What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 103 added, 77 removed, 253 unchanged (42% of the section changed)

15 unchanged sentences

Since commencing operations in October 2007, substantially all our efforts have been dedicated to our research and development (R&D) activities, including developing tenapanor and developing our proprietary drug discovery and design platform, as well as commercialization activities, including the marketing and sales of IBSRELA and XPHOZAH.

We realized our first product sales of IBSRELA in March 2022 and realized our first product sales of XPHOZAH in November 2023.

As of March 31, 2024, we had an accumulated deficit of $872.7 million.

We expect to continue to incur operating losses for the foreseeable future as we invest in the commercialization of IBSRELA and XPHOZAH, incur manufacturing and development cost for tenapanor, and incur R&D costs related to potential new product candidates.

To date, we have funded our operations from the sale and issuance of common stock and convertible preferred stock, funds from our collaboration partnerships, which includes license fees, milestones and product supply revenue, funds from our loan agreement with SLR Investment Corp.

We recognized our first product sales of IBSRELA in March 2022 and recognized our first product sales of XPHOZAH in November 2023.

As of June 30, 2024, we had an accumulated deficit of $889.2 million.

We expect to continue to incur operating losses for the foreseeable future as we invest in the commercialization of IBSRELA and XPHOZAH, incur manufacturing and development cost for tenapanor, and incur additional expenses related to our ongoing operations and our pursuit of future business opportunities.

To date, we have funded our operations from the sale of common stock and convertible preferred stock, funds from our collaboration partnerships, which includes license fees, milestones and product supply revenue, funds from our loan agreement with SLR Investment Corp.

(SLR), as amended on August 1, 2022, February 9, 2023 and October 17, 2023 (collectively, the 2022 Loan Agreement), as well as from sales of IBSRELA and XPHOZAH.

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These dynamics enabled a targeted promotional focus on patients currently being managed for IBS-C by the approximately 9,000 high-writing healthcare providers who account for approximately 50% of IBS-C prescriptions.

Central to our go to market strategy for IBSRELA has been our highly experienced specialty sales force, many with existing relationships across their GI target base, and omnichannel digital initiatives.

We expect competition for IBSRELA will come largely from the three prescription products indicated for IBS-C:

Central to our go to market strategy for IBSRELA has been our highly experienced specialty sales force, composed of many with existing relationships across their GI target base, and omnichannel digital initiatives.

We believe competition for IBSRELA comes largely from the three prescription products indicated for IBS-C:

Linzess (linaclotide), Amitiza (lubiprostone) and Trulance (plecanatide).

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FDA to market XPHOZAH 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.

to reduce serum phosphorus in adults with 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.

XPHOZAH has a differentiated mechanism of action and acts locally in the gut to inhibit NHE3.

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It is estimated that there are more than 550,000 adult patients with CKD on dialysis in the U.S.

and approximately eighty percent of those patients are being treated with phosphate lowering therapies.

In addition, approximately seventy percent of patients treated with phosphate binders to treat hyperphosphatemia were unable to consistently maintain phosphorous levels <=5.5 mg/dL over a six-month period.

and approximately 80% of those patients are being treated with phosphate lowering therapies.

In addition, approximately 70% of patients treated with phosphate binders to treat hyperphosphatemia were unable to consistently maintain phosphorous levels <=5.5 mg/dL over a six-month period.

XPHOZAH is the first therapy for phosphate management that blocks phosphate absorption at the primary site of uptake.

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In addition, market research indicated a high level of awareness, interest and intent to adopt XPHOZAH upon approval and favorable response to the XPHOZAH product profile as a novel mechanism therapy.

These dynamics enabled a targeted promotional focus on patients currently being managed for hyperphosphatemia by the approximately 8,000 nephrology healthcare providers who write approximately 80% of phosphate lowering therapy prescriptions.

Central to our go to market strategy for XPHOZAH is our highly experienced specialty sales force, many with existing relationships across their nephrology target base, and innovative omnichannel digital initiatives.

XPHOZAH is indicated 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.

Central to our go to market strategy for XPHOZAH has been our highly experienced specialty sales force, many with existing relationships across their nephrology target base, and innovative omnichannel digital initiatives.

XPHOZAH is indicated to reduce serum phosphorus in adults with 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.

The various types of phosphate binders commercialized in the U.S.

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

Discovery and Developmental Assets

We have suspended further investment in RDX013, our small molecule potassium secretagogue program, and in RDX020, our discovery program targeting the inhibition of the chloride bicarbonate exchanger for the treatment of metabolic acidosis.

We are continuing to actively develop our strategy related to our pipeline.

Collaboration Partners

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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, 2024, of which $0.7 million has been received and recognized as revenue as of March 31, 2024.

We may also be eligible to receive approximately CAD 22.2 million for development and commercialization milestones, 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 throughout the term of the agreement, and a transfer price for manufacturing services.

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 $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 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.

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

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).

On April 11, 2022, we entered into an amendment to the 2017 Kyowa Kirin Agreement (2022 Amendment).

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

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As discussed in Note 7.

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future 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).

Deferred Royalty Obligation Related to the Sale of Future Royalties , the future royalties we may receive under the 2017 Kyowa Kirin Agreement will be remitted to HCR pursuant to the HCR Agreement.

As consideration for the reduction in the royalty rate, Kyowa Kirin agreed to pay us up to an additional $40.0 million, which was received and recognized as revenue as of September 2023 as described below.

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In September 2023, we announced that Kyowa Kirin received approval from the Japanese MHLW for the NDA for tenapanor for the improvement of hyperphosphatemia in adult patients with chronic kidney disease on dialysis, which resulted in payment to us from Kyowa Kirin for an aggregate of $30.0 million for milestone payments and payments under the 2022 Amendment.

In February 2024, Kyowa Kirin announced the launch of tenapanor, marketed as PHOZEVEL ® , for patients in Japan and during the first quarter of 2024, we began to recognize non-cash royalty revenue related to the sale of future royalties, which will be remitted to HCR in accordance with the HCR Agreement.

In February 2024, Kyowa Kirin announced the launch of tenapanor, marketed as PHOZEVEL ® , for patients in Japan and during the first quarter of 2024, we began to recognize non-cash royalty revenue related to the sale of future royalties, which is remitted to HCR in accordance with the HCR Agreement.

In December 2017, we entered into an exclusive license agreement with Fosun Pharma (Fosun Agreement) for the development and commercialization of tenapanor in China for both hyperphosphatemia and IBS-C.

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

In October 2023, we announced that the U.S.

FDA has approved XPHOZAH to reduce serum phosphorus in adults with 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.

In October 2023, the U.S.

FDA approved XPHOZAH to reduce serum phosphorus in adults with 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 an additional $3.0 million milestone payment to us under the terms of the Fosun Agreement, which we received during the first quarter of 2024.

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).

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%.

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%.

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 February 22, 2024.

During the three months ended March 31, 2024, we did not adopt any new critical accounting policies and significant judgements and estimates.

During the six months ended June 30, 2024, we did not adopt any new critical accounting policies and significant judgements and estimates.

Recent Accounting Pronouncements

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Our revenue to date has been generated primarily through a combination of product sales and payments in connection with license, research and development collaborative agreements with our various collaboration partners.

We realized our first commercial product sales of IBSRELA beginning in March 2022 and our first commercial product sales of XPHOZAH in November 2023.

We realized our first commercial product sales of IBSRELA in March 2022 and our first commercial product sales of XPHOZAH in November 2023.

In the future, we may generate revenue from a combination of our own product sales and payments in connection with our current or future collaborative partnerships, including license fees, other upfront payments, milestone payments, royalties and payments for drug product and/or drug substance.

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

whether or when XPHOZAH, along with other oral End Stage Renal Disease-related drugs without an injectable or intravenous equivalent, are bundled into the end stage renal disease prospective payment system (ESRD PPS), and the manner in which such introduction into the ESRD PPS may occur, including the length of any applicable Transitional Drug Add-on Payment Adjustment (TDAPA) period, the amount of the add-on payment available during the TDAPA period and whether, and the extent to which, the ESRD PPS base rate is adjusted following any applicable TDAPA period;

any legislative, regulatory or judicial action is taken to further delay the inclusion of XPHOZAH, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, in the ESRD PPS or adequacy of reimbursement and coverage of XPHOZAH beginning January 1, 2025 for all patients, regardless of insurance coverage, in the event that legislative, regulatory or judicial action to further delay the inclusion of oral only drugs in the ESRD PPS is not taken;

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

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Otherwise, such costs are expensed as research and development.

A portion of the costs of IBSRELA and XPHOZAH units recognized as revenue during the three months ended March 31, 2024 were expensed in periods prior to the commencement of capitalization of inventory costs for each respective product.

We believe our cost of goods sold for the three months ended March 31, 2024 would have been $1.2 million higher 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 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.

As of March 31, 2024 and December 31, 2023, we had approximately $21.3 million and $21.8 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.

A portion of the costs of IBSRELA and XPHOZAH units recognized as revenue during the three and six months ended June 30, 2024 were expensed in periods prior to the commencement of capitalization of inventory costs for each respective product.

We believe our cost of goods sold for the three and six months ended June 30, 2024 would have been $1.2 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, 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.

As of June 30, 2024 and December 31, 2023, we had approximately $19.6 million and $21.8 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 and XPHOZAH are recognized as revenue.

Other cost of revenue includes payments due to AstraZeneca, which under the terms of a termination agreement entered into in 2015 (AstraZeneca 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.

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Research and Development

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

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

R&D expenses include, but are not limited to, the following:

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RESULTS OF OPERATIONS

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

Comparison of the three months ended March 31, 2024 and 2023

The results of operations as of June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, for any other interim period, or for any other future year.

Comparison of the three and six months ended June 30, 2024 and 2023

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

Three Months Ended March 31, Change

Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

Product sales, net $ 72,591 $ 18,309 $ 54,282 296 % $ 116,103 $ 29,664 $ 86,439 291 %

Product supply revenue 2,126 2 2,124 (a)

Product supply revenue 13 3,260 (3,247) (100) % 2,139 3,262 (1,123) (34) %

Licensing revenue 19 764 (745) (98) % 36 776 (740) (95) %

Non-cash royalty revenue related to the sale of future royalties 368 — 368 (a)

Non-cash royalty revenue related to the sale of future royalties 599 — 599 (a) 967 — 967 (a)

Total revenues $ 73,222 $ 22,333 $ 50,889 228 % $ 119,245 $ 33,702 $ 85,543 254 %

1 unchanged sentence

Below is a summary of our net product sales by product (dollars in thousands):

Three Months Ended March 31,

Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

Product sales, net:

IBSRELA $ 35,445 $ 18,309 $ 17,136 94 % $ 63,806 $ 29,664 $ 34,142 115 %

XPHOZAH 15,151 —

XPHOZAH 37,146 — 37,146 (a) 52,297 — 52,297 (a)

Total product sales, net $ 72,591 $ 18,309 $ 54,282 296 % $ 116,103 $ 29,664 $ 86,439 291 %

The increase in product sales, net during the three months ended March 31, 2024 as compared to the same periods in 2023 is attributable to increased net product sales for IBSRELA, which is primarily driven by increased demand, as well as sales from XPHOZAH following the launch of the product in the fourth quarter of 2023.

The increase in product supply revenue during the three months ended March 31, 2024 as compared to the same periods in 2023 is attributable to increased product supply revenue to Kyowa Kirin.

The increase in licensing revenue during the three months ended March 31, 2024 as compared to the same periods in 2023 is attributable to royalties earned under the Knight Agreement.

Non-cash royalty revenue during the three months ended March 31, 2024 is attributable to royalties from Kyowa Kirin for sales of PHOZEVEL in Japan, which will be remitted to HCR in accordance with the HCR Agreement.

(a) Percent change is not meaningful.

The increase in product sales, net during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is attributable to increased net product sales for IBSRELA, which is primarily driven by increased demand, as well as sales from XPHOZAH following the launch of the product in the fourth quarter of 2023.

The fluctuations in product supply revenue during the three and six months ended June 30, 2024 as compared to the same periods in 2023 are attributable to the timing of product supply shipments to Kyowa Kirin.

The decrease in licensing revenue during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily attributable to a one-time upfront payment we received from METiS Therapeutics Inc.

during the prior year.

Non-cash royalty revenue during the three and six months ended June 30, 2024 is attributable to royalties from Kyowa Kirin for sales of PHOZEVEL in Japan, which we remit to HCR upon receipt in accordance with the HCR Agreement.

Cost of Goods Sold

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

Three Months Ended March 31, Change

Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

2 unchanged sentences

Total cost of goods sold $ 9,436 $ 3,489 $ 5,947 170 % $ 16,564 $ 5,026 $ 11,538 230 %

The increase to cost of product sales during the three months ended March 31, 2024 as compared to the same period in 2023 is primarily attributable to cost of goods sold for increased net product sales of IBSRELA and XPHOZAH.

The increase to other cost of revenue during the three months ended March 31, 2024 as compared to the same period in 2023 is primarily attributable to the growth in payments due to AstraZeneca under the AstraZeneca Termination Agreement, driven by increases in our product sales, as well as cost of goods sold for increased product supply sold to our collaboration partners.

The increase to cost of product sales during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily attributable to cost of goods sold for increased net product sales of IBSRELA and XPHOZAH.

The increase to other cost of revenue during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily attributable to an increase in payments due to AstraZeneca under the AstraZeneca Termination Agreement, driven by increases in our product sales, which is partially offset by cost of goods sold for decreased product supply sold to our collaboration 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

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

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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

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

4 unchanged sentences

Total research and development expenses $ 12,762 $ 8,282 $ 4,480 54 % $ 23,341 $ 17,375 $ 5,966 34 %

The change in our R&D expenses during the three months ended March 31, 2024 as compared to the same period in 2023 is primarily the result of clinical trial and pharmacovigilance activities related to IBSRELA.

The increase in our R&D expenses during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily the result of increased engagement with the scientific communities in the areas of gastroenterology and nephrology, clinical trial, and pharmacovigilance activities.

The increase in employee-related R&D expenses is the result of increases in headcount and related personnel costs, including stock-based compensation expense which increased by $1.4 million and $2.6 million, respectively, during the three and six months ended June 30, 2024 as compared to the same periods in 2023.

Selling, General and Administrative

The increase in selling, general and administrative expenses during the three months ended March 31, 2024 as compared to the same period in 2023 is primarily due to increased costs associated with the commercialization of IBSRELA and XPHOZAH and increases in expenses associated with administrative support functions as our company has grown in headcount and activity level.

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

The increase in selling, general and administrative expenses during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily due to increased costs associated with the commercialization of IBSRELA and XPHOZAH and increases in expenses associated with administrative support functions as our company has grown in headcount and activity level.

The increases consisted of external spending for disease awareness initiatives, commercial infrastructure, and strategy, as well as headcount and related personnel costs, including stock-based compensation expense which increased by $6.2 million and $9.7 million, respectively, during the three and six months ended June 30, 2024 as compared to the same periods in 2023.

Interest Expense

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

Three Months Ended March 31, Change

Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

Interest expense $ (3,326) $ (1,075) $ (2,251) 209 % $ (5,682) $ (2,103) $ (3,579) 170 %

The increase in interest expense during the three months ended March 31, 2024 as compared to the same period in 2023 is due to a higher variable interest rate applied to our loan balance primarily resulting from market fluctuations, as well as a larger loan balance outstanding following the draw of an additional $22.5 million for the Term B Loan in October 2023 and $50.0 million for the Term C Loan in March 2024.

The increase in interest expense during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is due to a larger loan balance outstanding following the draw of an additional $22.5 million for the Term B Loan in October 2023 and $50.0 million for the Term C Loan in March 2024, as well as 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 non-cash interest expense (dollars in thousands):

Three Months Ended March 31, Change

Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

Non-cash interest expense related to the sale of future royalties $ (1,576) $ (968) $ (608) 63 % $ (3,278) $ (1,937) $ (1,341) 69 %

The increase in non-cash interest expense related to the sales of future royalties during the three months ended March 31, 2024 as compared to the same period in 2023 is due to a higher liability balance following the receipt a $5.0 million payment in October 2023 as a result of Kyowa Kirin's receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, as well as prospective adjustments to the imputed interest rate and the related amortization of the deferred royalty obligation.

The increase in non-cash interest expense related to the sales of future royalties during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is due to a higher liability balance following the receipt a $5.0 million payment in October 2023 as a result of Kyowa Kirin's receipt of regulatory approval to market tenapanor for hyperphosphatemia in Japan, as well as prospective adjustments to the imputed interest rate and the related amortization of the deferred royalty obligation.

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

2023 Six Months Ended

June 30, Change

2024 2023 $ % 2024 2023 $ %

Other income, net $ 2,145 $ 1,546 $ 599 39 % $ 4,484 $ 2,848 $ 1,636 57 %

The increase in other income, net during the three months ended March 31, 2024 as compared to the same period in 2023 is primarily due to increased income on our investments resulting from both higher interest rates and larger investment balances throughout the period.

The increase in other income, net during the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily due to increased income on our investments resulting from both higher interest rates and larger investment balances throughout the period.

Liquidity and Capital Resources

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

March 31, 2024 December 31, 2023 Change $ Change %

June 30, 2024 December 31, 2023 Change $ Change %

Cash and cash equivalents $ 41,890 $ 21,470 $ 20,420 95 %

1 unchanged sentence

Total liquid funds $ 185,961 $ 184,299 $ 1,662 1 %

As of March 31, 2024, we had cash, cash equivalents and short-term investments of approximately $202.6 million.

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;

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

In January 2023, we filed a registration statement of Form S-3, 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;

and (ii) a prospectus supplement 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 with Jefferies, deemed to be “at-the-market offerings” (2023 Open Market Sales Agreement).

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 three months ended June 30, 2024 and 2023, 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.

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

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FDA for our NDA for XPHOZAH by November 30, 2023 and (ii) we achieved certain product revenue milestone targets described in the 2022 Loan Agreement (the Term B Loan).

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

The initial funding of $27.5 million was used to repay the 2018 Loan and is funding our ongoing operations.

14 unchanged sentences

We received these payments in October 2023.

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

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

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

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

Our primary uses of cash have been to fund operating expenses, primarily research and development expenditures, as well as pre-commercial and commercial expenses.

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We 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 milestones payments from our collaboration partners and payments from Kyowa Kirin under the 2022 Amendment to our License Agreement, which were received in October 2023, and from proceeds of the Term B and Term C Loans.

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 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 financial statements.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

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

• whether any legislative, regulatory or judicial action is taken to further delay the inclusion of XPHOZAH, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, in the ESRD PPS, which would otherwise occur on January 1, 2025;

• the adequacy of reimbursement and coverage of XPHOZAH beginning January 1, 2025 for all patients, regardless of insurance coverage, in the event that legislative, regulatory or judicial action to further delay the inclusion of oral only drugs in the ESRD PPS is not taken;

• the availability of adequate third-party reimbursement for IBSRELA and XPHOZAH;

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

• whether or when XPHOZAH, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, are bundled into the ESRD PPS, the manner in which such introduction into the ESRD PPS may occur, including the length of any applicable TDAPA period and the amount of the add-on payment available during the TDAPA period and whether, and the extent to which, the ESRD PPS base rate is adjusted following any applicable 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;

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• the costs of filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights, including litigation costs and the outcome of such litigation, and costs of defending any claims of infringement brought by others in connection with the development, manufacture or commercialization of tenapanor or any of our product candidates;

• the payment of interest and principal related to the 2022 Loan Agreement, as amended to date.

• the payment of interest and principal related to our loan and security agreement entered into with SLR Investment Corp., as amended to date.

Please see the risk factors set forth in Part II, Item 1A, Risk Factors, in this Quarterly Report on Form 10-Q for additional risks associated with our capital requirements.

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

Three Months Ended March 31, Change

Six Months Ended June 30, Change

2024 2023 $ %

Net cash used in operating activities $ (55,120) $ (59,532) $ 4,412 (7) %

Net cash used in investing activities (2,572) (9,777) 7,205 (74) %

Net cash provided by (used in) investing activities 20,961 (68,984) 89,945 (130) %

Net cash provided by financing activities 54,579 62,434 (7,855) (13) %

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Cash Flows from Operating Activities

Net cash used in operating activities during the three months ended March 31, 2024 decreased by $9.1 million as compared to the same period in 2023 primarily due to changes in our operating assets and liabilities, as well as an improvement in net loss after adjustments to reconcile net loss to net cash used in operating activities such as stock-based compensation and non-cash interest expense.

Net cash used in operating activities during the six months ended June 30, 2024 decreased by $4.4 million as compared to the same period in 2023 primarily due to adjustments to reconcile net loss to net cash used in operating activities such as stock-based compensation, as well as changes in our operating assets and liabilities.

Cash Flows from Investing Activities

Net cash used in investing activities during the three months ended March 31, 2024 decreased by $7.2 million as compared to the same period in 2023 primarily due to the timing of our investment maturities and purchases.

Net cash provided investing activities during the six months ended June 30, 2024 increased by $89.9 million as compared to the same period in 2023 primarily due to the timing of our investment maturities and purchases.

Cash Flows from Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2024 increased by $2.1 million as compared to the same period in 2023 primarily due to $49.8 million net proceeds from the Term C Loan received in March 2024, as well as from the issuance of common stock under our equity incentive and stock purchase plans.

Largely offsetting these amounts, were proceeds from the issuance of common stock under the 2021 Open Market Sales Agreement which were received in 2023.

We did not receive any proceeds under the 2021 Open Market Sales Agreement in 2024.

Net cash provided by financing activities during the six months ended June 30, 2024 decreased by $7.9 million as compared to the same period in 2023 primarily due to the receipt of $62.1 million from the issuance of common stock under the 2021 Open Market Sales Agreement in 2023.

We have not received any proceeds under the 2021 Open Market Sales Agreement in 2024.

Largely offsetting the decrease were $49.8 million net proceeds from the Term C Loan received in March 2024, as well as from the issuance of common stock under our equity incentive and stock purchase plans.

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