What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-12 compared with 2021-08-13 · 168 added, 112 removed, 424 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2021 December 31,

2 unchanged sentences

Short-term investments 66,363 95,452

Accounts receivable 287 —

Prepaid expenses and other current assets 11,441 8,202

22 unchanged sentences

5,000,000 shares authorized;

no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

Common stock, $ 0.0001 par value;

300,000,000 shares authorized;

102,967,017 and 93,599,975 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

106,771,584 and 93,599,975 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

Additional paid-in capital 758,114 680,872

7 unchanged sentences

(in thousands, except share and per share amounts)

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

10 unchanged sentences

Interest expense ( 1,216 ) ( 1,202 ) ( 3,518 ) ( 3,785 )

Other income, net 847 477 798 1,230

Other (expense) income, net ( 134 ) 255 664 1,485

Loss before provision for income taxes ( 43,586 ) ( 18,108 ) ( 121,927 ) ( 65,437 )

5 unchanged sentences

Net loss $ ( 43,587 ) $ ( 18,108 ) $ ( 121,931 ) $ ( 65,437 )

Unrealized gains on available-for-sale securities 11 361 8 297

Unrealized (losses) gains on available-for-sale securities ( 1 ) ( 227 ) 7 70

Comprehensive loss $ ( 43,588 ) $ ( 18,335 ) $ ( 121,924 ) $ ( 65,367 )

2 unchanged sentences

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Six Months ended June 30, 2021

For the Three and Nine Months ended September 30, 2021

(in thousands, except shares)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance as of March 31, 2021 98,688,577 $ 10 $ 718,728 $ ( 587,920 ) $ ( 7 ) $ 130,811

Balance as of June 30, 2021 102,967,017 $ 10 $ 750,664 $ ( 633,109 ) $ 4 $ 117,569

Issuance of common stock under employee stock purchase plan 284,456 — 341 — — 341

Issuance of common stock for services 25,989 — 190 — — 190

Issuance of common stock upon exercise of options 126,004 — 21 — — 21

Issuance of common stock upon vesting of restricted stock units 34,410 — — — — —

Taxes paid related to net share settlement of equity awards — — ( 106 ) — — ( 106 )

Issuance of common stock in at-the-market offering 3,333,708 1 4,742 4,743

Stock-based compensation — — 2,262 — — 2,262

Unrealized gains on available-for-sale securities — — — — 11 11

Unrealized losses on available-for-sale securities — — — — ( 1 ) ( 1 )

Net loss — — — ( 43,587 ) — ( 43,587 )

Balance as of June 30, 2021 102,967,017 $ 10 $ 750,664 $ ( 633,109 ) $ 4 $ 117,569

Six Months Ended June 30, 2021

Balance as of September 30, 2021 106,771,584 $ 11 $ 758,114 $ ( 676,696 ) $ 3 $ 81,432

Nine Months Ended September 30, 2021

Common Stock Additional

6 unchanged sentences

Issuance of common stock under employee stock purchase plan 386,664 — 819 — — 819

Issuance of common stock for services 25,989 — 190 — — 190

Issuance of common stock upon exercise of options 331,310 — 584 — — 584

Issuance of common stock upon vesting of restricted stock units 114,194 — — — — —

Taxes paid for net share settlement of equity awards — — ( 106 ) — — ( 106 )

Issuance of common stock in at-the-market offering 12,313,452 2 67,187 — — 67,189

2 unchanged sentences

Net loss — — — ( 121,931 ) — ( 121,931 )

Balance as of June 30, 2021 102,967,017 $ 10 $ 750,664 $ ( 633,109 ) $ 4 $ 117,569

Balance as of September 30, 2021 106,771,584 $ 11 $ 758,114 $ ( 676,696 ) $ 3 $ 81,432

The accompanying notes are an integral part of these condensed financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Six Months ended June 30, 2020

For the Three and Nine Months ended September 30, 2020

(in thousands, except shares)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance as of March 30, 2020 89,035,096 $ 9 $ 650,617 $ ( 482,825 ) $ ( 44 ) $ 167,757

Issuance of common stock for services 42,403 — 310 — — 310

Balance as of June 30, 2020 89,140,563 $ 9 $ 653,805 $ ( 507,781 ) $ 317 $ 146,350

Issuance of common stock under employee stock purchase plan 94,127 — 459 — — 459

Issuance of common stock upon exercise of options 142,191 — 339 — — 339

Issuance of common stock upon vesting of restricted stock units 866,528 — — — — —

Stock-based compensation — — 2,527 — — 2,527

Unrealized gains on available-for-sale securities — — — — 361 361

Unrealized losses on available-for-sale securities — — — — ( 227 ) ( 227 )

Net loss — — — ( 18,108 ) — ( 18,108 )

Balance as of June 30, 2020 89,140,563 $ 9 $ 653,805 $ ( 507,781 ) $ 317 $ 146,350

Six Months Ended June 30, 2020

Balance as of September 30, 2020 90,243,409 $ 9 $ 657,130 $ ( 525,889 ) $ 90 $ 131,340

Nine Months Ended September 30, 2020

Common Stock Additional

8 unchanged sentences

Issuance of common stock upon exercise of options 346,806 — 759 — — 759

Issuance of common stock upon vesting of restricted stock units 866,528 — — — — —

Stock-based compensation — — 8,149 — — 8,149

1 unchanged sentence

Net loss — — — ( 65,437 ) — ( 65,437 )

Balance as of June 30, 2020 89,140,563 $ 9 $ 653,805 $ ( 507,781 ) $ 317 $ 146,350

Balance as of September 30, 2020 90,243,409 $ 9 $ 657,130 $ ( 525,889 ) $ 90 $ 131,340

The accompanying notes are an integral part of these condensed financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

10 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable ( 287 ) —

Prepaid expenses and other assets ( 3,927 ) ( 3,748 )

13 unchanged sentences

Proceeds from issuance of common stock under equity incentive and stock purchase plans 1,403 1,593

Payments for taxes related to net share settlement of equity awards ( 106 ) —

Net cash provided by financing activities 68,486 1,593

21 unchanged sentences

GAAP have been condensed or omitted.

These condensed financial statements have been prepared on the same basis as our most recent annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary to present fairly our financial position at June 30, 2021 and results of operations, changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2021 and 2020.

These condensed financial statements have been prepared on the same basis as our most recent annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary to present fairly our financial position, results of operations, changes in stockholders’ equity, and cash flows for the interim periods presented.

The accompanying condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of results to be expected for the entire year ending December 31, 2021, or for any other interim period or future year.

The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the entire year ending December 31, 2021, or for any other interim period or future year.

Use of Estimates

4 unchanged sentences

Actual results could materially differ from those estimates.

As of June 30, 2021, we had cash, cash equivalents and marketable securities of approximately $ 171.8 million.

We believe our current available cash, cash equivalents marketable securities will be sufficient to fund our planned expenditures and meet our obligations for at least 12 months following the filing of this Report on Form 10-Q.

As of September 30, 2021, we had cash, cash equivalents and marketable securities of approximately $ 141.7 million.

We believe our current available cash, cash equivalents and marketable securities will be sufficient to fund our planned expenditures and meet our obligations for at least 12 months following the filing of this Report on Form 10-Q.

On July 28, 2021, we received a Complete Response Letter ("CRL") from the U.S.

Food and Drug Administration ("FDA") regarding our New Drug Application ("NDA") for the control of serum phosphorus in adult patients with chronic kidney disease ("CKD") on dialysis in which the FDA noted additional requirements would need to be met in order to obtain approval for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis.

On July 29, 2021 we entered into a Fourth Amendment to our Term Loan Agreement which extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021, provided, however, if the FDA does not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on or before October 25, 2021, then the interest-only period will expire and principal repayments will be required to begin on November 1, 2021.

Further, on July 29, 2021, our Board of Directors approved, and on August 2, 2021 we began implementing, a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL.

On July 29, 2021 we entered into a Fourth Amendment to our Term Loan Agreement which extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021, provided, however, the amendment provided that if the FDA did not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on or before October 25, 2021, then the interest-only period would expire and principal repayments would be required to begin on November 1, 2021.

Further, on July 29, 2021, our Board of Directors approved, and on August 2, 2021, we implemented a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL.

On October 8, 2021, our Board of Directors approved, and on October 12, 2021 we began implementing, an additional restructuring plan to further reduce operating costs and better align our workforce with the needs of our business following the

subsequent conclusion of an End of Review Type A Meeting ("End of Review Meeting") with the FDA on October 1, 2021.

The restructuring plan is expected to be completed in December 2021.

During November 2021, in compliance with the terms of our Loan Agreement as discussed in Note 5, we paid the first principal repayment on the Term Loan in the amount of $ 16.7 million.

For additional information see Note 13, Subsequent Events.

1 unchanged sentence

Summary of Significant Accounting Policies

There have been no changes to the significant accounting policies disclosed in our most recent Annual Report on Form 10-K.

There have been no changes to the significant accounting policies disclosed in our most recent Annual Report on Form 10-K other than the following:

Restructuring

We recognize restructuring charges related to reorganization plans that have been committed to by management and when liabilities have been incurred.

In connection with these activities, we record restructuring charges at fair value for, a) contractual employee termination benefits when obligations are associated to services already rendered, rights to such benefits have vested, and payment of benefits is probable and can be reasonably estimated, b) one-time employee termination benefits when management has committed to a plan of termination, the plan identifies the employees and their expected termination dates, the details of termination benefits are complete, it is unlikely changes to the plan will be made or the plan will be withdrawn and communication to such employees has occurred, and c) contract termination costs when a contract is terminated before the end of its term.

One-time employee termination benefits are recognized in their entirety when communication has occurred and future services are not required.

If future services are required, the costs are recorded ratably over the remaining period of service.

Contract termination costs to be incurred over the remaining contract term without economic benefit are recorded in their entirety when the contract is canceled.

The recognition of restructuring charges requires us to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned reorganization plan.

To the extent our actual results differ from our estimates and assumptions, we may be required to revise the estimates of future accrued restructuring liabilities, requiring the recognition of additional restructuring charges or the reduction of accrued restructuring liabilities already recognized.

Such changes to previously estimated amounts may be material to the consolidated financial statements.

Changes in the estimates of the restructuring charges are recorded in the period the change is determined.

At the end of each reporting period, we evaluate the remaining accrued restructuring balances to ensure that no excess accruals are retained, and the utilization of the provisions are for their intended purpose in accordance with developed restructuring plans.

Recent Accounting Pronouncements

8 unchanged sentences

The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model.

For smaller reporting companies the guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

For smaller reporting companies the

guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

On June 30, 2021, our public float exceeded $700 million and therefore, on December 31, 2021, we will no longer qualify as a “smaller reporting company” and will instead be considered a large accelerated filer.

2 unchanged sentences

CASH, CASH EQUIVALENTS AND INVESTMENTS

Securities classified as cash, cash equivalents and investments as of June 30, 2021 and December 31, 2020 are summarized below (in thousands):

June 30, 2021

Securities classified as cash, cash equivalents and investments as of September 30, 2021 and December 31, 2020 are summarized below (in thousands):

September 30, 2021

Gross Unrealized

31 unchanged sentences

treasury and agency securities and are classified as “available-for-sale.”

All available-for-sale securities held as of June 30, 2021 had contractual maturities of less than one year.

All of the available-for-sale securities that we held as of September 30, 2021 had contractual maturities of less than one year.

Our available-for-sale securities are subject to a periodic impairment review.

We consider a debt security to be impaired when the fair value of that security is less than its carrying cost, in which case we would further evaluate the investment to determine whether the security is other-than-temporarily impaired.

When we evaluate an investment for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition or creditworthiness of the issuer and any changes thereto, intent to sell, and whether it is more likely than not we will be required to sell the investment before the recovery of its cost basis.

If an investment is other-than-temporarily impaired, we write the investment down through the statement of operations to its fair value and establishes that value as the new cost basis for the investment.

Management has determined that none of our available-for-sale securities were other-than-temporarily impaired in any of the periods presented, and as of June 30, 2021, no investment was in a continuous unrealized loss position for more than one year.

When we evaluate an investment for other-

than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition or creditworthiness of the issuer and any changes thereto, intent to sell, and whether it is more likely than not we will be required to sell the investment before the recovery of its cost basis.

If an investment is other-than-temporarily impaired, we write the investment down through the statement of operations to its fair value and establish that value as the new cost basis for the investment.

Management has determined that none of our available-for-sale securities were other-than-temporarily impaired in any of the periods presented, and, as of September 30, 2021, no investment was in a continuous unrealized loss position for more than one year.

As such, we believe that it is more likely than not that investments in a loss position will be held until maturity or a forecasted recovery of fair value.

13 unchanged sentences

The following table sets forth the fair value of our financial assets and liabilities that are measured or disclosed on a recurring basis by level within the fair value hierarchy (in thousands):

June 30, 2021

September 30, 2021

Fair Value Level 1 Level 2 Level 3

23 unchanged sentences

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities, such as the Exit Fee, as defined and discussed in Note 6, are classified as Level 3.

The carrying amounts reflected in the balance sheets for cash equivalents, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both June 30, 2021 and December 31, 2020, due to their short-term nature.

The carrying amounts reflected in the balance sheets for cash equivalents, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both September 30, 2021 and December 31, 2020, due to their short-term nature.

Fair Value of Debt

The interest rate of our term loan facility approximates the rate at which we could obtain alternative financing.

Therefore, the carrying amount of the term loan facility approximated its fair value at June 30, 2021 and December 31, 2020.

Therefore, the carrying amount of the term loan facility approximated its fair value at September 30, 2021 and December 31, 2020.

COLLABORATION AND LICENSING AGREEMENTS

7 unchanged sentences

(i) 2 years following the Effective Date, (ii) the nomination of a program DC for both programs, (iii) the nomination of one program DC and the decision by the parties to cease research for the other program, or (iv) the decision by the parties to cease research for both programs.

During the three and six months ended June 30, 2021, we recognized $ 1.3 million and $ 2.8 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss.

During the three and six months ended June 30, 2020, we recognized $ 1.1 million and $ 2.3 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss.

The aggregate amount of the transaction price allocated to our partially unsatisfied performance obligations as of June 30, 2021 and December 31, 2020 was $ 1.4 million and $ 4.2 million, respectively, which is presented in the accompanying condensed balance sheet as deferred revenue.

As of June 30, 2021, we expect to recognize the remaining transaction price allocated to our partially unsatisfied performance obligations over the remaining research terms, which is currently expected to extend through the end of 2021.

There were no significant changes in estimates associated with the 2019 KKC Agreement during the six months ended June 30, 2021.

During the three and nine months ended September 30, 2021, we recognized $ 0.9 million and $ 3.7 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss.

During the three and nine months ended September 30, 2020, we recognized $ 1.4 million and $ 3.7 million, respectively, as collaborative development revenue under the 2019 KKC Agreement in the accompanying condensed statement of operations and comprehensive loss.

The aggregate amount of the transaction price allocated to our

partially unsatisfied performance obligations as of September 30, 2021 and December 31, 2020 was $ 0.5 million and $ 4.2 million, respectively, which is presented in the accompanying condensed balance sheet as deferred revenue.

As of September 30, 2021, we expect to recognize the remaining transaction price allocated to our partially unsatisfied performance obligations over the remaining research terms, which is currently expected to extend through the end of 2021.

There were no significant changes in estimates associated with the 2019 KKC Agreement during the nine months ended September 30, 2021.

2017 KKC Agreement

8 unchanged sentences

Based on our assessment, management determined that the license and the manufacturing supply services were its material performance obligations at the inception of the 2017 KKC Agreement, and as such, each of the performance obligations is distinct.

In addition to the up-front license fee received of $ 30.0 million, we may be entitled to receive up to $ 55.0 million in total development milestones, of which $ 10.0 million has been received and recognized as revenue as of June 30, 2021, and approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 76.5 million at the currency exchange rate on June 30, 2021, as well as reimbursement of costs plus a reasonable overhead for the supply of product and high-teen royalties on net sales throughout the term of the agreement.

The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at June 30, 2021.

During the three and six months ended June 30, 2021 we recognized zero and $ 5.0 million, respectively, as licensing revenue upon the achievement of development milestones.

During the three and six months ended June 30, 2020, we

recognized no licensing revenue upon the achievement of development milestones.

In addition to the up-front license fee received of $ 30.0 million, we may be entitled to receive up to $ 55.0 million in total development milestones, of which $ 10.0 million has been received and recognized as revenue as of September 30, 2021, and approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 76.1 million at the currency exchange rate on September 30, 2021, as well as reimbursement of costs plus a reasonable overhead for the supply of product and high-teen royalties on net sales throughout the term of the agreement.

The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at September 30, 2021.

During the three and nine months ended September 30, 2021 we recognized zero and $ 5.0 million, respectively, as licensing revenue upon the achievement of development milestones.

During the three and nine months ended September 30, 2020, we recognized no licensing revenue upon the achievement of development milestones.

The $ 5.0 million development milestone recognized during the three months ended March 31, 2021 related to the initiation by KKC of phase 3 clinical studies in Japan to evaluate tenapanor for hyperphosphatemia.

During the three and six months ended June 30, 2021, we recognized zero and $ 0.1 million as product supply revenue related to the manufacturing supply of tenapanor and other materials to KKC pursuant to the 2017 KKC Agreement.

During the three and six months ended June 30, 2020, we recognized $ 5.0 thousand and $ 43.0 thousand as product supply revenue.

During the three and six months ended June 30, 2021 we received a $ 2.9 million prepayment from KKC for the manufacturing of tenapanor drug substance.

The prepayment is reflected within prepaid and other current assets and deferred revenue, non-current on our condensed balance sheet as of June 30, 2021.

During the three and nine months ended September 30, 2021, we recognized $ 0.3 million and $ 0.4 million as product supply revenue related to the manufacturing supply of tenapanor and other materials to KKC pursuant to the 2017 KKC Agreement.

During the three and nine months ended September 30, 2020, we recognized $ 1.4 million and $ 1.4 million as product supply revenue.

During the three months ended March 31, 2021, we received a $ 2.9 million prepayment from KKC for the manufacturing of tenapanor drug substance.

The prepayment is reflected within prepaid and other current assets and deferred revenue, non-current on our condensed balance sheet as of September 30, 2021.

Shanghai Fosun Pharmaceutical Industrial Development Co.

5 unchanged sentences

We may be entitled to additional development and commercialization milestones of up to $ 110.0 million, as well as reimbursement of cost plus a reasonable overhead for the supply of product and tiered royalties on net sales ranging from the mid-teens to 20 %.

The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at June 30, 2021.

We have recorded no revenue during the three and six months ended June 30, 2021 related to the Fosun Agreement.

The variable consideration related to the remaining development milestone payments has not been included in the transaction price as these were fully constrained at September 30, 2021.

We have recorded no revenue during the three and nine months ended September 30, 2021 related to the Fosun Agreement.

Knight Therapeutics, Inc.

4 unchanged sentences

We are also eligible to receive royalties throughout the term of the agreement, and a transfer price for manufacturing services.

The variable consideration related to the remaining development milestone payments has not been included in the transaction price as they were fully constrained at June 30, 2021.

The variable consideration related to the remaining development milestone payments has not been included in the transaction price as they were fully constrained at September 30, 2021.

AstraZeneca AB (“AstraZeneca”)

In June 2015, we entered into a termination agreement with AstraZeneca (the “AstraZeneca Termination Agreement”) pursuant to which we have agreed to pay AstraZeneca (i) future royalties at a royalty rate of 10 % of net sales of tenapanor or other NHE3 products by us or our licensees, and (ii) 20 % of non-royalty revenue received from a new collaboration partner should we elect to license, or otherwise provide rights to develop and commercialize tenapanor or another NHE3 inhibitor, up to a maximum of $ 75.0 million in aggregate for (i) and (ii).

As of June 30, 2021, to date in aggregate, we have recognized $ 11.6 million of the $ 75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $ 10.6 million.

For the three and six months ended June 30, 2021 we recognized and recorded as cost of revenue zero and $ 1.0 million related to the AstraZeneca Termination Agreement.

For the three and six months ended June 30, 2020 we recognized $ 0.1 million cost of revenue related to the AstraZeneca Termination Agreement.

As of September 30, 2021, to date in aggregate, we have recognized $ 11.6 million of the $ 75.0 million, which has been recorded as cost of revenue, and have paid AstraZeneca $ 11.6 million.

For the three and nine months ended September 30, 2021 we recognized and recorded as cost of revenue zero and $ 1.0 million related to the AstraZeneca Termination Agreement.

For the three and nine months ended September 30, 2020 we recognized zero and $ 0.1 million, respectively, as cost of revenue related to the AstraZeneca Termination Agreement.

Deferred Revenue

4 unchanged sentences

Decreases due to revenue recognized in the period for which cash has been received ( 3,650 )

Balance at June 30, 2021 $ 1,412

Balance at September 30, 2021 $ 527

Deferred revenue - non-current

1 unchanged sentence

Increases to amounts invoiced for which cash has been received 2,947

Balance at June 30, 2021 $ 2,947

Balance at September 30, 2021 $ 2,947

Solar Capital and Western Alliance Bank Loan Agreement

3 unchanged sentences

On October 9, 2020, we and the Lenders entered into an amendment to the Loan Agreement (“the 2020 Amendment”) to extend the date through which we are permitted to make interest-only payments on the Term Loan by twelve months to December 1, 2021.

The 2020 amendment also required that if either the FDA does not approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before May 31, 2021 or the FDA issues a CRL with respect to our NDA Number 213931, then we are to begin principal payments on the earlier of June 1, 2021 or the first day of the month immediately following the date that the FDA issues us a CRL.

respect to our NDA Number 213931, then we are to begin principal payments on the earlier of June 1, 2021 or the first day of the month immediately following the date that the FDA issues us a CRL.

On April 29, 2021, the FDA extended the Prescription Drug User Fee Act ("PDUFA") date for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis by three months to July 29, 2021, making it unlikely that the FDA would approve our NDA for tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis on or before May 31, 2021.

2 unchanged sentences

If principal repayments are required to begin prior to December 1, 2021 under the 2021 Amendments, then the first such repayment shall include all payments that would have been due if monthly principal repayment had begun on June 1, 2021.

As of June 30, 2021, we have classified our loan payable, current to include all principal payments that would have been due beginning on June 1, 2021.

As of September 30, 2021, we have classified our loan payable, current to include all principal payments that would have been due beginning on June 1, 2021.

During November 2021, in compliance with the terms of our Loan Agreement, we paid the first principal repayment on the Term Loan in the amount of $ 16.7 million.

For additional information see Note 13, Subsequent Events.

We paid a closing fee of 1 % of the Term Loan, or $ 0.5 million, upon the closing of the Term Loan, $ 0.1 million upon closing of the 2020 Amendment and $ 0.1 million upon closing of the 2021 Amendments.

3 unchanged sentences

Additionally, in connection with the Term Loan, we entered into the Exit Fee Agreement, as discussed in Note 6.

The Loan Agreement also contains customary events of default that entitle the Lender to cause us indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the

Term Loan, including our cash.

The Loan Agreement also contains customary events of default that entitle the Lenders to cause us indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loan, including our cash.

Upon the occurrence and for the duration of an event of default, an additional default interest rate equal to 4 % per annum will apply to all amounts owed under the Loan Agreement.

As of June 30, 2021, to our knowledge, there were no facts or circumstances in existence that would give rise to an event of default.

As of June 30, 2021, our future payment obligations related to the Term Loan, excluding interest payments and the Exit Fee, are as follows (in thousands):

As of September 30, 2021 and as of the date of filing this Quarterly Report on Form 10-Q, to our knowledge, there were no facts or circumstances in existence that would give rise to an event of default.

As of September 30, 2021, our future payment obligations related to the Term Loan, excluding interest payments and the Exit Fee, are as follows (in thousands):

Total repayment obligations $ 52,475

7 unchanged sentences

Notwithstanding the prepayment or termination of the Term Loan, as defined and discussed in Note 5, our obligation to pay the Exit Fee will expire on May 16, 2028.

We concluded that the Exit Fee is a freestanding derivative which should be accounted for at fair value on a recurring basis.

We concluded that the Exit Fee is a freestanding derivative which should be accounted for at fair value on a

recurring basis.

The estimated fair value of the Exit Fee is recorded as a derivative liability and included in accrued expenses and other current liabilities on the accompanying condensed balance sheets.

4 unchanged sentences

Generally, increases or decreases in the probability of occurrence would result in a directionally similar impact in the fair value measurement of the derivative liability and it is estimated that a 10 % increase (decrease), not to exceed 100%, in the probability of occurrence would result in a fair value fluctuation of no more than $ 0.1 million.

Changes in the fair value of recurring measurements included in Level 3 of the fair value hierarchy are presented as other income, net in our statements of operations and were as follows for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

Changes in the fair value of recurring measurements included in Level 3 of the fair value hierarchy are presented as other income, net in our statements of operations and were as follows for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Fair value of Exit Fee derivative liability at January 1 $ 1,376 $ 969

Change in estimated fair value of derivative liability ( 713 ) 152

Fair value of Exit Fee derivative liability at June 30 $ 663 $ 1,121

During the three months ended June 30, 2021 we reduced the value of the derivative liability due the receipt of the CRL from the FDA regarding our NDA for the control of serum phosphorus in adult patients with CKD on dialysis.

Change in estimated fair value of Exit Fee derivative liability ( 696 ) 290

Fair value of Exit Fee derivative liability at September 30 $ 680 $ 1,259

During the nine months ended September 30, 2021 we reduced the value of the derivative liability due the receipt of the CRL from the FDA regarding our NDA for the control of serum phosphorus in adult patients with CKD on dialysis.

All of our leases are operating leases and each contain customary rent escalation clauses.

1 unchanged sentence

We have elected to account for each separate lease component and the non-lease components associated with that lease component as a single lease component for all classes of underlying assets.

During the six months ended June 30, 2021, we entered into an amendment to the lease for our Fremont, California facility that extended the term of the lease to March 2025.

During May 2021, we entered into an amendment to the lease for our Fremont, California facility that extended the term of the lease to March 2025.

The office space consists of 72,500 square feet with the lease terminating in September 2025.

We increased the right-of-use asset and lease liability by $ 11.9 million for the Fremont lease upon commencement of the amendment.

During the six months ended June 30, 2021, we recorded a right-of-use operating lease asset for a new facility in Waltham, Massachusetts under a lease agreement entered into during December 2020 with lease commencement dates during April and May 2021.

During April 2021 and May 2021, we recorded right-of-use operating lease assets for a new facility in Waltham, Massachusetts under a lease agreement entered into during December 2020 with lease commencement dates during April and May 2021.

The office space consists of 12,864 square feet with the lease terminating in June 2026.

2 unchanged sentences

We recorded a $ 1.6 million right-of-use asset and lease liability for the Waltham lease upon commencement of the lease.

The following table provides additional details of our facility leases presented in the condensed balance sheet as of June 30, 2021 (dollars in thousands):

The following table provides additional details of our facility leases presented in the condensed balance sheet as of September 30, 2021 (dollars in thousands):

Right-of-use assets $ 13,580

5 unchanged sentences

Lease costs, which are included in operating expenses in our statements of operations, were as follows (in thousands):

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

1 unchanged sentence

Cash paid for operating leases $ 829 $ 767 $ 2,383 $ 2,288

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of June 30, 2021 (in thousands):

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of September 30, 2021 (in thousands):

Remainder of 2021 $ 1,056

7 unchanged sentences

At the Market Offerings Agreement

In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020, containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings;

and (ii) a prospectus supplement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 100.0 million of our common stock that may be issued and sold, from time to time, under a sales agreement with Jefferies LLC, deemed to be “at the market offerings.” During the six months ended June 30, 2021 we sold 9.0 million shares of our common stock for aggregate gross proceeds of $ 63.8 million at a weighted average price of $ 7.10 per share under the Open Market Sales Agreement.

We sold 8.2 million shares of our common stock between the dates of November 13, 2020 through February 19, 2021 and 4.0 million shares between the dates of May 11, 2021 through June 18, 2021 for a cumulative total of 12.2 million shares and gross proceeds of $ 85.4 million at a weighted average sales price of approximately $ 6.98 per share during the life of the Open Market Sales Agreement.

In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020 ("Registration Statement"), containing (i) a base prospectus for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 250.0 million of our common stock, preferred stock, debt securities, warrants and/or units, from time to time in one or more offerings;

Pursuant to the 2020 Open Market Sales Agreement, Jefferies, as our sales agent, received a commission of up to 3.0 % of the gross sales price for shares of common stock sold under the 2020 Open Market Sales Agreement.

During the nine months ended September 30, 2021 we sold 12.3 million shares of our common stock for aggregate gross proceeds of $ 68.7 million at a weighted average price of $ 5.58 per share under the 2020 Open Market Sales Agreement.

We sold 8.2 million shares of our common stock between the dates of November 13, 2020 through February 19, 2021, 4.0 million shares between the dates of May 11, 2021 through June 18, 2021 and 3.3 million shares between the dates of August 24, 2021 and September 10, 2021 for a

cumulative total of 15.6 million shares and gross proceeds of $ 90.3 million at a weighted average sales price of approximately $ 5.80 per share during the life of the 2020 Open Market Sales Agreement.

In August 2021, we filed an additional prospectus supplement under the Registration Statement for the offering, issuance and sale by us of up to a maximum aggregate offering price of $ 150.0 million of our common stock that may be issued and sold, from time to time, under an additional sales agreement we entered into with Jefferies (the "2021 Open Market Sales Agreement"), pursuant to which we may, from time to time, sell up to $ 150.0 million in shares of our common stock through Jefferies.

We are not required to sell shares under the 2021 Open Market Sales Agreement.

Pursuant to the 2021 Open Market Sales Agreement, Jefferies, as our sales agent, receives a commission of up to 3.0 % of the gross sales price for shares of common stock sold under the 2021 Open Market Sales Agreement.

As of September 30, 2021 we had sold no shares of our common stock under the 2021 Open Market Sales Agreement.

EQUITY INCENTIVE PLANS

1 unchanged sentence

Stock-based compensation expense recognized for stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PRSUs") and our employee stock purchase program (the "ESPP") are recorded as operating expenses in our condensed statements of operations and comprehensive loss, as follows (in thousands):

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

2 unchanged sentences

Total $ 2,262 $ 2,527 $ 8,568 $ 8,149

As of June 30, 2021, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands):

As of September 30, 2021, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands):

Unrecognized Compensation

5 unchanged sentences

Stock Options

A summary of our stock option activity and related information for the six months ended June 30, 2021 is as follows (in thousands, except dollar amounts):

A summary of our stock option activity and related information for the nine months ended September 30, 2021 is as follows (in thousands, except dollar amounts):

Number of Shares Weighted Average Exercise Price

3 unchanged sentences

Forfeited ( 1,481 ) $ 6.01

Outstanding balance at June 30, 2021 12,511 $ 6.76

Exercisable at June 30, 2021 6,043 $ 7.38

Outstanding balance at September 30, 2021 11,387 $ 6.95

Exercisable at September 30, 2021 6,434 $ 7.51

Restricted Stock Units

A summary of our RSUs activity and related information for the six months ended June 30, 2021 is as follows (in thousands, except dollar amounts):

A summary of our RSUs activity and related information for the nine months ended September 30, 2021 is as follows (in thousands, except dollar amounts):

Number of RSUs Weighted Average Value at Grant

3 unchanged sentences

Forfeited ( 322 ) $ 6.68

Unvested at June 30, 2021 1,135 $ 6.52

We issued no PRSUs during the six months ended June 30, 2021 and we have no PRSUs outstanding as of June 30, 2021.

Unvested at September 30, 2021 820 $ 6.42

We issued no PRSUs during the nine months ended September 30, 2021 and we have no PRSUs outstanding as of September 30, 2021.

Employee Stock Purchase Plan

In February 2021, we sold approximately 0.2 million shares of our common stock under the ESPP.

In August 2021, we sold approximately 0.5 million shares of our common stock under the ESPP.

The shares were purchased by employees at a purchase price of $ 1.21 per share resulting in proceeds to us of approximately $ 0.6 million.

1 unchanged sentence

Under Our Amended and Restated Non-Employee Director Compensation Program, members of our board of directors may elect to receive shares of our stock in lieu of their cash fees.

During the six months ended June 30, 2021, we issued no shares of our common stock to members of the board of directors in accordance with the program.

During the nine months ended September 30, 2021, we issued approximately 25,989 shares of our common stock to members of the board of directors in accordance with the program.

RESTRUCTURING

On July 29, 2021, our Board of Directors approved, and on August 2, 2021, we began implementing a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL.

Under the restructuring plan, we reduced our workforce by 83 employees (approximately 33 %).

Impacted employees received cash payments equal to their base pay for a notice period of sixty ( 60 ) days and Company funded COBRA premiums through such notice period.

In addition, impacted employees were eligible to receive severance benefits and additional Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a separation agreement, which includes a general release of claims against us.

In connection with the restructuring, we have incurred restructuring charges of $ 3.6 million, which were recorded during the quarter ended September 30, 2021, related to one-time termination notice and severance payments and other employee-related costs.

Of this charge, $ 1.2 million was recorded in research and development expenses, and $ 2.4 million was recorded in general and administrative expense in the accompanying condensed statements of operations and comprehensive loss.

The cash payments related to the reduction in workforce were disbursed during the quarter ended September 30, 2021.

As discussed in Note 13, on October 8, 2021, our Board of Directors approved an additional restructuring plan subsequent to the conclusion of an End of Review Meeting with the FDA on October 1, 2021.

The restructuring plan is expected to be completed in December 2021.

NET LOSS PER SHARE

1 unchanged sentence

Diluted net loss per common share is computed giving effect to all potential dilutive common shares, including common stock issuable upon exercise of stock options, and unvested restricted common stock and stock units.

As we had net losses for the three and six months ended June 30, 2021 and 2020, all potential common shares were determined to be anti-dilutive.

As we had net losses for the three and nine months ended September 30, 2021 and 2020, all potential common shares were determined to be anti-dilutive.

The following table sets forth the computation of net loss per common share (in thousands, except per share amounts):

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

2 unchanged sentences

Net loss per share - basic and diluted $ ( 0.42 ) $ ( 0.20 ) $ ( 1.21 ) $ ( 0.73 )

For the three and six months ended June 30, 2021, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 13.8 million and 13.4 million, respectively.

For the three and six months ended June 30, 2020, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 11.5 million and 11.7 million, respectively.

For the three and nine months ended September 30, 2021, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 13.2 million and 13.4 million, respectively.

For the three and nine months ended September 30, 2020, the total number of securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share because the effect would have been antidilutive was 9.6 million and 10.4 million, respectively.

CONTINGENCIES

From time to time we may be involved in claims arising in connection with our business.

Based on information currently available, management believes that the amount, or range, of reasonably possible losses in connection with any pending actions against us would not be material to our financial condition or cash flows, and no contingent liabilities were accrued as of June 30, 2021 or 2020.

SUBSEQUENT EVENTS

On July 28, 2021, we received a CRL from the FDA regarding our NDA for the control of serum phosphorus in adult patients with CKD on dialysis.

According to the CRL, while the FDA agrees “that the submitted data provide substantial evidence that tenapanor is effective in reducing serum phosphorus in CKD patients on dialysis,” the FDA characterizes the magnitude of the treatment effect as “small and of unclear clinical significance.” Additionally, the FDA noted that for the application to be approved, we will need “to conduct an additional adequate and well-controlled trial demonstrating a clinically relevant treatment effect on serum phosphorus or an effect on the clinical outcome thought to be caused by hyperphosphatemia in CKD patients on dialysis.” There were no safety, clinical pharmacology/biopharmaceutics, chemistry, manufacturing, and controls or non-clinical issues identified in the CRL.

We intend to request a Type A meeting as soon as possible to discuss the CRL and determine potential paths forward for the approval of tenapanor for the control of serum phosphorus in adult patients with CKD on dialysis.

On July 29, 2021, we entered into a Fourth Amendment to the Loan Agreement (the “Amendment”) which extended the period of time that we are permitted to make interest-only payments on the Term Loan to December 1, 2021;

provided that if we have not received FDA approval for our NDA for tenapanor for the control of serum phosphorus in adult patients with CDK on dialysis on or before October 25, 2021, the interest-only period will expire and principal repayments shall be required to begin on November 1, 2021.

On July 29, 2021, our Board of Directors approved, and on August 2, 2021 we began implementing, a restructuring plan to better align our workforce and anticipated commercial and development spend with our capital resources and the needs of our business following the receipt of the CRL.

The restructuring plan is expected to be completed in August 2021.

Under the restructuring plan, we are reducing our workforce by approximately 83 employees (approximately 33 %).

Impacted employees will receive cash payments equal to their base pay for a notice period of sixty ( 60 ) days and Company funded COBRA premiums through such notice period.

In addition, impacted employees are eligible to receive severance benefits and additional Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a separation agreement, which includes a general release of claims against the Company.

We expect that the workforce reduction will decrease our annual cash compensation costs by approximately $ 17 million.

In connection with the restructuring, we estimate that we will incur restructuring charges of approximately $ 3.4 million, which will be recorded primarily in the third quarter of 2021, related to one-time termination notice and severance payments and other employee-related costs.

The cash payments related to the reduction in workforce will be paid primarily during the third quarter of 2021.

We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the reduction in workforce.

On July 30, 2021, a putative securities class action lawsuit was commenced in the U.S.

4 unchanged sentences

We believe the plaintiff’s claims are without merit and we have not recorded any accrual for a contingent liability associated with these legal proceedings.

From time to time we may be involved in claims arising in connection with our business.

SUBSEQUENT EVENTS

Restructuring

On October 8, 2021, our Board of Directors approved, and on October 12, 2021 we began implementing, a restructuring plan to reduce operating costs and better align our workforce with the needs of our business following the receipt of a CRL from the FDA on July 28, 2021 regarding our NDA for the control of serum phosphorus in CKD patients on dialysis, and the subsequent conclusion of an End of Review Meeting with the FDA on October 1, 2021.

The restructuring plan actions are expected to be completed in December 2021.

Under the restructuring plan, we are reducing our workforce by approximately 100 employees (approximately 60 %).

Impacted employees received notice that their positions will be eliminated on December 15, 2021.

The restructuring plan will result in the elimination of all positions in our research organization as well as the cessation of all research activities.

At the time of departure from the Company, either on December 15, 2021, or earlier, impacted employees are eligible to receive severance benefits and Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a separation agreement, which includes a general release of claims against the Company.

In connection with the restructuring, we estimate that we will incur aggregate restructuring charges of approximately $ 4 million, which will be recorded primarily in the fourth quarter 2021, related to severance payments and other employee-related costs.

We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the reduction in workforce.

In addition, on October 8, 2021, the Board determined that it is in the best interests of the Company and its stockholder to put in place arrangements designed to provide that the Company will have the continued dedication and commitment of those employees, including executives, determined to be key to the restructuring and planned future operations of the Company, and

thus, not impacted by the reduction in force.

The Board approved, and management has implemented a retention program consisting of cash payments and grants of RSUs to the Company’s employees not impacted by the reduction in force.

As part of the retention plan we have entered into retention agreements with the retained employees, including the following named executive officers:

Mike Raab, our Chief Executive Officer, Justin Renz, our Chief Financial Officer and Susan Rodriguez, our Chief Commercial Officer.

Under those retention arrangements, each of Messrs.

Raab and Renz and Ms.

Rodriguez have received an RSU grant for 300 thousand, 250 thousand and 150 thousand shares, respectively.

The RSUs will vest in full on June 1, 2022.

Additionally, the retention agreements provide Messrs.

Raab and Renz and Ms.

Rodriguez the opportunity to earn cash bonuses upon the achievement of certain milestones in the amounts of $ 300 thousand, $ 250 thousand and $ 150 thousand, respectively.

During November 2021, in compliance with the terms of our Loan Agreement as discussed in Note 5, we made the first principal repayment on the Term Loan in the amount of $ 16.7 million.

At the Market Offerings Agreement

We sold 6.0 million shares of our common stock pursuant to the 2020 Open Market Sales Agreement between the dates of October 21, 2021 and November 5, 2021 for gross proceeds of $ 7.4 million at a weighted average sales price of approximately $ 1.23 per share.

We did not sell any additional shares of our common stock after November 5, 2021 and through the date of filing this report on Form 10-Q.

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

What changed 10-Q

Item 1. Financial Statements