What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-01 · 99 added, 91 removed, 265 unchanged (42% of the section changed)

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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.

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 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.

As of September 30, 2024, we had an accumulated deficit of $890.0 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 costs 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 (including 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, October 17, 2023, and October 29, 2024 (collectively, the 2022 Loan Agreement), as well as from sales of IBSRELA and XPHOZAH.

Our Commercial Products

IBSRELA for IBS-C

Our unique discovery platform and deep understanding of the primary mechanism of sodium transport in the intestine resulted in our discovery and development of IBSRELA, a first-in-class, U.S.

FDA approved, sodium hydrogen exchange 3 (NHE3) inhibitor for the treatment of IBS-C in adults.

IBSRELA is a first-in-class sodium hydrogen exchange 3 (NHE3) inhibitor U.S.

FDA approved for the treatment of IBS-C in adults.

IBSRELA acts locally in the gut and is minimally absorbed.

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in March 2022.

For our commercial launch of IBSRELA, we designed a market-responsive commercial strategy and built a commercial organization highly experienced in launching novel therapies into specialty areas.

The dynamics of the IBS-C market reflect an established patient base, limited number of competitors all confined to a single mechanism of action, concentrated number of prescribers, and recognized unmet need.

We deploy a market-responsive commercial strategy for IBSRELA and have a commercial organization highly experienced in launching and commercializing novel therapies into specialty areas.

The dynamics of the IBS-C market reflect an established patient base, limited number of competitors all confined to a single mechanism of action (secretagogues), concentrated number of prescribers, and recognized unmet need.

In addition, market research indicated a favorable response to the IBSRELA product profile as a novel mechanism therapy.

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.

These dynamics enabled a targeted promotional focus on IBS-C patients currently being managed by high-writing healthcare providers.

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.

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(Fosun Pharma) in China and Knight Therapeutics, Inc.

(Knight) in Canada for IBSRELA for IBS-C.

(Knight) in Canada for IBSRELA.

Knight is currently marketing IBSRELA in Canada.

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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

On October 17, 2023, XPHOZAH, a first-in-class phosphate absorption inhibitor, received approval from the U.S.

FDA to market XPHOZAH in the U.S.

On October 17, 2023, we received approval from the U.S.

FDA to market XPHOZAH, a first-in-class phosphate absorption inhibitor, in the U.S.

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.

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For our commercial launch of XPHOZAH, we designed a market-responsive commercial strategy and built a commercial organization highly experienced and knowledgeable of the nephrology market.

The dynamics of the hyperphosphatemia market reflect an established patient base, limited number of competitors all confined to a single mechanism of action, concentrated number of prescribers, and recognized unmet need.

The dynamics of the hyperphosphatemia market reflect an established patient base, limited number of competitors all confined to a single mechanism of action (phosphate binders), concentrated number of prescribers, and recognized unmet need.

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.

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FDA for the treatment of pediatric hyperphosphatemia.

On July 2, 2024, the Company announced that it had chosen not to apply to include XPHOZAH in the Centers for Medicare & Medicaid Services (CMS) End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) Transitional Drug Add-on Payment Adjustment (TDAPA) following an analysis of the CMS policy to include oral-only medicines in the PPS and the Calendar Year 2025 ESRD PPS Proposed Rule released on June 27, 2024, which revealed that the policy and the manner in which CMS intends to implement it are likely to cause significant restrictions on the use of XPHOZAH for all patients, irrespective of insurance coverage, because it interferes with the essential and appropriate shared decision-making between healthcare professionals and their patients.

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 U.S.

District Court for the District of Columbia against 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.

We have established commercial agreements with Kyowa Kirin, Co.

(Kyowa Kirin) in Japan, Fosun Pharma in China and Knight in Canada for tenapanor for hyperphosphatemia.

In July 2023, we announced that a New Drug Application (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.

In July 2023, we announced that a New Drug Application (NDA) for tenapanor had been accepted for review by China’s Center for Drug Evaluation of the NMPA for the control of serum phosphorus in adult patients with CKD on hemodialysis.

In September 2023, we announced that Kyowa Kirin received approval from the Japanese Ministry of Health, Labour and Welfare (MHLW) for the NDA for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis.

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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 $16.2 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 may also be eligible to receive approximately CAD 22.2 million for development and commercialization milestones, or approximately $16.4 million at the currency exchange rate on September 30, 2024, of which $0.7 million has been received and recognized as revenue as of September 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 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.

We may also be eligible to receive approximately ¥8.5 billion for commercialization milestones, or approximately $59.8 million at the currency exchange rate on September 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.

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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 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%.

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

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

Recent Accounting Pronouncements

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

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;

any legislative, regulatory or judicial action is taken to further delay or prevent the inclusion of XPHOZAH, along with other oral ESRD-related drugs without an injectable or intravenous equivalent, in the ESRD PPS;

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

Other cost of revenue consists of the cost of materials sold to our international partners under product supply agreements, as well as payments due to AstraZeneca AB (AstraZeneca) based on sales of tenapanor.

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

Other cost of revenue consists of the cost of materials sold to our international partners under product supply agreements, certain costs related to capacity expansion at current and future contract manufacturing service providers, as well as payments due to AstraZeneca AB (AstraZeneca) based on sales of tenapanor.

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

Otherwise, such costs are expensed as research and development.

A portion of the costs of IBSRELA 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.

A portion of the costs of IBSRELA and XPHOZAH units recognized as revenue during the three and nine months ended September 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 nine months ended September 30, 2024 would have been $2.2 million and $4.6 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 nine months ended September 30, 2023 would have been $1.0 million and $3.4 million higher, respectively, if we had not previously expensed certain material and production costs with respect to the units sold.

As of September 30, 2024 and December 31, 2023, we had approximately $18.0 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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RESULTS OF OPERATIONS

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

The results of operations as of September 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 nine months ended September 30, 2024 and 2023

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

Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

September 30, Change

2023 Nine Months Ended

September 30, Change

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Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

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2023 Nine Months Ended

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(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.

The increase in product sales, net during the three and nine months ended September 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 increase in product supply revenue during the three and nine months ended September 30, 2024 as compared to the same periods in 2023 is attributable to the timing of product supply shipments to Kyowa Kirin.

The decrease in licensing revenue during the three and nine months ended September 30, 2024 as compared to the same periods in 2023 is primarily attributable to earning an aggregate of $30.0 million for milestones under the 2017 Kyowa Kirin Agreement and payments under the 2022 Amendment upon approval from the Japanese MHLW for the NDA for tenapanor for the improvement of hyperphosphatemia in adult patients with CKD on dialysis during the three months ended September 30, 2023.

We also earned a $2.0 million milestone under the terms of the Fosun Agreement upon acceptance of the NDA for tenapanor by China’s Center for Drug Evaluation of the NMPA for the control of serum phosphorus in adult patients with CKD on hemodialysis and 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.

Non-cash royalty revenue during the three and nine months ended September 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

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Three Months Ended

June 30, Change

2023 Six Months Ended

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September 30, Change

2023 Nine Months Ended

September 30, Change

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Total cost of goods sold $ 15,728 $ 7,692 $ 8,036 104 % $ 32,292 $ 12,718 $ 19,574 154 %

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.

The increase to cost of product sales during the three and nine months ended September 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 nine months ended September 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, as well as cost of goods sold for increased product supply sold to our collaboration partners.

Operating Expenses

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June 30, Change

2023 Six Months Ended

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2023 Nine Months Ended

September 30, Change

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Three Months Ended

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2023 Six Months Ended

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Total research and development expenses $ 15,310 $ 8,637 $ 6,673 77 % $ 38,651 $ 26,012 $ 12,639 49 %

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.

The increase in our R&D expenses, including other R&D expenses, during the three and nine months ended September 30, 2024 as compared to the same periods in 2023 is primarily the result of increased medical engagement with scientific communities in the areas of gastroenterology and nephrology, as well as pediatric clinical trial 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 $2.0 million and $4.6 million, respectively, during the three and nine months ended September 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 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.

The increase in selling, general and administrative expenses during the three and nine months ended September 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 $3.6 million and $13.3 million, respectively, during the three and nine months ended September 30, 2024 as compared to the same periods in 2023.

Interest Expense

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Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

September 30, Change

2023 Nine Months Ended

September 30, Change

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Interest expense $ (3,357) $ (1,107) $ (2,250) 203 % $ (9,039) $ (3,210) $ (5,829) 182 %

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.

The increase in interest expense during the three and nine months ended September 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

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Three Months Ended

June 30, Change

2023 Six Months Ended

June 30, Change

September 30, Change

2023 Nine Months Ended

September 30, Change

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Non-cash interest expense related to the sale of future royalties $ (1,924) $ (922) $ (1,002) 109 % $ (5,202) $ (2,859) $ (2,343) 82 %

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.

The increase in non-cash interest expense related to the sales of future royalties during the three and nine months ended September 30, 2024 as compared to the same periods in 2023 is due to a higher full year 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

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Three Months Ended

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2023 Six Months Ended

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September 30, Change

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Other income, net $ 2,282 $ 1,460 $ 822 56 % $ 6,766 $ 4,308 $ 2,458 57 %

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.

The increase in other income, net during the three and nine months ended September 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):

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

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

Cash and cash equivalents $ 47,429 $ 21,470 $ 25,959 121 %

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Total liquid funds $ 190,402 $ 184,299 $ 6,103 3 %

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;

As of September 30, 2024, we had cash, cash equivalents and short-term investments of approximately $190.4 million.

In January 2023, we filed a registration statement on 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 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.

During the three months ended September 30, 2024 and 2023, we completed no sales pursuant to the 2023 Open Market Sales Agreement.

As of September 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.

During the three months ending June 30, 2024, we achieved the Revenue Milestone and, in October 2024, we paid 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.

1 unchanged sentence

We paid the 2018 Exit Fee in October 2023 following 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.

As discussed in Note 9.

Derivative Liabilities , in connection with entering into the 2022 Loan Agreement, we entered into the 2022 Exit Fee agreement, as amended, whereby we agreed to pay an exit fee in the amount of 2% of the Term A Loan and Term B Loan by SLR if certain conditions are met.

Notwithstanding the prepayment or termination of the 2022 Loan, the 2022 Exit Fee will expire on February 23, 2032.

FDA for 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, we entered into a Third Amendment (the Third Amendment) to the 2022 Loan Agreement by and between us and the 2022 Lenders.

As discussed in Note 8.

Borrowing , the Third Amendment, among other things, (1) provided us with the option to draw an additional $50.0 million of committed capital by March 15, 2024 (the Term C Loan);

(2) provides us with the option to draw up to an additional $50.0 million of uncommitted capital, subject to approval by the Agent's investment committee (the Term D Loan);

and (3) extended the interest-only period for the Four Loans to December 31, 2026, effective upon our decision to draw the Term B Loan in the amount of $22.5 million.

In October 2023, we provided the Agent with notice of our decision to draw the Term B Loan to support the commercial launch of XPHOZAH and received the proceeds of the Term B Loan.

Borrowing , the Third Amendment, among other things, (1) provided us with the option to draw an additional $50.0 million of committed capital by March 15, 2024 (the Term C Loan) provided we have drawn the Term B Loan;

and (2) provided us with the option to draw up to an additional $50.0 million of uncommitted capital by December 31, 2026, subject to approval by the Agent’s investment committee (the Term D Loan).

In February 2024, we provided the Agent with notice of our decision to draw the Term C Loan to support the commercial launch of XPHOZAH and received the proceeds of the Term C Loan in March 2024.

On October 29, 2024, we entered into a Fourth Amendment (the Fourth Amendment) to the 2022 Loan Agreement by and between us and the 2022 Lenders.

The Fourth Amendment, among other things, (1) provides for the immediate draw of the Term D Loan on the closing date of the Fourth Amendment and (2) provides us with the option to draw an additional $50.0 million of committed capital by June 30, 2025 (the Term E Loan).

Under the Fourth Amendment, the maturity date for the Five 2022 Loans is extended from March 1, 2027 to July 1, 2028 (the Maturity Date).

The interest rate for each of the Term A Loan and the Term B Loan is 7.95% plus a SOFR value equal to 0.022% plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website, subject to a SOFR floor of one percent.

The interest rate for the Term C Loan is 4.25% plus a SOFR value equal to 0.022% plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator’s Website, subject to a SOFR floor of 4.7%.

The interest rate for each of the Term D Loan and the Term E Loan is 4.00% plus a SOFR value equal to 0.022% plus the 1-month CME Term SOFR reference rate as published by the CME Term SOFR Administrator on the CME Term SOFR Administrator's Website, subject to a SOFR floor of 4.7%.

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 and entitled us to a $5.0 million payment under the terms of the HCR Agreement.

We received these payments in October 2023.

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

We have incurred operating losses since inception in 2007 and our accumulated deficit as of September 30, 2024 is $890.0 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.

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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 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 believe our available cash, cash equivalents and short-term investments as of September 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;

• whether any legislative, regulatory or judicial action is taken to further delay or prevent 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 or prevent the inclusion of oral only drugs in the ESRD PPS is not taken;

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

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

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

2024 2023 $ %

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Cash Flows from Operating Activities

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.

Net cash used in operating activities during the nine months ended September 30, 2024 decreased by $26.4 million as compared to the same period in 2023 primarily due to higher product sales, net, as well as net changes in our operating assets and liabilities, including decreased accounts receivable and increased accounts payable and accrued and other liabilities, which were partially offset by increased inventory expenditures.

Cash Flows from Investing Activities

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.

Net cash provided investing activities during the nine months ended September 30, 2024 increased by $125.0 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 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.

Net cash provided by financing activities during the nine months ended September 30, 2024 decreased by $63.0 million as compared to the same period in 2023 primarily due to the receipt of $119.2 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.

Largely offsetting the decrease were $49.8 million net of 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