What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-03 · 83 added, 73 removed, 227 unchanged (41% of the section changed)

11 unchanged sentences

for the treatment of adults with irritable bowel syndrome with constipation (“IBS-C”).

In April 2023, we resubmitted a New Drug Application (“NDA”) to the U.S.

Food and Drug Administration (“FDA”) for the approval of XPHOZAH (tenapanor) for the control of serum phosphate in adult patients with chronic kidney disease (“CKD”) on dialysis who have had an inadequate response or intolerance to a phosphate binder therapy, under the brand name XPHOZAH.

On May 17, 2023, the U.S.

Food and Drug Administration (“FDA”) accepted our resubmission of the New Drug Application (“NDA”) for tenapanor, branded XPHOZAH for the control of serum phosphorus in adult patients with chronic kidney disease (“CKD”) on dialysis who have had an inadequate response or intolerance to a phosphate binder therapy.

The FDA set a user fee goal date for review of the NDA of October 17, 2023.

We also have a development stage asset, RDX013 for adult patients with CKD and/or heart failure with hyperkalemia, or elevated serum potassium, and a discovery stage asset, RDX020, for adult patients with metabolic acidosis, a serious electrolyte disorder, in patients with CKD.

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

As of March 31, 2023, we had an accumulated deficit of $806.9 million.

As of June 30, 2023, we had an accumulated deficit of $824.0 million.

We expect to continue to incur substantial operating losses for the foreseeable future as we invest in the commercialization of IBSRELA, seek to gain approval in the U.S.

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IBSRELA acts locally in the gut and is minimally absorbed.

IBS-C is a gastrointestinal ("GI") disorder characterized by both abdominal pain and altered bowel movements, and is estimated to affect 12 million people in the U.S.

IBS-C is a gastrointestinal ("GI") disorder characterized by both abdominal pain and altered bowel movements, and depending on the diagnostic criteria employed, is estimated to affect up to 13 million people in the U.S.

IBS-C is associated with significantly impaired quality of life, reduced productivity, and substantial economic burden.

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In December 2022, the OND granted our appeal to the CRL for the NDA for XPHOZAH and directed the Division to work with us to develop an appropriate label for the commercialization of XPHOZAH.

We believe that a label could reflect an indication for patients whose hyperphosphatemia is insufficiently managed on binder therapy.

On February 13, 2023, we participated in a Type A meeting with the Division where we discussed the resubmission of the NDA, and the information to be contained in the resubmitted NDA.

In April 2023, we resubmitted a NDA to the FDA for the approval of XPHOZAH for the control of serum phosphate in adult patients with CKD on dialysis who have had an inadequate response or intolerance to a phosphate binder therapy.

An Acknowledgement of Receipt letter from the FDA, confirming the resubmission is complete, is expected in mid-May.

We expect that the letter will include the classification of the resubmission and the review goal date.

We currently expect that the FDA will act upon the XPHOZAH NDA in the second half of 2023, and that, if approved, we will launch XPHOZAH in the second half of 2023.

In April 2023, we resubmitted a NDA to the FDA for the approval of XPHOZAH for the control of serum phosphorus in adult patients with CKD on dialysis who have had an inadequate response or intolerance to a phosphate binder therapy.

In May 2023, we announced that the FDA accepted our resubmission of our NDA for XPHOZAH, and that the FDA determined that the NDA is a class 2 review, which results in a six-month review period from the date of resubmission.

The FDA set a user fee goal date of October 17, 2023.

If approved, we expect XPHOZAH to be commercially available in the fourth quarter of 2023, as soon as possible following an approval from the FDA.

We have established commercial agreements with Kyowa Kirin, Co.

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In October 2022, Kyowa Kirin submitted an NDA to the Japanese Ministry of Health, Labour and Welfare for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis.

In July 2023, we announced that an NDA for tenapanor had been accepted for review by China’s Center for Drug Evaluation of the National Medical Products Administration ("NMPA") for the control of serum phosphorus in adult patients with chronic kidney disease on hemodialysis.

Discovery and Developmental Assets

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Under the terms of the Knight Agreement, Knight paid us a $2.3 million non-refundable, one-time payment in March 2018.

We may also be eligible to receive approximately CAD 22.2 million for development and commercialization milestones, or approximately $16.3 million at the currency exchange rate on March 31, 2023, of which $0.7 million has been received and recognized as revenue as of March 31, 2023.

We may also be eligible to receive approximately CAD 22.2 million for development and commercialization milestones, or approximately $16.7 million at the currency exchange rate on June 30, 2023, of which $0.7 million has been received and recognized as revenue as of June 30, 2023.

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 March 31, 2023.

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, 2023.

In November 2017, we entered into an exclusive license agreement with Kyowa Kirin (“2017 Kyowa Kirin Agreement”) for the development, commercialization and distribution of tenapanor in Japan for cardiorenal indications.

Under the terms of the 2017 Kyowa Kirin Agreement, we received a $30.0 million upfront payment from Kyowa Kirin, and we may be entitled to receive up to $55.0 million in total development and regulatory milestones, of which $20.0 million has been received and recognized as revenue as of March 31, 2023.

We may also be eligible to receive approximately ¥8.5 billion for commercialization milestones, or approximately $64.1 million at the currency exchange rate on March 31, 2023, 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 $58.8 million at the currency exchange rate on June 30, 2023, 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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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 $110.0 million, of which $3.0 million has been received and recognized as revenue as of March 31, 2023, 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

The global COVID-19 pandemic has impacted the operational decisions of companies worldwide.

We have undertaken measures to protect our employees, partners, collaborators, and vendors, some of which impact our operations.

To date, we have been able to continue our operations with our workforce, most of whom have the ability to work in company-provided offices or remotely, and our pre-existing infrastructure that supports secure access to our internal systems.

For a discussion of risks of COVID-19 relating to our business, see “Part II:

Other Information-Item 1A.- Risk Factors- Risks Related to Our Business- The ongoing effects of the COVID-19 pandemic, or any other outbreak of epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows .” As of the date of issuance of this financial report, we are not aware of any specific event or circumstance that would require updates to our estimates and judgments or revisions to the carrying value of our assets or liabilities.

These estimates may change as new events occur and additional information is obtained.

In July 2023, we announced that an NDA for tenapanor had been accepted for review by China’s Center for Drug Evaluation of the NMPA for the control of serum phosphorus in adult patients with chronic kidney disease on hemodialysis.

This acceptance triggers a $2.0 million milestone payment to us under the terms of the Fosun Agreement, which we expect to receive in the third quarter of 2023.

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, 2023, 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%.

Critical Accounting Policies and Significant Judgments and Estimates

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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 March 2, 2023.

During the three months ended March 31, 2023, we did not adopt any new critical accounting policies and significant judgements and estimates.

During the six months ended June 30, 2023, we did not adopt any new critical accounting policies and significant judgements and estimates.

Recent Accounting Pronouncements

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whether and the extent to which we are successful in our commercialization of XPHOZAH, if approved;

whether or when XPHOZAH, if approved, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, are bundled into the end stage renal disease (“ESRD”) prospective payment system, and the manner in which such introduction into the ESRD prospective payment system may occur, including the length of any applicable Transitional Drug Add-on Payment Adjustment ("TDAPA") period and the amount of the add-on payment available during the TDAPA period;

the timing and progress of goods and services provided pursuant to our current or future collaborative partnerships;

our or our collaborators’ achievement of clinical, regulatory or commercialization milestones, to the extent achieved;

or our collaborators’ achievement of clinical, regulatory or commercialization milestones, to the extent achieved;

the timing and amount of any payments to us relating to the aforementioned milestones;

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and the extent to which tenapanor or other licensed products are approved and successfully commercialized by a collaboration partner.

current collaboration partners or any future collaboration partners fail to obtain regulatory approval for tenapanor or other licensed products, our ability to generate future revenue from our collaborative arrangements, and our results of operations and financial position, would be materially and adversely affected.

If our current collaboration partners or any future collaboration partners fail to obtain regulatory approval for tenapanor or other licensed products, our ability to generate future revenue from our collaborative arrangements, and our results of operations and financial position, would be materially and adversely affected.

Our past revenue performance is not necessarily indicative of results to be expected in future periods.

Cost of Revenue

Cost of revenue consists of the cost of commercial goods sold to our Customers and international partners under product supply agreements, as well as royalty expense based on sales of tenapanor.

Cost of Goods Sold

Cost of sales consists of the cost of commercial goods sold to our Customers.

Other cost of revenue consists of the cost of materials sold to our international partners under product supply agreements, as well as royalty expense based on sales of tenapanor.

We capitalize inventory costs associated with the production of our products after regulatory approval or when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized.

Otherwise, such costs are expensed as research and development.

A portion of the costs of IBSRELA units recognized as revenue during the three months ended March 31, 2023 were expensed prior to the fourth quarter of 2021, at which time 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 months ended March 31, 2023 would have been $0.4 million higher if we had not previously expensed certain material and production costs with respect to the units sold.

The increase in cost of revenue as of March 31, 2022 would have been immaterial.

As of March 31, 2023 and December 31, 2022, we had approximately $26.9 million and $28.0 million, respectively, 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 AB (“AstraZeneca”), which under the terms of a termination agreement entered into in 2015 (“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 other NHE3 products.

A portion of the costs of IBSRELA units recognized as revenue during the three and six months ended June 30, 2023 were expensed prior to the fourth quarter of 2021, at which time 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, 2023 would have been $2.0 million and $2.4 million higher, respectively, if we had not previously expensed certain material and production costs with respect to the units sold.

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, 2023 and December 31, 2022, we had approximately $24.5 million and $28.0 million, respectively, 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.

Other cost of revenue includes payments due to AstraZeneca AB (“AstraZeneca”), which under the terms of a termination agreement entered into in 2015 (“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 other NHE3 products.

We have agreed to pay AstraZeneca up to a maximum of $75.0 million in the aggregate for (i) and (ii).

We recognize these expenses as cost of revenue when we recognize the corresponding revenue that gives rise to payments due to AstraZeneca.

To date, we have recognized an aggregate of $16.4 million as cost of revenue under the AZ Termination Agreement.

We recognize these expenses as other cost of revenue when we recognize the corresponding revenue that gives rise to payments due to AstraZeneca.

To date, we have recognized an aggregate of $18.3 million as other cost of revenue under the AZ Termination Agreement.

See details in Note 6, Collaboration and Licensing Agreements , under AstraZeneca, in the notes to our financial statement of this Quarterly Report on Form 10-Q.

Research and Development

Pursuant to the October 2021 restructuring plan, we eliminated our internal research organization and we do not currently expect to meaningfully advance our discovery efforts with respect to our discovery and developmental assets until such time as we have determined our available resources can support additional activities after prioritization of the commercialization of IBSRELA and, if approved, XPHOZAH.

Pursuant to the October 2021 restructuring plan, we eliminated our internal research organization and we do not currently expect to meaningfully advance our efforts with respect to our discovery and developmental assets until such time as we have determined our available resources can support additional activities after prioritization of the commercialization of IBSRELA and, if approved, XPHOZAH.

We recognize all research and development expenses as they are incurred to support the discovery, research, development and manufacturing of our product candidates.

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RESULTS OF OPERATIONS

The results of operations as of March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, for any other interim period, or for any other future year.

Comparison of the three months ended March 31, 2023 and 2022

The results of operations as of June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, for any other interim period, or for any other future year.

Comparison of the three and six months ended June 30, 2023 and 2022

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

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Total revenues $ 22,333 $ 2,526 $ 19,807 784 % $ 33,702 $ 2,994 $ 30,708 1,026 %

The increase in total revenues during the three months ended March 31, 2023 is primarily attributable to $11.4 million of net product sales for IBSRELA to our customers subsequent to the commercial launch of IBSRELA in March 2022.

The increase in total revenues during the three and six months ended June 30, 2023 as compared to the same periods in 2022 is primarily attributable to increased net product sales for IBSRELA as well as increased product supply revenue to Kyowa Kirin.

Cost of Goods Sold

Below is a summary of our cost of goods sold (dollars in thousands):

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

Cost of sales $ 492 $ 44 $ 448 1,018 % $ 864 $ 57 $ 807 1,416 %

Other cost of revenue 2,997 94 2,903 3,088 % 4,162 166 3,996 2,407 %

Total cost of goods sold $ 3,489 $ 138 $ 3,351 2,428 % $ 5,026 $ 223 $ 4,803 2,154 %

The increase to cost of sales for the three and six months ended June 30, 2023 as compared to the same periods in 2022 is attributable to cost of goods sold for increased net product sales of IBSRELA.

The increase to other cost of revenue for the three and six months ended June 30, 2023 as compared to the same periods in 2022 is primarily attributable to payments due to AstraZeneca under the AZ Termination Agreement as well as cost of goods sold for product supply sold to our international partners.

Operating Expenses

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

Cost of revenue $ 1,537 $ 85 $ 1,452 1,708 %

Research and development $ 8,282 $ 9,741 $ (1,459) (15) % $ 17,375 $ 18,592 $ (1,217) (7) %

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Total operating expenses $ 35,468 $ 28,603 $ 6,865 24 % $ 71,364 $ 56,793 $ 14,571 26 %

Cost of Revenue

The increase to cost of revenue for the three months ended March 31, 2023 is primarily attributable to payments due to AstraZeneca under the AZ Termination Agreement for IBSRELA net product sales during the three months ended March 31, 2023.

In addition, during the three months ended March 31, 2023, we incurred $0.4 million cost of goods sold for net product sales of IBSRELA.

Research and Development

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

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Total research and development expenses $ 8,282 $ 9,741 $ (1,459) (15) % $ 17,375 $ 18,592 $ (1,217) (7) %

The increase in our external R&D expenses for the three months ended March 31, 2023 was not material and was primarily the result of external regulatory consulting for tenapanor.

The decrease in our external R&D expenses for the three and six months ended June 30, 2023 as compared to the same periods in 2022 is primarily the result of tenapanor manufacturing expenses as well as regulatory consulting expenses related to the FDA appeal of XPHOZAH.

Selling, General and Administrative

The increase in selling, general and administrative expenses for the three months ended March 31, 2023 was primarily due to increased costs associated with the commercial launch of IBSRELA.

The increase in selling, general and administrative expenses for the three and six months ended June 30, 2023 as compared to the same periods in 2022 is primarily due to increased costs associated with the commercial launch of IBSRELA.

The increases 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 March 31, Change

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

Interest expense $ (1,075) $ (777) $ (298) 38 % $ (2,103) $ (1,523) $ (580) 38 %

The increase in interest expense for the three months ended March 31, 2023 was due to a higher variable interest rate applied to our loan balance primarily resulting from market fluctuations.

The increase in interest expense for the three and six months ended June 30, 2023 as compared to the same periods in 2022 is due to a higher variable interest rate applied to our loan balance primarily resulting from market fluctuations.

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 March 31, Change

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

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

Non-cash interest expense related to the sale of future royalties $ (969) $ — $ (969) (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 for the three months ended March 31, 2023 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.

Non-cash interest expense related to the sale of future royalties $ (968) $ (10) $ (958) (a) $ (1,937) $ (10) $ (1,927) (a)

(a) Not meaningful

Non-cash interest expense related to the sales of future royalties for the three and six months ended June 30, 2023 is accrued on the deferred royalty obligation that we recorded following the receipt of the $10.0 million upfront payment from HCR during June 2022.

Other Income, net

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2022 Six Months Ended June 30, Change

2023 2022 $ % 2023 2022 $ %

Other income, net $ 1,546 $ 70 $ 1,476 2,109 % $ 2,848 $ 554 $ 2,294 414 %

The increase in other income, net for the three months ended March 31, 2023 is primarily due to increased income on our investments resulting from higher returns on larger investment balances throughout the period.

The increase in other income, net for the three and six months ended June 30, 2023 as compared to the same periods in 2022 is primarily due to increased income on our investments resulting from both higher returns and larger investment balances throughout the period.

Liquidity and Capital Resources

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

March 31, 2023 December 31, 2022 Change $ Change %

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

June 30, 2023 December 31, 2022 Change $ Change %

Cash and cash equivalents $ 30,058 $ 96,140 $ (66,082) (69) %

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Total liquid funds $ 127,579 $ 123,909 $ 3,670 3 %

As of March 31, 2023, we had cash, cash equivalents and short-term investments of approximately $130.4 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of March 31, 2023 is $806.9 million.

Our current level of cash, cash equivalents and short-term investments alone is not sufficient to meet our plans for the next twelve months following the filing of these condensed financial statements on May 3, 2023.

As of June 30, 2023, we had cash, cash equivalents and short-term investments of approximately $127.6 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of June 30, 2023 is $824.0 million.

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 condensed financial statements.

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These condensed financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event that we can no longer continue as a going concern.

In August 2021, we filed an additional prospectus supplement under a Registration Statement which was filed in July 2020 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 a 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.

In August 2021, we filed an additional prospectus supplement under a Registration Statement which was filed in July 2020 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 was authorized for issuance and sale, from time to time, under a sales agreement we entered into with Jefferies (the "2021 Open Market Sales Agreement"), pursuant to which we, from time to time, sold up to $150.0 million in shares of our common stock through Jefferies.

Pursuant to the 2021 Open Market Sales Agreement, Jefferies, as our sales agent, received 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 three months ended March 31, 2023 we sold 15.5 million shares and received gross proceeds of $51.9 million at a weighted average sales price of approximately $3.35 per share under the 2021 Open Market Sales Agreement.

As of March 31, 2023, we have sold a total of 95.2 million shares and received the maximum gross proceeds of $150.0 million under the 2021 Open Market Sales Agreement.

As of March 31, 2023, we had sold a total of 95.2 million shares and received the maximum gross proceeds of $150.0 million under the 2021 Open Market Sales Agreement.

In January 2023, we filed a Form S-3 registration statement, which became effective in January 2023 ("2023 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;

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Pursuant to the 2023 Open Market Sales Agreement, Jefferies, as sales agent, may receive a commission of up to 3.0% of the gross sales price for shares of common stock sold under the 2023 Open Market Sales Agreement.

As of March 31, 2023, there have been no sales of our common stock under the 2023 Open Market Sales Agreement.

During the three months ended June 30, 2023, we initiated sales pursuant to the 2023 Open Market Sales Agreement resulting in the issuance of 3.0 million shares of our common stock and receipt of gross proceeds of $11.6 million at a weighted average sales price of approximately $3.83 per share.

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

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Notwithstanding the February 2022 prepayment of the 2018 Loan, our obligation to pay the 2018 Exit Fee will expire on May 16, 2028.

In connection with entering into the 2022 Loan Agreement, we entered into the 2022 Exit Fee agreement, whereby we agreed to pay an exit fee in the amount of 2% of the 2022 Loan funded if certain conditions are met.

As discussed in Note 9.

Derivative Liabilities , in connection with entering into the 2022 Loan Agreement, we entered into the 2022 Exit Fee agreement, whereby we agreed to pay an exit fee in the amount of 2% of the 2022 Loan funded if certain conditions are met.

In October 2022, we announced that our collaboration partner, Kyowa Kirin, 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.

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

• whether or when XPHOZAH, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, are bundled into the ESRD prospective payment system, and the manner in which such introduction into the ESRD prospective payment system may occur;

• whether or when XPHOZAH, if approved, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, are bundled into the ESRD prospective payment system, and the manner in which such introduction into the ESRD prospective payment system may occur, including the length of any applicable TDAPA period and the amount of the add-on payment available during the TDAPA period;

• 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 by Kyowa Kirin in connection with the 2022 Kyowa Kirin Amendment;

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

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

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

Three Months Ended March 31, Change 2022 vs.

Six Months Ended June 30, Change 2023 vs.

2023 2022 $ %

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Net cash (used in) provided by investing activities (68,984) 17,806 (86,790) (487) %

Net cash provided by (used in) financing activities 50,919 (63) 50,982 (80,924) %

Net cash provided by financing activities 62,434 22,075 40,359 183 %

Net decrease in cash and cash equivalents $ (66,082) $ (19,020) $ (47,062) 247 %

Cash Flows from Operating Activities

Net cash used in operating activities during the three months ended March 31, 2023 increased by $17.2 million primarily as a result of changes to our operating assets and liabilities related to expenditures for commercial manufacturing and inventory for the production of IBSRELA.

Net cash used in operating activities during the six months ended June 30, 2023 increased by $0.6 million as compared to the same periods in 2022 primarily as a result of our lower net loss and expenditures for commercial manufacturing and inventory for the production of IBSRELA.

Cash Flows from Investing Activities

Net cash (used in) provided by investing activities decreased by $12.1 million due to the timing of our investment maturities and purchases.

Net cash (used in) provided by investing activities during the six months ended June 30, 2023 decreased by $86.8 million as compared to the same periods in 2022 due to increased investment purchases during 2023 as we invested higher levels of cash as compared to the same period in 2022.

Cash Flows from Financing Activities

Net cash provided by (used in) financing activities increased by $51.0 million primarily due to net proceeds from issuance of our common stock pursuant to the at the market offerings of $50.7 million during the three months ended March 31, 2023 compared to $5.9 million during the three months ended March 31, 2022.

In addition, during the three months ended March 31, 2022 we expended net $6.1 million in conjunction with entering into the 2022 Loan and repaying the principal outstanding under the 2018 Loan.

Net cash provided by financing activities during the six months ended June 30, 2023 increased by $40.4 million as compared to the same periods in 2022 primarily due to net proceeds from issuance of our common stock pursuant to the at the market offerings of $62.1 million during the six months ended June 30, 2023 compared to $18.5 million during the six months ended June 30, 2022.

In addition, during the six months ended June 30, 2022 we expended net $6.1 million in conjunction with entering into the 2022 Loan and repaying the principal outstanding under the 2018 Loan and received net proceeds of $9.6 million from the sale of future royalties to HCR.

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