benefits and non-cash stock-based compensation expense. The workforce reductions were completed as of December 31, 2022, and the Company has incurred all related charges. Akebia Therapeutics, Inc. | Form 10-K | Page 165 Table of Content s The following table is a reconciliation of the beginning and ending restructuring liability for the year ended December 31, 2023 and 2022 respectively (in thousands): December 31, 2023 2022 Beginning balance $ 3,758 $ — Restructuring accrual and adjustments ( 521 ) 12,735 Cash payments ( 2,230 ) ( 8,977 ) Ending balance $ 1,007 $ 3,758 As of December 31, 2023, $ 0.7 million and $ 0.3 million of the accrued severance, benefits and associated costs are reflected in accrued expenses and other current liabilities and other non-current liabilities, respectively. As of December 31, 2022, $ 2.8 million and $ 1.0 million of the accrued severance, benefits and associated costs are reflected in accrued expenses and other current liabilities and other non-current liabilities, respectively. 18. SUBSEQUENT EVENTS The Company has evaluated events and transactions occurring after the balance sheet date through the date of the Company's consolidated financial statements were issued and concluded that there were no events or transactions occurring during this period that required recognition or disclosure in the Company's consolidated financial statements, except for matters described in Note 7, Indebtedness , related to the entering into the BlackRock Credit Agreement and the termination of the Pharmakon Term Loans and Note 13, Capital Stock , related to warrants issued in connection with the BlackRock Credit Agreement and the offerings under the At-the-Market facility. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.