What changed in this filing

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Item 1A. Risk Factors

2024-08-01 compared with 2024-05-02 · 56 added, 48 removed, 929 unchanged (10% of the section changed)

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Risks Related to our Financial Condition and Capital Requirements

We are not profitable and have incurred significant losses since our inception, and we expect to continue to incur operating losses in the future as we commercialize IBSRELA ® and XPHOZAH ® , incur manufacturing and development costs for tenapanor, and incur research and development costs related to potential new product candidates.

In March 2022, we commenced the commercialization of our first product, IBSRELA ® (tenapanor) for the treatment of irritable bowel syndrome with constipation (IBS-C) in adult patients and have generated approximately $124.0 million in net revenue from product sales through March 31, 2024.

In October 2023, we received U.S.

Food and Drug Administration (U.S.

FDA) approval for XPHOZAH ® (tenapanor) for the reduction of 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.

In November 2023, we commenced the commercialization of XPHOZAH and generated approximately $17.6 million in net revenue from product sales through March 31, 2024.

We are not profitable and have incurred significant losses since our inception, and we expect to continue to incur operating losses in the future as we commercialize IBSRELA ® and XPHOZAH ® , incur manufacturing and development costs for tenapanor, and incur additional expenses related to our ongoing operations and our pursuit of future business opportunities.

In March 2022, we commenced the commercialization of our first product, IBSRELA® (tenapanor) for the treatment of irritable bowel syndrome with constipation (IBS-C) in adult patients.

In November 2023, we commenced the commercialization of XPHOZAH® (tenapanor) for the reduction of 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 are not profitable and have incurred losses in each year since our inception in October 2007, and we do not know whether or when we will become profitable.

We continue to incur significant commercialization, development and other expenses related to our ongoing operations.

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 commercialize IBSRELA and XPHOZAH, incur manufacturing and development costs for tenapanor, and incur research and development costs related to potential new product candidates.

We continue to incur significant commercialization, development and additional expenses related to our ongoing operations.

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 commercialize IBSRELA and XPHOZAH, incur manufacturing and development costs for tenapanor, and incur additional expenses related to our ongoing operations and our pursuit of future business opportunities.

There are no assurances that our efforts to meet our operating cash flow requirements will be successful.

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We will require additional financing for the foreseeable future as we invest in the commercialization of IBSRELA and XPHOZAH in the U.S.

and incur research and development costs related to potential new product candidates.

The inability to access necessary capital when needed on acceptable terms, or at all, could force us to reduce our efforts to commercialize IBSRELA or XPHOZAH, or to delay or limit our pursuit of potential new product candidates

and incur additional expenses related to our ongoing operations.

We believe that we will continue to expend substantial resources for the foreseeable future, including costs associated with our efforts to commercialize IBSRELA and XPHOZAH;

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manufacturing for IBSRELA and XPHOZAH and research and development related to potential new product candidates.

The inability to access necessary capital when needed on acceptable terms, or at all, could force us to reduce our efforts to commercialize IBSRELA or XPHOZAH, or to otherwise limit aspects of our business.

Our future funding requirements will depend on many factors, including, but not limited to:

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

• whether any legislative 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 prospective payment system (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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Additional funds may not be available when we need them on terms that are acceptable to us, or at all.

If adequate funds are not available to us on a timely basis, we may be required to limit or reduce our commercialization of IBSRELA or XPOHZAH, delay or limit additional clinical trials for tenapanor, or delay or limit our pursuit of potential new product candidates.

Additionally, our inability to access capital on a timely basis and on terms that are acceptable to us may force us to restructure certain aspects of our business or identify and complete one or more strategic collaborations or other transactions in order to fund the commercialization of IBSRELA or XPHOZAH through the use of alternative structures.

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We began selling IBSRELA in the U.S.

in March 2022 and have generated approximately $124.0 million in net revenue from product sales through March 31, 2024.

On October 17, 2023, our NDA for XPHOZAH was approved by the U.S.

Food and Drug Administration’s (U.S.

In November, we commenced the commercialization of XPHOZAH and generated approximately $17.6 million in net revenue from product sales through March 31, 2024.

in March 2022 and have recognized approximately $159.5 million in net revenue from product sales of IBSRELA through June 30, 2024.

We began selling XPHOZAH in the U.S.

in November 2023 and have recognized approximately $54.8 million in net revenue from product sales of XPHOZAH through June 30, 2024.

We have no other products approved for sale.

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• our ability to obtain and sustain an adequate level of coverage and reimbursement for IBSRELA and XPHOZAH by third-party payors;

• 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;

• establishing and maintaining supply and manufacturing relationships with third parties that can provide an adequate (in amount and quality) supply of product to support the market demand for IBSRELA and XPHOZAH;

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• attracting, hiring, and retaining qualified personnel.

With respect to our commercialization of IBSRELA and XPHOZAH, our revenue will be dependent, in part, upon the size of the markets in the U.S., the label for which approval was granted, accepted price for the product, and the ability to get reimbursement at any price.

While there is significant uncertainty related to the insurance coverage and reimbursement of newly approved products in general in the U.S., there is additional uncertainty related to insurance coverage and reimbursement for drugs, like XPHOZAH, which is being marketed for the reduction of 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.

Our ability to generate and sustain future revenues from sales of XPHOZAH, will be significantly dependent upon whether and when XPHOZAH, along with other oral end stage renal disease (ESRD)-related drugs without an injectable or intravenous equivalent, are bundled into the ESRD PPS, and the manner in which such introduction into the ESRD PPS may occur.

While there is significant uncertainty related to the insurance coverage and reimbursement of newly approved products in general in the U.S., there is additional uncertainty related to insurance coverage and reimbursement for drugs, like XPHOZAH, which is being marketed for the reduction of 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.

Our ability to generate and sustain future revenues from sales of XPHOZAH, will be significantly dependent upon whether and when XPHOZAH, along with other oral drugs without an injectable or intravenous equivalent, are bundled into the ESRD PPS.

See “— Third-party payor coverage and reimbursement status of newly commercialized products are uncertain.

Failure to obtain or maintain adequate coverage and reimbursement for IBSRELA and XPHOZAH could limit our ability to market those products and decrease our ability to generate revenue ” and “— In the event no legislative or regulatory action is taken to further delay the inclusion of oral only ESRD related drugs in the ESRD PPS, XPHOZAH will become part of the ESRD PPS on January 1, 2025, and will no longer be covered under Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted ” below.

Failure to obtain or maintain adequate coverage and reimbursement for IBSRELA and XPHOZAH could limit our ability to market those products and decrease our ability to generate revenue ” and “— 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, XPHOZAH will become part of the ESRD PPS on January 1, 2025, and will no longer be covered under Medicare Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted ” below.

Additionally, if the number of adult patients for IBSRELA and/or XPHOZAH is not as significant as we estimate, coverage and reimbursement for either IBSRELA or XPHOZAH are not available in the manner and to the extent we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from the sale of IBSRELA or XPHOZAH.

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There is no guarantee that we will achieve sufficient market acceptance for XPHOZAH, secure and maintain adequate coverage and reimbursement for XPHOZAH, or generate sufficient revenue from product sales of XPHOZAH.

There is no guarantee that we will achieve sufficient market acceptance for XPHOZAH, secure and maintain adequate coverage and reimbursement for XPHOZAH or generate sufficient revenue from product sales of XPHOZAH .

The commercial success of XPHOZAH will depend on a number of factors, including the following:

Our ability to maintain adequate coverage and reimbursement for XPHOZAH significantly depends upon whether and when XPHOZAH, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, are bundled into the ESRD PPS.

Absent legislative, regulatory or judicial action, XPHOZAH will enter the ESRD PPS on January 1, 2025, and separate reimbursement under Medicare Part D will no longer be available, which will negatively and materially impact our sales of XPHOZAH.

See “— Third-party payor coverage and reimbursement status of newly commercialized products are uncertain.

Failure to obtain or maintain adequate coverage and reimbursement for IBSRELA and XPHOZAH could limit our ability to market those products and decrease our ability to generate revenue ” and “— 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, XPHOZAH will become part of the ESRD PPS on January 1, 2025, and will no longer be covered under Medicare Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted ” below.

Even if legislative, regulatory or judicial action is taken to delay the inclusion of oral only drugs in the ESRD PPS, the commercial success of XPHOZAH will depend on a number of factors, including the following:

• the length of any such legislative, regulatory or judicial delay in the inclusion of oral only drugs in the ESRD PPS;

• when, and the manner in which, XPHOZAH and other oral ESRD-related drugs without an injectable or intravenous equivalent are bundled into the ESRD PPS, 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, in the event that legislative, regulatory or judicial action is taken to delay but not ultimately prevent the inclusion of oral only drugs in the ESRD PPS;

• the ability of the third-party manufacturers we contract with to provide an adequate (in amount and quality) supply of product to support the market demand for both IBSRELA and XPHOZAH;

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• a continued acceptable safety and tolerability profile of XPHOZAH following approval.

In the event no legislative or regulatory action is taken to further delay the inclusion of oral only ESRD related drugs in the ESRD PPS, XPHOZAH will become part of the ESRD PPS on January 1, 2025, after which time, coverage for XPHOZAH for Medicare beneficiaries will no longer be available under Medicate Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted.

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, XPHOZAH will become part of the ESRD PPS on January 1, 2025, after which time, coverage for XPHOZAH for Medicare beneficiaries will no longer be available under Medicate Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted.

In January 2011, the Centers for Medicare & Medicaid Services (CMS), an agency within the United States Department of Health and Human Services responsible for administering the Medicare program, implemented the ESRD PPS, a new prospective payment system for dialysis treatment.

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The inclusion of oral medications without injectable or intravenous equivalents in the bundled payment was initially delayed by CMS until January 1, 2014, and through several subsequent legislative actions has been delayed until January 1, 2025.

Absent further legislation or regulation on this matter, beginning in January 2025, oral ESRD-related drugs without injectable or intravenous equivalents, including XPHOZAH and all other phosphate lowering medications, will be included in the ESRD bundle and separate Medicare payment for these drugs will no longer be available, as is the case today under Medicare Part D.

ESRD facilities may nonetheless receive a Transitional Drug Add on Payment Adjustment (TDAPA) for new renal dialysis drugs and biological products dispensed to Medicare beneficiaries that meet certain criteria for a period of two years.

The TDAPA payment is based on 100 percent of average sales price (ASP).

If ASP is not available, then the TDAPA is based on 100 percent of wholesale acquisition cost (WAC).

If WAC is unavailable, then the payment is based on the drug manufacturer’s invoice.

There can be no assurances that CMS will determine that XPHOZAH will qualify for TDAPA status, or that Medicare Advantage Plans will pay a TDAPA if XPHOZAH is dispensed to Medicare beneficiaries covered by Medicare Advantage Plans.

Even if deemed eligible by CMS, revenue for sales of XPHOZAH could be significantly less in the TDAPA period than it would be if XPHOZAH is not bundled into the ESRD PPS.

Moreover, in the post-TPDAPA period, CMS currently expects to increase the single bundled payment base rate paid to the dialysis facility for each dialysis treatment to reflect that oral only phosphate lowering drugs will be reimbursed as part of the single bundled payment for Medicare patients.

There can be no assurances that any increase in the single bundled payment base rate will be sufficient to adequately reimburse the dialysis facilities for XPOHZAH at a price that is profitable for us.

The inclusion of XPHOZAH in the ESRD PPS would affect our ability to optimize the commercialization of XPHOZAH, will negatively and materially impact the revenue that we may generate on sales of XPHOZAH and could materially impact our profitability, results of operations, financial condition, and prospects.

On June 27, 2024, CMS released the proposed Calendar Year 2025 ESRD PPS rule (CY 2025 Proposed Rule) in which CMS confirmed its intention to bring XPHOZAH other oral ESRD-related drugs without and injectable or intravenous equivalent into the ESRD PPS beginning January 1, 2025, and to cease separate payment for XPHOZAH and other such drugs under Medicare Part D on such date.

CMS also provided specific guidance as to how it intends to bundle XPHOZAH into the ESRD PPS indicating that it does not intend to introduce XPHOZAH into the ESRD PPS in the same manner that it intends to introduce all other phosphate lowering medications.

Rather, CMS has determined that the Transitional Drug Add on Payment Adjustment (TDAPA) for new renal dialysis drugs applies to XPHOZAH.

Under the CMS guidance for new renal dialysis drugs, in order to ensure TDAPA availability on January 1, 2025, a TDAPA application should be filed in the application period ending on July 1, 2024.

Additionally, CMS’s determination to introduce XPHOZAH into the ESRD PPS through a different pathway than that through which phosphate binders will be introduced suggests CMS’ current intention to limit the utilization data considered in determining the amount of a permanent base rate adjustment after the TDAPA period to the utilization data collected for the phosphate binders, excluding XPHOZAH utilization from such permanent base rate adjustment analysis.

With review and analysis of the CY 2025 Proposed Rule, we determined that filing for TDAPA at this time is not in the best interest of patients or our XPHOZAH business, and on July 2, 2024, we announced that we did not file an application for TDAPA on or prior to July 1, 2024.

CMS’s determination to bring XPHOZAH into the ESRD PPS will materially and adversely impact our XPHOZAH business, and our profitability, results of operations, financial condition and prospects will be materially and adversely impacted.

The extent to which the inclusion of XPHOZAH in the ESRD PPS will materially and adversely impact our XPHOZAH business is dependent on the following:

• the extent to which access to XPHOZAH is restricted by the dialysis providers and the extent to which such restrictions will interfere with the shared decision-making between healthcare professionals and their patients, regardless of insurance coverage;

• the extent to which the separate payment for XPHOZAH for Medicare beneficiaries under Medicare Part D will influence the payment decisions of other payors and the extent to which payment XPHOZAH will continue to be paid for as a pharmacy benefit for non-Medicare patients.

IBSRELA and/or XPHOZAH may cause undesirable side effects or have other properties that could limit the commercial success of the product.

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• we or a collaboration partner may be required to recall the product;

distribution to patients, a communication plan to educate healthcare providers of the drugs’ risks, as well as other elements to assure safe use of the product, such as a patient registry and training and certification of prescribers;

• additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof, including the imposition of a Risk Evaluation and Mitigation Strategy (REMS) which could require creation of a Medication Guide or patient package insert outlining the risks of such side effects for distribution to patients, a communication plan to educate healthcare providers of the drugs’ risks, as well as other elements to assure safe use of the product, such as a patient registry and training and certification of prescribers;

• we or a collaboration partner may be subject to fines, injunctions or the imposition of civil or criminal penalties;

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Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products.

In the U.S., the principal decisions about coverage and reimbursement for new drugs are typically made by CMS, an agency within the United States Department of Health and Human Services responsible for administering the Medicare program, as CMS decides whether and to what extent a new drug will be covered and reimbursed under Medicare.

In the U.S., the principal decisions about coverage and reimbursement for new drugs are typically made by CMS, as CMS decides whether and to what extent a new drug will be covered and reimbursed under Medicare.

Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree.

It is difficult to predict what CMS will decide with respect to reimbursement for products such as ours.

Additionally, absent legislative or regulatory action, XPHOZAH, along with other oral ESRD related drugs without injectable or intravenous equivalents, will be included in the ESRD PPS beginning on January 1, 2025, after which time, separate payment for these drugs for Medicare beneficiaries will no longer be available, as is the case today under Medicare Part D.

While it is too early to project the full impact that bundling may have on sales of XPHOZAH and on our business, should XPHOZAH be brought into the bundle in 2025, or at any time, we may be unable to sell XPHOZAH to dialysis providers on a profitable basis.

See “— In the event no legislative or regulatory action is taken to further delay the inclusion of oral only ESRD related drugs in the ESRD PPS, XPHOZAH will become part of the ESRD PPS on January 1, 2025, and will no longer be covered under Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted ” above for a more detailed discussion related to the risks that may occur if XPHOZAH is brought into the bundle.

On June 27, 2024, CMS released the CY 2025 Proposed Rule in which CMS confirmed its intention to bring XPHOZAH and all oral only drugs in to the ESRD PPS beginning January 1, 2025, and to cease separate payment for XPHOZAH and all oral only drugs under Medicare Part D on such date.

In the event of no legislative, regulatory or judicial action, XPHOZAH, along with other oral ESRD related drugs without injectable or intravenous equivalents, will be included in the ESRD PPS beginning on January 1, 2025.

Should XPHOZAH be brought into the ESRD PPS bundle in 2025, or at any time, we may be unable to sell XPHOZAH to dialysis providers on a profitable basis.

See “— 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, XPHOZAH will become part of the ESRD PPS on January 1, 2025, and will no longer be covered under Medicare Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted ” above for a more detailed discussion related to the risks that may occur if XPHOZAH is brought into the ESRD PPS bundle.

Outside the U.S., international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, Japan, China and other countries has and will continue to put pressure on the pricing and usage of IBSRELA and XPHOZAH, even if regulatory approval is received in such countries.

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FDA, the Competent Authorities of the Member States of the European Economic Area (EEA) and comparable foreign regulatory authorities for all of our products in nonclinical and clinical development, respectively.

Regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators and trial sites.

Regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal

investigators and trial sites.

If we or any of our third-party contractors fail to comply with applicable regulatory requirements, including GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the U.S.

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The ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Moreover, on June 27, 2024, CMS released the CY 2025 Proposed Rule in which CMS confirmed its intention to bring XPHOZAH and all oral only drugs in to the ESRD PPS beginning January 1, 2025, and to cease separate payment for XPHOZAH and all oral only drugs under Medicare Part D on such date.

Absent legislative, regulatory or judicial action, XPHOZAH will enter the ESRD PPS on January 1, 2025, which means it will no longer be covered by Medicare Part D, which will negatively and materially impact our sales of XPHOZAH.

See “— 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, XPHOZAH will become part of the ESRD PPS on January 1, 2025, and will no longer be covered under Medicare Part D, and as a result the revenue that we may generate on sales of XPHOZAH will be negatively and materially impacted ” above.

Other legislative changes have been proposed and adopted in the U.S.

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HRSA has finalized regulations regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities for 340B-eligible drugs.

HRSA has also finalized an administrative dispute resolution process through which

340B covered entities may pursue claims against participating manufacturers for overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting of 340B drugs.

HRSA has also finalized an administrative dispute resolution process through which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting of 340B drugs.

In order to be eligible to have drug products paid for with federal funds under Medicaid and purchased by certain federal agencies and grantees, we also participate in the U.S.

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Furthermore, even if unchallenged, our patents and patent applications may not prevent others from designing around our patent claims.

For example, a third party may develop a competitive product that provides therapeutic benefits similar to one or more of our product candidates but has a sufficiently different composition to fall outside the scope of our patent protection.

For example, a third party may develop a

competitive product that provides therapeutic benefits similar to one or more of our product candidates but has a sufficiently different composition to fall outside the scope of our patent protection.

If the breadth or strength of protection provided by the patents and patent applications we hold or pursue with respect to IBSRELA and XPHOZAH or any future product candidates is successfully challenged, then our ability to commercialize such product could be negatively affected, and we may face unexpected competition that could have a material adverse impact on our business.

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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 1A. Risk Factors