What changed in this filing

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Item 1. Financial Statements

2024-08-01 compared with 2024-05-02 · 148 added, 117 removed, 516 unchanged (34% of the section changed)

27 unchanged sentences

Operating lease liability, net of current portion 1,096 1,725

Long-term debt, net of current portion 99,834 49,822

Long-term debt 100,249 49,822

Deferred revenue, non-current 9,613 8,644

3 unchanged sentences

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

5,000,000 shares authorized;

no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

Common stock, $ 0.0001 par value;

500,000,000 shares authorized;

233,959,744 and 232,453,190 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

235,401,398 and 232,453,190 shares issued and outstanding as of June 30, 2024 and December 31, 2023

Additional paid-in capital 1,036,244 1,012,773

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

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

2024 2023 2024 2023

Product sales, net $ 72,591 $ 18,309 $ 116,103 $ 29,664

22 unchanged sentences

Net loss $ ( 16,454 ) $ ( 17,121 ) $ ( 42,972 ) $ ( 43,894 )

Unrealized (losses) gains on available-for-sale securities ( 244 ) 34

Unrealized losses on available-for-sale securities ( 81 ) ( 190 ) ( 325 ) ( 156 )

Comprehensive loss $ ( 16,535 ) $ ( 17,311 ) $ ( 43,297 ) $ ( 44,050 )

2 unchanged sentences

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months ended March 31, 2024 and 2023

For the Three and Six Months ended June 30, 2024 and 2023

(in thousands, except shares)

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance as of March 31, 2024 233,959,744 $ 23 $ 1,023,610 $ ( 872,722 ) $ ( 20 ) $ 150,891

Issuance of common stock for services 40,549 — 257 — — 257

Issuance of common stock upon exercise of options 862,691 — 1,608 — — 1,608

Issuance of common stock upon vesting of restricted stock units 538,414 — — — — —

Stock-based compensation — — 10,769 — — 10,769

Unrealized losses on available-for-sale securities — — — — ( 81 ) ( 81 )

Net loss — — — ( 16,454 ) — ( 16,454 )

Balance as of June 30, 2024 235,401,398 $ 23 $ 1,036,244 $ ( 889,176 ) $ ( 101 ) $ 146,990

Six Months Ended June 30, 2024

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders'

Shares Amount

Balance as of December 31, 2023 232,453,190 $ 23 $ 1,012,773 $ ( 846,204 ) $ 224 $ 166,816

Issuance of common stock under employee stock purchase plan 253,312 — 1,038 — — 1,038

Issuance of common stock for services 40,549 — 257 — — 257

Issuance of common stock upon exercise of options 1,564,269 — 3,791 — — 3,791

3 unchanged sentences

Net loss — — — ( 42,972 ) — ( 42,972 )

Balance as of June 30, 2024 235,401,398 $ 23 $ 1,036,244 $ ( 889,176 ) $ ( 101 ) $ 146,990

Three Months Ended June 30, 2023

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders'

Shares Amount

Balance as of March 31, 2023 214,462,050 $ 21 $ 932,330 $ ( 806,910 ) $ ( 20 ) $ 125,421

Three Months Ended March 31, 2023

Issuance of common stock for services 86,095 — 337 — — 337

Issuance of common stock upon exercise of options 62,993 — 149 — — 149

Issuance of common stock upon vesting of restricted stock units 215,301 — — — — —

Issuance of common stock in at-the-market offerings 3,036,482 1 11,365 — — 11,366

Stock-based compensation — — 3,199 — — 3,199

Unrealized losses on available-for-sale securities — — — — ( 190 ) ( 190 )

Net loss — — — ( 17,121 ) — ( 17,121 )

Balance as of June 30, 2023 217,862,921 $ 22 $ 947,380 $ ( 824,031 ) $ ( 210 ) $ 123,161

Six Months Ended June 30, 2023

Common Stock Additional

6 unchanged sentences

Issuance of common stock under employee stock purchase plan 165,969 — 138 — — 138

Issuance of common stock for services 86,095 — 337 — — 337

Issuance of common stock upon exercise of options 98,994 — 211 — — 211

Issuance of common stock upon vesting of restricted stock units 423,074 — — — — —

Issuance of common stock in at the market offering 15,477,291 1 50,718 — — 50,719

Issuance of common stock in at-the-market offerings 18,513,773 2 62,083 — — 62,085

Stock-based compensation — — 6,111 — — 6,111

Unrealized gains on available-for-sale securities — — — — 34 34

Unrealized losses on available-for-sale securities — — — — ( 156 ) ( 156 )

Net loss — — — ( 43,894 ) — ( 43,894 )

Balance as of March 31, 2023 214,462,050 $ 21 $ 932,330 $ ( 806,910 ) $ ( 20 ) $ 125,421

Balance as of June 30, 2023 217,862,921 $ 22 $ 947,380 $ ( 824,031 ) $ ( 210 ) $ 123,161

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

5 unchanged sentences

Non-cash interest expense 3,411 2,090

Non-cash royalty revenue related to the sale of future royalties ( 967 ) —

Other, net ( 2,483 ) ( 521 )

14 unchanged sentences

Purchases of property and equipment ( 281 ) ( 107 )

Net cash used in investing activities ( 2,572 ) ( 9,777 )

Net cash provided by (used in) investing activities 20,961 ( 68,984 )

Financing activities

Proceeds from 2022 Loan, net of issuance costs 49,750 —

Proceeds from 2022 Loan Agreement, net of issuance costs 49,750 —

Proceeds from issuance of common stock in at the market offering, net of issuance costs — 62,085

7 unchanged sentences

Cash paid for income taxes $ 272 $ 19

Supplementary disclosure of non-cash activities:

Right-of-use assets obtained in exchange for lease obligations $ 689 $ —

Issuance of common stock for services $ 257 $ 337

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

8 unchanged sentences

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

Tenapanor, branded as XPHOZAH ® , was approved by the U.S.

Food and Drug Administration (U.S.

FDA) on October 17, 2023, to reduce serum phosphorus in adults with chronic kidney disease (CKD) on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

Tenapanor, branded as XPHOZAH ® , is approved in the U.S.

to reduce serum phosphorus in adults with chronic kidney disease (CKD) on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

We operate in one business segment, which is the development and commercialization of biopharmaceutical products.

6 unchanged sentences

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, 2023.

The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the entire year ending December 31, 2024, or for any other interim period or future year.

The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the entire year ending December 31, 2024, 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 March 31, 2024, we had cash, cash equivalents and short-term investments of approximately $ 202.6 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of March 31, 2024 is $ 872.7 million.

We have addressed our operating cash flow requirements through cash generated from product sales of IBSRELA and XPHOZAH, proceeds from the sale of shares of our common stock under our at-the-market offering, from the receipt of milestone payments from our collaboration partners and payments from our Japanese collaboration partner under the second amendment to our License Agreement, and through funds from our loan agreements with SLR Investment Corp.

As of June 30, 2024, we had cash, cash equivalents and short-term investments of approximately $ 186.0 million.

We have incurred operating losses since inception in 2007 and our accumulated deficit as of June 30, 2024 is $ 889.2 million.

We have addressed our operating cash flow requirements through cash generated from product sales of IBSRELA and XPHOZAH, proceeds from the sale of shares of our common stock under our at-the-market offering, the receipt of milestone payments from our collaboration partners and payments from our Japanese collaboration partner under the second amendment to our License Agreement, and funds from our loan agreements with SLR Investment Corp.

(SLR), as amended.

We believe our available cash, cash equivalents and short-term investments as of March 31, 2024 will be sufficient to fund our planned operations for at least a period of one year from the issuance of these condensed financial statements.

We believe our available cash, cash equivalents and short-term investments as of June 30, 2024 will be sufficient to fund our planned operations for at least a period of one year from the issuance of these condensed financial statements.

Summary of Significant Accounting Policies

17 unchanged sentences

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

This Update requires publicly traded entities to provide enhanced disclosures about significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public traded entities with a single reportable segment.

This Update requires publicly traded entities to provide enhanced disclosures about significant segment expenses regularly reviewed by the chief operating decision maker, including public traded entities with a single reportable segment.

The amendments in this update are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2024.

7 unchanged sentences

Management is currently assessing the impact of this standard on the Company’s financial statements.

In March 2024, the FASB issued ASU No.

2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements, an amendment to the Codification which removes references to various FASB Concepts Statements.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance.

Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.

The amendments in this update are effective for fiscal years beginning after December 15, 2024 and are not expected to have a significant impact on our financial statements.

CASH, CASH EQUIVALENTS AND INVESTMENTS

Securities classified as cash, cash equivalents and short-term investments as of March 31, 2024 and December 31, 2023 are summarized below (in thousands):

March 31, 2024

Securities classified as cash, cash equivalents and short-term investments as of June 30, 2024 and December 31, 2023 are summarized below (in thousands):

June 30, 2024

Gross Unrealized

8 unchanged sentences

Asset-backed securities 3,748 — ( 1 ) 3,747

treasury securities 2,489 — — 2,489

Total short-term investments 144,172 4 ( 105 ) 144,071

19 unchanged sentences

Realized gains or losses have not been significant and are included in other income, net, in the statement of operations and comprehensive loss.

All of the short-term available-for sale securities held as of March 31, 2024 and December 31, 2023 had contractual maturities of less than one year .

All of the short-term available-for sale securities held as of June 30, 2024 and December 31, 2023 had contractual maturities of less than one year .

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

2 unchanged sentences

If an investment is other-than-temporarily impaired or subject to credit losses, we write it down through the statement of operations and comprehensive loss to its fair value and establish that value as a new cost basis for the investment.

Our unrealized losses as of March 31, 2024 and December 31, 2023 were not material.

We determined that none of our available-for-sale securities were other-than-temporarily impaired as of March 31, 2024 and December 31, 2023, and no investment was in a continuous unrealized loss position for more than one year.

Our unrealized losses as of June 30, 2024 and December 31, 2023 were not material.

We determined that none of our available-for-sale securities were other-than-temporarily impaired as of June 30, 2024 and December 31, 2023, and 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 the investments will be held until maturity or a forecasted recovery of fair value.

9 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):

March 31, 2024

June 30, 2024

Fair Value Level 1 Level 2 Level 3

3 unchanged sentences

Asset-backed securities 3,747 — 3,747 —

treasury securities 2,489 — 2,489 —

Total $ 180,127 $ 36,056 $ 144,071 $ —

Derivative liabilities for exit fee $ 834 $ — $ — $ 834

Total $ 834 $ — $ — $ 834

December 31, 2023

13 unchanged sentences

government-sponsored agency bonds, U.S.

treasury securities, corporate bonds, commercial paper, and asset-backed securities as Level 2.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities, such as the 2022 Exit Fee, as defined and discussed in Note 9.

treasury securities, commercial paper, and asset-backed securities as Level 2.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities or derivative liabilities, such as the 2022 Exit Fee valuation as of December 31, 2023, as defined and discussed in Note 9.

Derivative Liabilities , are classified as Level 3.

The carrying amounts reflected in the condensed balance sheets for accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both March 31, 2024 and December 31, 2023, due to their short-term nature.

Based on our procedures under the expected credit loss model, including an assessment of unrealized losses in our portfolio, we concluded that any unrealized losses on our marketable securities were not attributable to credit and, therefore, we have no t recorded an allowance for credit losses for these securities as of March 31, 2024 and December 31, 2023.

As of June 30, 2024, the conditions for payment of the 2022 Exit Fee were met and it was therefore valued at its full contractual amount as there were no unobservable inputs.

The carrying amounts reflected in the condensed balance sheets for accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at both June 30, 2024 and December 31, 2023 due to their short-term nature.

Fair Value of Debt

The principal amount outstanding under our term loan facilities is subject to a variable interest rate.

Therefore, we believe the carrying amount of the term loan facility approximates fair value as of March 31, 2024 and December 31, 2023.

Therefore, we believe the carrying amount of the term loan facility approximates fair value as of June 30, 2024 and December 31, 2023.

Borrowing for a description of the Level 2 inputs used to estimate the fair value of the liability.

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of March 31, 2024 and December 31, 2023 and is based on our current estimates of future royalties and commercialization milestones expected to be paid to us by Kyowa Kirin Co., Ltd.

The carrying value of the deferred royalty obligation related to the sale of future royalties approximates its fair value as of June 30, 2024 and December 31, 2023 and is based on our current estimates of future royalties and commercialization milestones expected to be paid to us by Kyowa Kirin Co., Ltd.

(Kyowa Kirin) over the life of the agreement.

Deferred Royalty Obligation Related to the Sale of Future Royalties for a description of the Level 3 inputs used to estimate the fair value of the liability.

Inventory as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024 December 31, 2023

Inventory as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024 December 31, 2023

Raw materials $ 25,915 $ 22,920

5 unchanged sentences

Total $ 83,432 $ 49,487

In addition to inventory, we had prepaid commercial manufacturing of $ 9.8 million and $ 23.2 million as of March 31, 2024 and December 31, 2023, respectively, which consisted of prepayments to third party contract manufacturing organizations, including prepayments of $ 4.2 million as of both March 31, 2024 and December 31, 2023 that are expected to be converted into inventory after 12 months.

Total revenues during the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Three Months Ended March 31,

In addition to inventory, we had prepaid commercial manufacturing of $ 14.8 million and $ 23.2 million as of June 30, 2024 and December 31, 2023, respectively, which consisted of prepayments to third party contract manufacturing organizations, including prepayments of zero and $ 4.2 million as of June 30, 2024 and December 31, 2023 that are expected to be converted into inventory after 12 months.

Total revenues during the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

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

2024 2023 2024 2023

Product sales, net:

6 unchanged sentences

Total revenues $ 73,222 $ 22,333 $ 119,245 $ 33,702

Revenue from Customers who contributed greater than 10% of our total gross product revenue during the three months ended March 31, 2024 and 2023 was as follows (as a percentage of total gross product revenue):

Three Months Ended March 31,

Revenue from Customers who contributed greater than 10% of our total gross product revenue during the three and six months ended June 30, 2024 and 2023 was as follows (as a percentage of total gross product revenue):

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

2024 2023 2024 2023

BioRidge Pharma, LLC 50.8 % 20.0 % 46.3 % 19.0 %

7 unchanged sentences

Credits/payments ( 5,473 ) ( 19,334 ) ( 10,265 ) ( 35,072 )

Balance as of March 31, 2024 $ 655 $ 6,548 $ 6,910 $ 14,113

Balance as of June 30, 2024 $ 933 $ 9,838 $ 6,909 $ 17,680

Adjustments to prior period provisions recorded in the current period were not material.

12 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 Kyowa Kirin Agreement, and as such, each of the performance obligations is distinct.

We may be entitled to receive up to $ 55.0 million in total development and regulatory milestones, of which $ 35.0 million has been received and recognized as revenue as of March 31, 2024.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 56.2 million at the currency exchange rate on March 31, 2024, 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 be entitled to receive up to $ 55.0 million in total development and regulatory milestones, of which $ 35.0 million has been received and recognized as revenue as of June 30, 2024.

We may also be eligible to receive approximately ¥ 8.5 billion for commercialization milestones, or approximately $ 52.8 million at the currency exchange rate on June 30, 2024, 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.

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future royalties and commercial milestone payments we may receive under the 2017 Kyowa Kirin Agreement will be remitted to HealthCare Royalty Partners IV, L.P.

pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement.

The variable consideration related to the remaining milestone payments was fully constrained at March 31, 2024.

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future royalties and commercial milestone payments we may receive under the 2017 Kyowa Kirin Agreement are remitted to HealthCare Royalty Partners IV, L.P.

(HCR) upon receipt pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement (HCR Agreement).

The variable consideration related to the remaining milestone payments was fully constrained at June 30, 2024.

In April 2022, we entered into a second amendment to the 2017 Kyowa Kirin Agreement (2022 Amendment).

2 unchanged sentences

As discussed in Note 7.

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future commercial milestones and royalties we may receive under the 2017 Kyowa Kirin Agreement will be remitted to HealthCare Royalty Partners IV, L.P.

(HCR) pursuant to a Royalty and Sales Milestone Interest Acquisition Agreement (HCR Agreement).

As consideration for the reduction in the royalty rate, Kyowa Kirin agreed to pay us up to an additional $ 40.0 million payable in two tranches, with the first payment due following Kyowa Kirin's filing with the Japanese Ministry of Health, Labour and Welfare (MHLW) of its application for marketing approval for tenapanor and the second payment due following Kyowa Kirin’s receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, both of which occurred as of September 30, 2023.

4 unchanged sentences

In February 2024, Kyowa Kirin announced the launch of tenapanor, marketed as PHOZEVEL ® , for patients in Japan.

During the first quarter of 2024, we recognized $ 0.4 million of non-cash royalty revenue related to the sale of future royalties, which will be remitted to HCR in accordance with the HCR Agreement.

During the three months ended March 31, 2024, we recognized $ 2.1 million of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

During the three months ended March 31, 2023, we recognized $ 2 thousand of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

During the three months ended March 31, 2024 and 2023, we did not recognize a material amount of licensing revenue pursuant to the 2017 Kyowa Kirin Agreement.

During the three and six months ended June 30, 2024, we recognized $ 0.6 million and $ 1.0 million, respectively, of non-cash royalty revenue related to the sale of future royalties which we remit to HCR upon receipt in accordance with the HCR Agreement.

During the three and six months ended June 30, 2024, we recognized $ 13 thousand and $ 2.1 million, respectively, of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

During the three and six months ended June 30, 2023, we recognized $ 3.3 million of product supply revenue pursuant to the 2017 Kyowa Kirin Agreement.

Shanghai Fosun Pharmaceutical Industrial Development Co.

4 unchanged sentences

Based on our assessment, we determined that the license and the manufacturing supply services represented the material performance obligations at the inception of the agreement and, as such, each of the performance obligations are distinct.

We may be entitled to receive development and commercialization milestones of up to $ 113.0 million, of which $ 8.0 million has been received and recognized as revenue as of March 31, 2024, 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 was fully constrained at March 31, 2024.

We may be entitled to receive development and commercialization milestones of up to $ 113.0 million, of which $ 8.0 million has been received and recognized as revenue as of June 30, 2024, 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 was fully constrained at June 30, 2024.

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 CKD on hemodialysis.

5 unchanged sentences

Also, in October 2023, we announced that Fosun Pharma received approval from the Hong Kong Department of Health for the marketing application for tenapanor for the treatment of irritable bowel syndrome with constipation (IBS-C).

During the three months ended March 31, 2024 and 2023, we did not recognize a material amount of revenue pursuant to the Fosun Agreement.

During the three and six months ended June 30, 2024 and 2023, we did not recognize a material amount of revenue pursuant to the Fosun Agreement.

Knight Therapeutics, Inc.

2 unchanged sentences

Based on our assessment, we determined that the license and the manufacturing supply services were the material performance obligations at the inception of the agreement and, as such, each of the performance obligations are distinct.

Under the terms of the Knight Agreement, we received a $ 2.3 million non-refundable, one-time upfront payment in March 2018 and may be eligible to receive additional development and commercialization milestone payments worth up to CAD 22.2 million, or approximately $ 16.3 million at the currency exchange rate on March 31, 2024, of which $ 0.7 million has been received and recognized as revenue as of March 31, 2024.

Under the terms of the Knight Agreement, we received a $ 2.3 million non-refundable, one-time upfront payment in March 2018 and may be eligible to receive additional development and commercialization milestone payments worth up to CAD 22.2 million, or approximately $ 16.2 million at the currency exchange rate on June 30, 2024, of which $ 0.7 million has been received and recognized as revenue as of June 30, 2024.

We are also eligible to receive royalties ranging from the mid-single digits to the low twenties throughout the term of the agreement, and a transfer price for manufacturing services.

The variable consideration related to the remaining development milestone payments was fully constrained at March 31, 2024.

During the three months ended March 31, 2024 and 2023, we did not recognize a material amount of revenue pursuant to the Knight Agreement.

The variable consideration related to the remaining development milestone payments was fully constrained at June 30, 2024.

During the three and six months ended June 30, 2024 and 2023, we did not recognize a material amount of revenue pursuant to the Knight Agreement.

AstraZeneca AB (AstraZeneca)

In June 2015, we entered into a termination agreement with AstraZeneca (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 other NHE3 products, up to a maximum of $ 75.0 million in aggregate for (i) and (ii).

As of March 31, 2024, to date in aggregate, we have recognized $ 32.4 million of the $ 75.0 million, which has been recorded as other cost of revenue on our condensed statements of operations and comprehensive loss.

During the three months ended March 31, 2024, we recognized $ 4.7 million as other cost of revenue related to the AstraZeneca Termination Agreement.

During the three months ended March 31, 2023 we recognized $ 1.2 million as other cost of revenue related to the AstraZeneca Termination Agreement.

As of June 30, 2024, to date in aggregate, we have recognized $ 40.2 million of the $ 75.0 million, which has been recorded as other cost of revenue on our condensed statements of operations and comprehensive loss.

During the three and six months ended June 30, 2024, we recognized $ 7.9 million and $ 12.6 million, respectively, as other cost of revenue related to the AstraZeneca Termination Agreement.

During the three and six months ended June 30, 2023 we recognized $ 1.9 million and $ 3.0 million, respectively, as other cost of revenue related to the AstraZeneca Termination Agreement.

Deferred Revenue

5 unchanged sentences

Reclassify amounts to be recognized in the next twelve months 4,244 ( 4,244 ) 3,265 ( 3,265 )

Balance at March 31, $ 6,586 $ 12,103 $ 5,545 $ 11,498

Balance at June 30, $ 10,829 $ 9,613 $ 5,959 $ 9,238

DEFERRED ROYALTY OBLIGATION RELATED TO THE SALE OF FUTURE ROYALTIES

14 unchanged sentences

Such factors include, but are not limited to, the amount and timing of potential future royalty payments to be received from Kyowa Kirin under the 2017 Kyowa Kirin agreement, changing standards of care, the introduction of competing products, manufacturing or other delays, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to HCR are made in U.S.

dollars while the underlying

sales of the products by Kyowa Kirin are made in Japanese yen, and other events or circumstances that could result in reduced royalty payments from Kyowa Kirin, which are not within our control, and all of which would result in a reduction of non-cash royalty revenues and the non-cash interest expense over the life of the deferred royalty obligation.

dollars while the underlying sales of the products by Kyowa Kirin are made in Japanese yen, and other events or circumstances that could result in reduced royalty payments from Kyowa Kirin, which are not within our control, and all of which would result in a reduction of non-cash royalty revenues and the non-cash interest expense over the life of the deferred royalty obligation.

We periodically assess the estimated royalty payments from Kyowa Kirin and, to the extent that the amount or timing of such payments is materially different than our original estimates, we prospectively adjust the imputed interest rate and the related amortization of the deferred royalty obligation.

As of March 31, 2024, our effective interest rate used to amortize the liability is 33.7 %.

During the three months ended March 31, 2024, we recognized approximately $ 1.7 million of non-cash interest expense related to the deferred royalty obligation.

During the three months ended March 31, 2023, we recognized approximately $ 1.0 million of non-cash interest expense related to the deferred royalty obligation.

As of March 31, 2024, we have received no royalty payments from Kyowa Kirin and, therefore, the deferred royalty obligation has not begun to be reduced.

As of June 30, 2024, our effective interest rate used to amortize the liability is 28.8 %.

During the three and six months ended June 30, 2024, we recognized $ 1.6 million and $ 3.3 million, respectively, of non-cash interest expense related to the deferred royalty obligation.

During the three and six months ended June 30, 2023, we recognized $ 1.0 million and $ 1.9 million, respectively, of non-cash interest expense related to the deferred royalty obligation.

As of June 30, 2024, we have received $ 0.4 million royalty payments from Kyowa Kirin and the deferred royalty obligation has been reduced accordingly.

Solar Capital and Western Alliance Bank Loan Agreement

38 unchanged sentences

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 obligations owed under the 2022 Loan Agreement.

We have classified the 2022 Original Loan balance as a non-current liability as of March 31, 2024 due to principal repayments beginning in January 2027.

We have classified the 2022 Original Loan balance as a non-current liability as of June 30, 2024 due to principal repayments beginning in January 2027.

We have concluded that the provisions that could cause acceleration of the principal repayments are remote.

As of March 31, 2024, our future payment obligations related to the 2022 Loan, excluding interest payments and the 2022 final fee, were as follows (in thousands):

As of June 30, 2024, our future payment obligations related to the 2022 Loan, excluding interest payments and the 2022 final fee, were as follows (in thousands):

Total repayment obligations $ 104,950

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

We concluded that the 2018 Exit Fee was a freestanding derivative which should be accounted for at fair value on a recurring basis.

We concluded that the 2018 Exit Fee was a freestanding derivative which was recorded at fair value as a derivative liability included in accrued expense and other current liabilities on the condensed balance sheets.

In October 2023, we received approval from the U.S.

FDA for XPHOZAH to reduce serum phosphorus in adults with chronic kidney disease (CKD) on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.

This triggered our obligation to pay the 2018 Exit Fee to the 2018 Lenders.

Prior to our subsequent payment of the 2018 Exit Fee in October 2023, the estimated fair value of the 2018 Exit Fee was recorded as a derivative liability and included in accrued expense and other current liabilities on the accompanying condensed balance sheets.

This triggered our obligation to pay the 2018 Exit Fee to the 2018 Lenders, which we paid in October 2023.

2022 Exit Fee

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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 of March 31, 2024 and December 31, 2023, the estimated fair value of the 2022 Exit Fee was $ 0.8 million and $ 0.7 million, respectively.

The fair value of the derivative liability was determined using a discounted cash flow analysis and is classified as a Level 3 measurement within the fair value hierarchy since our valuation utilized significant unobservable inputs.

Specifically, the key assumptions included in the calculation of the estimated fair value of the 2022 Exit Fee derivative liability include:

During the three months ended June 30, 2024, we achieved the Revenue Milestone and therefore expect to pay the $ 1.0 million 2022 Exit Fee to the Agent.

As of June 30, 2024 and December 31, 2023, the estimated fair value of the 2022 Exit Fee was $ 1.0 million and $ 0.7 million, respectively.

The fair value of the derivative liability was determined using a discounted cash flow analysis and was classified as a Level 3 measurement within the fair value hierarchy since our valuation utilized significant unobservable inputs prior to June 30, 2024.

Specifically, the key assumptions included in the calculation of the estimated fair value of the 2022 Exit Fee derivative liability included:

(i) our estimates of both the probability and timing of achieving the Revenue Milestone and (ii) the probability and timing of funding the Term B Loan, which was dependent upon (a) approval by the U.S.

FDA for our NDA for the control of serum phosphorus in adult patients with CKD on dialysis by November 30, 2023, and (b) achievement of certain product revenue milestone targets.

As of March 31, 2024, uncertainty around two of the noted valuation estimates had been removed, as the Term B Loan had been funded and the U.S.

FDA had approved our NDA for the control of serum phosphorus in adult patients with CKD on dialysis prior to November 30, 2023.

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) in the probability of occurrence would not result in a material fair value fluctuation.

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 condensed statements of operations and comprehensive loss and were as follows for the three months ended March 31, 2024 and 2023 (in thousands):

As of June 30, 2024, uncertainty around all of the noted valuation estimates had been removed, as the Term B Loan had been funded, the U.S.

FDA had approved our NDA for the control of serum phosphorus in adult patients with CKD on dialysis prior to November 30, 2023, and we had achieved the Revenue Milestone.

Changes in the fair value of recurring measurements are presented as other income, net in our condensed statements of operations and comprehensive loss and were as follows for the six months ended June 30, 2024 and 2023 (in thousands):

Fair value of exit fee derivative liabilities at January 1, $ 675 $ 1,656

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2022 Exit Fee 325 3

Fair value of exit fee derivative liabilities at March 31, $ 834 $ 1,726

Fair value of exit fee derivative liabilities at June 30, $ 1,000 $ 1,737

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

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The following table provides additional details of our facility leases presented in our condensed balance sheets (dollars in thousands):

Facilities March 31, 2024 December 31, 2023

Facilities June 30, 2024 December 31, 2023

Right-of-use assets $ 4,324 $ 5,589

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The lease costs, which are included in operating expenses in our condensed statements of operations and comprehensive loss, were as follows (in thousands):

Three Months Ended March 31,

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

2024 2023 2024 2023

Operating lease expense $ 1,091 $ 1,064 $ 2,137 $ 2,128

Cash paid for operating lease $ 1,221 $ 1,100 $ 2,386 $ 2,198

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of March 31, 2024 (in thousands):

The following table summarizes our undiscounted cash payment obligations for our operating lease liabilities as of June 30, 2024 (in thousands):

Remainder of 2024 $ 2,487

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STOCKHOLDERS’ EQUITY

At the Market Offerings Agreement

At-the-Market Offering Agreements

In July 2020, we filed a Form S-3 registration statement, which became effective in August 2020 (2020 Registration Statement).

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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.

During the three months ended March 31, 2024 and 2023, we completed no sales pursuant to the 2023 Open Market Sales Agreement.

As of March 31, 2024, we have sold 16.8 million shares of our common stock and received gross proceeds of $ 70.0 million at a weighted average sales price of approximately $ 4.17 per share under the 2023 Open Market Sales Agreement.

During the six months ended June 30, 2024 we completed no sales pursuant to the 2023 Open Market Sales Agreement.

As of June 30, 2024, we have sold 16.8 million shares of our common stock and received gross proceeds of $ 70.0 million at a weighted average sales price of approximately $ 4.17 per share under the 2023 Open Market Sales Agreement.

EQUITY INCENTIVE PLANS

Stock-Based Compensation

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Selling, general and administrative $ 8,460 $ 2,303 $ 14,106 $ 4,391

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Total $ 10,769 $ 3,199 $ 18,385 $ 6,111

As of March 31, 2024, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands):

As of June 30, 2024, our total unrecognized stock-based compensation expense, net of estimated forfeitures, and average remaining vesting period, included the following (dollars in thousands):

Unrecognized Compensation Expense Average Remaining Vesting Period (Years)

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Stock Options

A summary of our stock option activity and related information for the three months ended March 31, 2024 is as follows (in thousands, except dollar amounts):

A summary of our stock option activity and related information for the six months ended June 30, 2024 is as follows (in thousands, except dollar amounts):

Number of Shares Weighted-Average

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Options forfeited or canceled ( 307 ) $ 4.87

Balance at March 31, 2024 27,790 $ 5.29

Exercisable at March 31, 2024 12,856 $ 5.29

Balance at June 30, 2024 27,767 $ 5.42

Exercisable at June 30, 2024 13,276 $ 5.43

Restricted Stock Units

A summary of our RSUs activity and related information for the three months ended March 31, 2024 is as follows (in thousands, except dollar amounts):

A summary of our RSUs activity and related information for the six months ended June 30, 2024 is as follows (in thousands, except dollar amounts):

RSUs Weighted-Average

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Forfeited ( 139 ) $ 4.60

Non-vested restricted stock units at March 31, 2024 7,935 $ 6.37

Non-vested restricted stock units at June 30, 2024 7,966 $ 6.58

Employee Stock Purchase Plan

During the three months ended March 31, 2024, we sold approximately 0.3 million shares of our common stock under the ESPP.

During the six months ended June 30, 2024, we sold approximately 0.3 million shares of our common stock under the ESPP.

The shares were purchased by employees at an average purchase price of $ 4.10 per share resulting in proceeds to us of approximately $ 1.0 million.

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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 three months ended March 31, 2024, we issued no shares of our common stock to members of the board of directors in accordance with the program.

During the six months ended June 30, 2024, we issued 41 thousand shares of our common stock to members of the board of directors in accordance with the program.

NET LOSS PER SHARE

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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 months ended March 31, 2024 and 2023, all potential common shares were determined to be anti-dilutive.

As we had net losses for the six months ended June 30, 2024 and 2023, 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 March 31,

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

2024 2023 2024 2023

Net loss $ ( 16,454 ) $ ( 17,121 ) $ ( 42,972 ) $ ( 43,894 )

Weighted average common shares outstanding - basic 233,066 207,023

Weighted average common shares outstanding - diluted 233,066 207,023

Shares used in computing net loss per share - basic and diluted 234,571 214,951 233,819 211,009

Net loss per share of common stock - basic and diluted $ ( 0.07 ) $ ( 0.08 ) $ ( 0.18 ) $ ( 0.21 )

For the periods presented, the total numbers of securities that could potentially dilute net income per share in the future that were not considered in the diluted net loss per share calculations because the effect would have been anti-dilutive were as follows (in thousands):

Three Months Ended March 31,

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

2024 2023 2024 2023

Options to purchase common stock 27,818 20,659 27,250 20,260

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The court provided plaintiffs a third opportunity to amend and plaintiffs filed a third amended complaint on April 19, 2024.

Defendant's motion to dismiss the third amended complaint is required to be filed by June 3, 2024.

Defendants filed a motion to dismiss the third amended complaint on June 3, 2024.

A hearing on the motion to dismiss is currently set for October 3, 2024.

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.

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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.

On July 17, 2024, the Company, in partnership with the American Association of Kidney Patients (AAKP) and the National Minority Quality Forum (NMQF), filed a lawsuit in the United States District Court for the District of Columbia against the Centers for Medicare & Medicaid Services (CMS), claiming that CMS has violated its statutory and regulatory authority under the Medicare Improvements for Patients and Providers Act (MIPPA), which established the ESRD PPS bundled payment system for dialysis services in 2008.

Specifically, the lawsuit claims that CMS’s plan to move XPHOZAH, along with all oral-only drugs, into the ESRD PPS is inconsistent with MIPPA’s statutory provision, and contradicts CMS’s own regulations.

XPHOZAH and other oral-only drugs, which are currently available to patients under Medicare Part D, are not administered by dialysis providers and cannot be taken during the delivery of maintenance dialysis.

The Company, AAKP and NMQF are seeking relief under the Administrative Procedure Act to enjoin CMS from proceeding with its plan to include XPHOZAH in the ESRD PPS and eliminate coverage under Medicare Part D beginning on January 1, 2025.

From time to time, we may be involved in legal proceedings arising in the ordinary course of business.

As of March 31, 2024, there is no litigation pending that would reasonably be expected to have a material adverse effect on our results of operations and financial condition, and no contingent liabilities were accrued as of March 31, 2024.

As of June 30, 2024, there is no litigation pending that would reasonably be expected to have a material adverse effect on our results of operations and financial condition, and no contingent liabilities were accrued as of June 30, 2024.

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