What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 106 added, 86 removed, 235 unchanged (45% of the section changed)

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We realized our first product sales of IBSRELA ® (tenapanor) in March 2022.

As of June 30, 2022, we had an accumulated deficit of $767.9 million.

As of September 30, 2022, we had an accumulated deficit of $790.8 million.

We expect to continue to incur substantial operating losses for the foreseeable future as we commercialize IBSRELA, seek to gain approval for XPHOZAH ® (tenapanor) for the control of serum phosphorus in adult patients with CKD on dialysis;

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If approved, XPHOZAH would be the first therapy for phosphate management that blocks phosphorus absorption at the primary site of uptake.

It is not a phosphate binder.

XPHOZAH is not a phosphate binder.

In June 2020, we submitted a new drug application ("NDA") to the FDA for XPHOZAH for the control of serum phosphorus in adult patients with CKD on dialysis.

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Accordingly, the OND directed the Division of Cardiology and Nephrology to convene the Advisory Committee, and indicated that a response to our appeal could be expected within thirty calendar days after the conclusion of the Advisory Committee meeting.

On June 21, 2022 we announced that the FDA has informed us that a meeting of the Advisory Committee is tentatively scheduled for November 16, 2022.

The Advisory Committee is scheduled for November 16, 2022.

There can be no assurances that the response from the Advisory Committee will be positive, or if the outcome of the Advisory Committee is positive, that approval of our NDA will ultimately be granted by the FDA.

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Under the terms of the Knight Agreement, Knight paid us a $2.3 million upfront payment.

We may also be eligible to receive approximately CAD22.2 million for development and commercialization milestones, or approximately $17.2 million at the currency exchange rate on June 30, 2022, of which $0.7 million has been received and recognized as revenue as of June 30, 2022.

We may also be eligible to receive approximately CAD22.2 million for development and commercialization milestones, or approximately $16.1 million at the currency exchange rate on September 30, 2022, of which $0.7 million has been received and recognized as revenue as of September 30, 2022.

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, 2022.

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, 2022.

KKC has exclusive rights for the development, commercialization and distribution of tenapanor in Japan for cardiorenal indications.

Under the terms of the agreement with KKC, we received a $30.0 million upfront payment from KKC, and we may be entitled to receive up to $55.0 million in total development and regulatory milestones, of which $10.0 million has been received and recognized as revenue as of June 30, 2022.

We may also be eligible to receive approximately ¥8.5 billion for commercialization milestones, or approximately $62.3 million at the currency exchange rate on June 30, 2022, as well as reimbursement of costs plus a reasonable overhead for the supply of product and royalties on net sales throughout the term of the agreement.

We may also be eligible to receive approximately ¥8.5 billion for commercialization milestones, or approximately $58.7 million at the currency exchange rate on September 30, 2022, as well as reimbursement of costs plus a reasonable overhead for the supply of product and royalties on net sales throughout the term of the agreement.

As discussed in Note 7.

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pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement.

On April 11, 2022, we entered into a second amendment (the "Amendment") to the 2017 KKC Agreement.

Under the terms of the Amendment, we and KKC have agreed to a reduction in the royalty rate payable to us by KKC upon net sales of tenapanor in Japan.

On April 11, 2022, we entered into a second amendment to the 2017 KKC Agreement (the "2022 Amendment").

Under the terms of the 2022 Amendment, we and KKC agreed to a reduction in the royalty rate payable to us by KKC upon net sales of tenapanor in Japan.

The royalty rate will be reduced from the high teens to low double digits for a two-year period of time following the first commercial sale in Japan, and then to mid-single digits for the remainder of the royalty term.

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Under the terms of the Fosun Agreement, Fosun paid us a $12.0 million upfront license fee.

We may be entitled to receive development and commercialization milestones of up to $113.0 million, of which $3.0 million has been received and recognized as revenue as of June 30, 2022, 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%.

We may be entitled to receive development and commercialization milestones of up to $113.0 million, of which $3.0 million has been received and recognized as revenue as of September 30, 2022, 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%.

Impact of COVID-19

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The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our condensed financial statements presented in this report are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K filed with the SEC on February 28, 2022.

During the six months ended June 30, 2022, we adopted the following critical accounting policies and significant judgements and estimates:

During the nine months ended September 30, 2022, we adopted the following critical accounting policies and significant judgements and estimates:

Product Sales, Net

We account for our commercial product sales, net in accordance with Topic 606 - Revenue from Contracts with Customers .

We received approval from the FDA in September 2019 to market IBSRELA, the first and only NHE3 inhibitor for the treatment of IBS-C in adults, in the United States (the "U.S.").

We received approval from the FDA in September 2019 to market IBSRELA, the first and only NHE3 inhibitor for the treatment of IBS-C in adults, in the United States ("U.S.").

We began selling IBSRELA in the U.S.

in March 2022.

We distribute our products principally through a limited number of distributors and specialty pharmacy providers (collectively, our "Customers").

Our Customers subsequently sell our products to pharmacies and patients.

Separately, we enter into arrangements with third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts.

We distribute IBSRELA principally through major wholesalers, specialty pharmacies and group purchasing organizations ("GPOs") (collectively, our "Customers").

Our Customers subsequently sell IBSRELA to pharmacies and patients.

Separately, we enter into arrangements with third parties that provide for government-mandated rebates, chargebacks and discounts.

Revenue from product sales is recognized when our performance obligations are satisfied, which is when Customers obtain control of our product and occurs upon delivery.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration, including rebates, discounts, patient copay assistance programs, and estimated product returns.

These estimates are based on the amounts earned or to be claimed for related sales and are classified as reductions of gross accounts receivable if the amount is payable to our Customers or a current liability if the amount is payable to a party other than a Customer.

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration, including discounts which may be settled in the form of off-invoice discounts, chargebacks, or rebates depending on the customer, wholesaler fees, group purchasing organization administrative fees, patient copay assistance programs, and estimated product returns.

These estimates are based on the amounts earned or to be claimed for related sales and are classified as reductions of gross accounts receivable settlement is expected to occur through a reduction in the amounts paid by our customers or a current liability if settlement is expected to occur through a payment from us.

Where appropriate, these estimates are based on factors such as industry data and forecasted customer buying and payment patterns, our historical experience, current contractual and statutory requirements, specific known market events and trends.

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As we gain more historical experience, estimates will be more heavily based on the expected utilization from historical data we have accumulated since the IBSRELA product launch.

Rebates are generally invoiced and paid quarterly in arrears.

Rebates include mandated discounts under the Medicaid Drug Rebate Program ("Medicaid") and the Medicare Coverage Gap Program ("Medicare").

Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public-sector benefit providers.

These estimates for rebates are recorded in the same period the related gross revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the condensed balance sheets.

Rebates include wholesaler fees, GPO fees, as well as mandated discounts under the Medicaid Drug Rebate Program ("Medicaid") and the Medicare Coverage Gap Program ("Medicare").

Estimates for rebates are recorded in the same period the related gross revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the condensed balance sheets.

We estimate our Medicaid and Medicare rebates based upon the estimated payor mix, and statutory discount rates.

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Amounts for estimated chargebacks are established in the same period that the related gross revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

The accrual for wholesaler chargebacks is estimated based on known chargeback rates, known sales to wholesalers, and estimated utilization by types of contracted purchasers.

The accrual for wholesaler chargebacks is estimated based on known chargeback rates, known sales to wholesalers, and estimated purchases by types of contracted purchasers.

Discounts and Fees:

Our payment terms are generally 30 to 60 days.

Wholesalers and specialty pharmacies are offered various forms of consideration, including service fees.

Wholesalers may also receive prompt pay discounts for payment within a specified period.

We expect prompt pay discounts to be earned when offered and therefore, we deduct the full amount of these discounts and service fees from product sales when revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

Wholesalers, GPOs and specialty pharmacies are offered various forms of consideration, including off-invoice discounts which may be paid to GPOs and specialty pharmacies.

Wholesalers and GPOs may also receive prompt pay discounts for payment within a specified period.

We expect discounts to be earned when offered and therefore, we deduct the full amount of these discounts from product sales when revenue is recognized, resulting in a reduction of product revenue and accounts receivable.

Other Reserves:

Patients who have commercial insurance may receive co-pay assistance when product is dispensed by pharmacies to patients.

We estimate the amount of co-pay assistance provided to eligible patients based on the terms of the program and redemption information provided by third-party claims processing organizations and are recorded in accounts payable and accrued expenses and other current liabilities on the condensed balance sheets.

Patients who have commercial insurance may receive copay assistance when product is dispensed by pharmacies to patients.

We estimate the amount of copay assistance provided to eligible patients based on the terms of the program and redemption information provided by third-party claims processing organizations and are recorded in accounts payable and accrued expenses and other current liabilities on the condensed balance sheets.

Other reserves include estimated product returns which are recorded in the same period the related gross revenue is recognized, resulting in a reduction of product revenue as well as gross accounts receivable.

We estimate our product returns reserve based upon our historical experience, and specific known market events and trends

Non-cash Interest Expense on Deferred Royalty Obligation

The net proceeds we receive from the sale of certain future royalties are amortized to non-cash interest expense over the estimated life of the associated agreement using the effective interest method.

As we earn royalties and remit those royalties pursuant to the agreement, the balance of the deferred royalty obligation will be effectively repaid over the life of agreement.

The net proceeds we receive from the sale of certain future royalties is recorded as deferred royalty obligation related to the sale of future royalties on our condensed balance sheets.

As we earn royalties and remit those royalties pursuant to the agreement, the balance of the deferred royalty obligation will be effectively repaid over the life of agreement and non-cash interest expense related to the sale of future royalties is recorded using the effective interest method.

To determine the amortization of our deferred royalty obligation, we are required to estimate the total amount of future royalty payments we expect to earn.

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Otherwise, such costs are expensed as research and development.

A portion of the costs of IBSRELA units recognized as revenue during the three and six months ended June 30, 2022 were expensed prior to the fourth quarter of 2021, when our intent to commercialize IBSRELA was established and we commenced preparation for the commercial launch of IBSRELA.

We believe our cost of goods sold for the three and six months ended June 30, 2022 would have been $140 thousand and $149 thousand higher, respectively, if we had not previously expensed certain material and production costs with respect to the units sold.

As of June 30, 2022, we had approximately $31.2 million of inventory on hand that was previously expensed as research and development expense and will not be reported as cost of goods sold in future periods when sales of IBSRELA are recognized as revenue.

A portion of the costs of IBSRELA units recognized as revenue during the three and nine months ended September 30, 2022 were expensed prior to the fourth quarter of 2021, when our intent to commercialize IBSRELA was established and we commenced preparation for the commercial launch of IBSRELA.

We believe our cost of revenue for the three and nine months ended September 30, 2022 would have been $0.2 million and $1.2 million higher, respectively, if we had not previously expensed certain material and production costs with respect to the units sold.

As of September 30, 2022, we had approximately $28.8 million of inventory on hand that was previously expensed as research and development expense and will not be reported as cost of revenue sold in future periods when sales of IBSRELA are recognized as revenue.

Cost of revenue includes payments due to AstraZeneca, which under the terms of a termination agreement entered into in 2015 (the "AZ Termination Agreement") is entitled to (i) future royalties at a 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 our collaboration partners in connection with the development and commercialization of tenapanor or certain other NHE3 inhibitors.

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Selling, General and Administrative

Selling, general and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, for certain of our executives, our board members, and our finance, legal, business development, market development, commercial and support staff.

Other selling, general and administrative expenses include facility related costs and professional fees for legal, accounting and audit, investor relations, other consulting services and allocated facility related costs not otherwise included in research and development expenses.

Selling, general and administrative expenses relate to sales and marketing, finance, human resources, legal and other administrative activities, including information technology investments.

Selling, general and administrative expenses consist primarily of personnel costs, facilities costs not otherwise allocated to research and development, outside marketing, advertising and legal expenses and other general and administrative costs.

Interest Expense

Interest expense represents the interest paid on our loan payable.

Non-cash interest expense related to the sale of future royalties

Non-cash interest expense related to the sale of future royalties represents the imputed interest expense on our deferred royalty obligation related to the sale of future royalties using the effective interest method.

As further described in Note 7.

Deferred Royalty Obligation , in June 2022, we and HealthCare Royalty Partners IV, L.P.

(“HCR”) entered into a Royalty and Sales Milestone Interest Acquisition Agreement (the “HCR Agreement”).

Under the terms of the HCR Agreement, HCR has agreed to pay us up to $20.0 million in exchange for the royalty payments and commercial milestone payments (collectively the “Royalty Interest Payments”) that we may receive under our 2017 License Agreement with KKC based upon KKC's net sales of tenapanor in Japan.

As part of the HCR Agreement, we received a $10.0 million upfront payment from HCR in June 2022 and recorded it as a deferred royalty obligation on our condensed balance sheet.

Non-cash interest expense will be recognized over the life of the HCR Agreement using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of future royalty payments to be received from KKC.

Other Income, net

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The results of operations are not necessarily indicative of the results to be expected for the year ending December 31, 2022, for any other interim period, or for any other future year.

Comparison of the three and six months ended June 30, 2022 and 2021

Comparison of the three and nine months ended September 30, 2022 and 2021

Below is a summary of our total revenue (dollars in thousands):

Three Months Ended June 30, Change

2021 Six Months Ended June 30, Change

Three Months Ended September 30, Change

2021 Nine Months Ended September 30, Change

2022 2021 $ % 2022 2021 $ %

Product sales, net $ 4,885 $ — $ 4,885 (a) $ 6,899 $ — $ 6,899 (a)

Product supply revenue 952 — 952 (a) 966 126 840 666.7 %

Product supply revenue 92 285 (193) (67.7) % 1,058 411 647 157 %

Licensing revenue 9 2 7 350 % 23 5,007 (4,984) (100) %

1 unchanged sentence

Total revenues $ 4,986 $ 1,173 $ 3,813 325 % $ 7,980 $ 9,068 $ (1,088) (12) %

(a) Percent change is not meaningful.

The increase to total revenues during the three months ended June 30, 2022 is primarily attributable to $1.6 million of net product sales for IBSRELA to our Customers in connection with the commercial launch of IBSRELA, as well as $1.0 million product supply revenue for which there was no comparable revenue during the three months ended June 30, 2021.

Partially offsetting these increases was the full recognition of upfront payments associated with the 2019 KKC Agreement through the end of 2021.

The decrease to total revenues during the six months ended June 30, 2022 is primarily attributable to a $5.0 million development milestone that was earned during the prior year that did not recur during the current year, as well as the full recognition of upfront payments associated with the 2019 KKC Agreement through the end of 2021, for which there was no comparable revenue during the six months ended June 30, 2022.

(a) There were no product sales during the prior year period.

The increase to total revenues during the three months ended September 30, 2022 is primarily attributable to $4.9 million of net product sales for IBSRELA to our Customers in connection with the commercial launch of IBSRELA.

Partially offsetting this increase was the full recognition of upfront payments associated with the 2019 KKC Agreement through the end of 2021.

The decrease to total revenues during the nine months ended September 30, 2022 is primarily attributable to a $5.0 million development milestone that was earned during the prior year that did not recur during the current year, as well as the full recognition of upfront payments associated with the 2019 KKC Agreement through the end of 2021, for which there was no comparable revenue during the nine months ended September 30, 2022.

Partially offsetting these decreases is recognition of $6.9 million of net product sales for sales of IBSRELA to our Customers in connection with the commercial launch of IBSRELA.

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Below is a summary of our operating expenses (dollars in thousands):

Three Months Ended June 30, Change

2021 Six Months Ended June 30, Change

Three Months Ended September 30, Change

2021 Nine Months Ended September 30, Change

2022 2021 $ % 2022 2021 $ %

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Total operating expenses $ 26,866 $ 43,409 $ (16,543) (38) % $ 83,882 $ 128,141 $ (44,259) (35) %

(a) Percent change is not meaningful.

(a) There were no product sales during the prior year period.

Cost of Revenue

The fluctuations in cost of revenue for the three and six months ended June 30, 2022 are primarily attributable to payments due to AstraZeneca under the AZ Termination Agreement related to the commercial sales of IBSRELA during the three and six months ended June 30, 2022 and a development milestone we earned during the six months ended June 30, 2021.

In addition, during the three and six months ended June 30, 2022, we incurred cost of revenue from sales of IBSRELA to our Customers in connection with the commercial launch of IBSRELA.

The fluctuations in cost of revenue for the three and nine months ended September 30, 2022 are primarily attributable to payments due to AstraZeneca under the AZ Termination Agreement related to the commercial sales of IBSRELA during the three and nine months ended September 30, 2022 and a development milestone we earned during the nine months ended September 30, 2021.

In addition, during the three and nine months ended September 30, 2022, we incurred cost of revenue from sales of IBSRELA to our Customers in connection with the commercial launch of IBSRELA.

Research and Development

Below is a summary of our research and development expenses (dollars in thousands):

Three Months Ended June 30, Change

2021 Six Months Ended June 30, Change

Three Months Ended September 30, Change

2021 Nine Months Ended September 30, Change

2022 2021 $ % 2022 2021 $ %

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Total research and development expenses $ 7,467 $ 23,695 $ (16,228) (68) % $ 26,059 $ 70,172 $ (44,113) (63) %

The decrease in our external R&D expenses for the three months ended June 30, 2022 is primarily the result of lower clinical study costs from the OPTIMIZE study, lower tenapanor manufacturing expense as we have begun to capitalize costs associated with the production of IBSRELA to inventory, and lower expenses for research following the elimination of our research function in the fourth quarter of 2021.

The decrease in our employee-related expenses for the three and six months ended June 30, 2022 is due to lower compensation and benefits expenses for our research and development workforce following restructuring actions in 2021.

The decrease in our external R&D expenses for the three months ended September 30, 2022 is primarily the result of lower clinical study costs as a result of the completion of the OPTIMIZE study, lower tenapanor manufacturing expense as we have begun to capitalize costs associated with the production of IBSRELA to inventory, and lower expenses for research following the significant reduction in the research function in the fourth quarter of 2021.

The decrease in our employee-related expenses for the three and six months ended September 30, 2022 is due to lower compensation and benefits expenses for our research and development workforce following restructuring actions in 2021.

Selling, General and Administrative

The fluctuations in general and administrative expenses for the three and six months ended June 30, 2022 is primarily due to the timing of costs associated with building and staffing our commercial infrastructure and teams as we prepared for the U.S.

launch of IBSRELA.

The decrease in selling, general and administrative expenses for the three and nine months ended September 30, 2022 is primarily due to a reduction in ongoing and one-time costs as a result of the restructuring action carried out during the third quarter of 2021, offset by increased costs associated with the commercial launch of IBSRELA during 2022.

The changes consisted of headcount and related personnel costs and external spending for disease awareness initiatives, commercial infrastructure and strategy.

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Below is a summary of our interest expense (dollars in thousands):

Three Months Ended June 30, Change

2021 Six Months Ended June 30, Change

Three Months Ended September 30, Change

2021 Nine Months Ended September 30, Change

2022 2021 $ % 2022 2021 $ %

Interest expense $ (886) $ (1,216) $ 330 (27) % $ (2,409) $ (3,518) $ 1,109 (32) %

The decrease in interest expense for the three and six months ended June 30, 2022 was primarily due to lower principal outstanding on our loan payable.

Other Income, net

Below is a summary of our other income, net (dollars in thousands):

Three Months Ended June 30, Change

2021 Six Months Ended June 30, Change

The fluctuation in interest expense for the three and nine months ended September 30, 2022 was due to higher principal outstanding on our loan payable in 2021 prior to principal repayments under our 2018 Loan commencing during the fourth quarter of 2021.

We repaid the remaining principal balance of the 2018 Loan in the amount of $25.0 million and entered into the new 2022 Loan in the amount of $27.5 million in February 2022.

Non-Cash Interest Expense Related to the Sale of Future Royalties

Below is a summary of our interest expense (dollars in thousands):

Three Months Ended September 30, Change

2021 Nine Months Ended September 30, Change

2022 2021 $ % 2022 2021 $ %

Other income, net $ 70 $ 847 $ (777) (91.7) % $ 554 $ 798 $ (244) (30.6) %

The decrease in other income, net for the three and months ended June 30, 2022 is primarily due to revaluation of our 2018 Exit Fee during the three months ended June 30, 2021 following the receipt of the CRL from the FDA.

Partially offsetting this decrease are sales of certain lab equipment and supplies for a net gain of $1.1 million.

Non-cash interest expense related to the sale of future royalties $ (831) $ — $ (831) (a) $ (841) $ — $ (841) (a)

(a) There was no non-cash interest expense related to the sales of future royalties during the prior year period.

Non-cash interest expense related to the sales of future royalties or the three and nine months ended September 30, 2022 was due to the recognized amortization of the deferred royalty obligation that we recorded following the receipt of the $10.0 million upfront payment from HCR during June 2022.

Other Income (Expense), net

Below is a summary of our other income (expense), net (dollars in thousands):

Three Months Ended September 30, Change

2021 Nine Months Ended September 30, Change

2022 2021 $ % 2022 2021 $ %

Other income (expense), net $ 704 $ (134) $ 838 (625) % $ 1,258 $ 664 $ 594 89 %

The increase in other income (expense), net for the three months ended September 30, 2022 is primarily due to unrealized gains on foreign currency.

The increase in other income (expense), net for the nine months ended September 30, 2022 is primarily due to revaluation of our 2018 Exit Fee during the three months ended June 30, 2021 following the receipt of the CRL from the FDA.

Also contributing to the fluctuations during the three and nine month periods are sales of certain lab equipment and supplies for a net gain of $1.5 million during the nine months ended September 30, 2022.

Liquidity and Capital Resources

Below is a summary of our cash, cash equivalents and investments (in thousands):

June 30, 2022 December 31, 2021 Change $ Change %

Below is a summary of our cash, cash equivalents and investments (dollars in thousands):

September 30, 2022 December 31, 2021 Change $ Change %

Cash and cash equivalents $ 61,628 $ 72,428 $ (10,800) (15) %

1 unchanged sentence

Total liquid funds $ 90,623 $ 116,689 $ (26,066) (22) %

As of June 30, 2022, we had cash, cash equivalents and investments totaling $81.0 million compared to $116.7 million as of December 31, 2021.

We have incurred operating losses since inception and our accumulated deficit as of June 30, 2022 is $767.9 million.

Our current level of cash and investments alone is not sufficient to meet our plans for the next twelve months following the filing of these financial statements on August 4, 2022.

As of September 30, 2022, we had cash, cash equivalents and investments totaling $90.6 million compared to $116.7 million as of December 31, 2021.

We have incurred operating losses since inception and our accumulated deficit as of September 30, 2022 is $790.8 million.

Our current level of cash and investments alone is not sufficient to meet our plans for the next twelve months following the filing of these financial statements on November 3, 2022.

These factors raise substantial doubt regarding our ability to continue as a going concern for a period of one year from the issuance of these financial statements.

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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 ("Jefferies"), deemed to be “at the market offerings” (the "2020 Open Market Sales Agreement").

The 2020 Open Market Sales Agreement was fully utilized as of December 31, 2021.

During the six months ended June 30, 2021 we sold 9.0 million shares and received gross proceeds of $63.8 million at a weighted average sales price of approximately $7.10 per share under the 2021 Open Market Sales Agreement.

As of December 31, 2021, we had sold 23.3 million shares and received the maximum gross proceeds of $100.0 million pursuant to 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.

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Pursuant to the 2021 Open Market Sales Agreement, Jefferies, as our sales agent, receives a commission of up to 3% of the gross sales price for shares of common stock sold under the 2021 Open Market Sales Agreement.

During the six months ended June 30, 2022 we sold 20.5 million shares and received gross proceeds of $18.9 million at a weighted average sales price of approximately $0.92 per share under the 2021 Open Market Sales Agreement.

During the three months ended September 30, 2022 we sold 32.6 million shares and received gross proceeds of $35.1 million at a weighted average sales price of approximately $1.08 per share under the 2021 Open Market Sales Agreement.

During the nine months ended September 30, 2022 we sold 53.1 million shares and received gross proceeds of $54.0 million at a weighted average sales price of approximately $1.02 per share under the 2021 Open Market Sales Agreement.

As of September 30, 2022, we have sold a total of 68.8 million shares and received aggregate gross proceeds of $79.0 million under the 2021 Open Market Sales Agreement.

In February 2022, we entered into a loan and security agreement (the “2022 Loan Agreement”) with SLR Investment Corp.

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The estimated fair value of the 2022 Exit Fee is recorded as a derivative liability and included in accrued expenses and other current liabilities on the accompanying condensed balance sheets.

As discussed in Note 16.

Subsequent Events, on October 31, 2022, we announced that our collaboration partner, KKC, submitted a New Drug Application to the Japanese Ministry of Health, Labour and Welfare for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis.

This submission triggers the obligation to make an aggregate of $35.0 million to us in milestone payments and payments under the 2022 Amendment.

In accordance with the terms of the 2022 Amendment, we expect to receive these payments during the fourth quarter of 2022.

Our primary sources of cash have been from the sale and issuance of common stock (in both public offerings and private placements) and private placements of convertible preferred stock, funds from our collaboration partnerships and funds from our 2018 Loan Agreement and 2022 Loan Agreement.

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• the extent to which we are able to generate product revenue from sales of IBSRELA;

• whether we are successful in our efforts under the FDR process, including the Advisory Committee meeting to be convened as part of the FDR process, to secure approval for our NDA for XPHOZAH, or to reach resolution with the FDA regarding a path to address the deficiencies in the NDA noted in the CRL and ADL, and the time and cost associated with such path;

• whether we are successful in our efforts under the FDR process, including the Advisory Committee meeting scheduled for November 16, 2022, and whether we are ultimately able to secure approval for our NDA for XPHOZAH, or to reach resolution with the FDA regarding a path to address the deficiencies in the NDA noted in the CRL, and the time and cost associated with such path;

• the availability of adequate third-party reimbursement for IBSRELA and, if approved, the sales price and the availability of adequate third-party reimbursement for XPHOZAH;

• the manufacturing costs of IBSRELA and XPHOZAH;

• the selling and marketing costs associated with IBSRELA and, if approved, XPHOZAH;

• the manufacturing, selling and marketing costs of IBSRELA and, if approved, XPHOZAH;

• our ability to maintain our existing collaboration partnerships and to establish additional collaboration partnerships, in-license/out-license, joint ventures or other similar arrangements and the financial terms of such agreements;

• the timing, receipt and amount of any milestones that may be received from our collaboration partners in connection with tenapanor, if any;

• the timing, receipt and amount of revenue, if any, that may be received from KKC in connection with the 2022 KKC Amendment;

• the timing, receipt, and amount of sales of, or royalties on, tenapanor, if any;

• the cash requirements of any future acquisitions or discovery of product candidates;

• any clinical trials we are required to or decide to pursue for tenapanor or RDX013;

• the timing, receipt and amount of revenue, if any, that may be received from KKC in connection with the 2022 Amendment;

• the timing, receipt, and amount of sales of, or royalties we may receive as a result of sales of tenapanor by our collaboration partners in China and Canada, if any;

• the cash requirements for the development of product candidates, including RDX013 and RDX020;

• the time and cost necessary to respond to technological and market developments;

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CASH FLOW ACTIVITIES

The following table summarizes our cash flows (in thousands):

Six Months Ended June 30,

2022 2021 Change $ Change %

The following table summarizes our cash flows (dollars in thousands):

Nine Months Ended September 30, Change 2022 vs.

2022 2021 $ %

Net cash used in operating activities $ (84,328) $ (113,082) $ 28,754 (25) %

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Cash Flows from Operating Activities

Net cash used in operating activities during the six months ended June 30, 2022 decreased by $19.6 million primarily as a result of our net loss which was $23.3 million less than during the six months ended June 30, 2021.

Net cash used in operating activities during the nine months ended September 30, 2022 decreased by $28.8 million primarily as a result of decreased spending on research and development expenses during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Partially offsetting the net loss improvement were changes to our operating assets and liabilities related to expenditures for commercial manufacturing and inventory for the production of IBSRELA.

Cash Flows from Investing Activities

Net cash provided by investing activities increased by $7.1 million due to the timing of our investment maturities and purchases, as well as $1.3 million proceeds from sale of laboratory equipment and supplies during the six months ended June 30, 2022.

Net cash provided by investing activities decreased by $11.9 million due to the timing of our investment maturities and purchases, as well as $1.8 million proceeds from sale of laboratory equipment and supplies during the nine months ended September 30, 2022.

Cash Flows from Financing Activities

Net cash provided by financing activities decreased by $41.4 million primarily due to net proceeds from issuance of our common stock pursuant to the at the market offerings of $62.4 million during the six months ended June 30, 2021 compared to $18.5 million during the six months ended June 30, 2022.

In addition, during the six months ended June 30, 2022, we received net proceeds of $27.0 million pursuant to the 2022 Loan Agreement, $9.6 million in proceeds for the sale of certain future royalties, and repaid $33.0 million, net of settlement costs, to repay the 2018 Loan.

Net cash provided by financing activities decreased by $11.9 million primarily due to net proceeds from issuance of our common stock pursuant to the at the market offerings of $67.2 million during the nine months ended September 30, 2021 compared to $52.8 million during the nine months ended September 30, 2022.

In addition, during the nine months ended September 30, 2022, we received net proceeds of $27.0 million pursuant to the 2022 Loan Agreement, $9.6 million in proceeds for the sale of certain future royalties, and repaid $33.0 million, net of settlement costs, to repay the 2018 Loan.

Off-Balance Sheet Arrangements

As of June 30, 2022 and 2021, respectively, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K as promulgated by the SEC.

As of September 30, 2022 and 2021, respectively, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K as promulgated by the SEC.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis