What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-10-31 compared with 2024-08-01 · 42 added, 42 removed, 943 unchanged (8% of the section changed)

3 unchanged sentences

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 additional expenses related to our ongoing operations and our pursuit of future business opportunities.

We have incurred losses in each year 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 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 additional expenses related to our ongoing operations.

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

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 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.

1 unchanged sentence

If our current cash, cash equivalents and short-term investments as well as our plans to meet our operating cash flow requirements are not sufficient to fund necessary expenditures and meet our obligations, our liquidity, financial condition, and business prospects will be materially affected.

Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

Our prior losses, combined with any future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

Further, the net losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

3 unchanged sentences

In addition, the future utilization of such net operating loss and tax credit carryforwards and credits may be subject to limitations, pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code).

In general, if a corporation undergoes an “ownership change,” generally defined as a cumulative change of more than 50 percentage points (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change net operating loss (NOL) carryforwards and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited.

In general, if a

corporation undergoes an “ownership change,” generally defined as a cumulative change of more than 50 percentage points (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change net operating loss (NOL) carryforwards and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited.

We have experienced ownership changes in the past and may experience additional ownership changes in the future, as a result of subsequent changes in our stock ownership, some of which are outside our control.

9 unchanged sentences

• 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;

• 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;

10 unchanged sentences

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.

We have generated limited revenue from product sales and may never be profitable.

We have generated limited revenue from product sales and may never be profitable for a full fiscal year.

We have generated limited revenue from product sales and have incurred significant net losses in each year since inception.

We began selling IBSRELA in the U.S.

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.

in March 2022 and we began selling XPHOZAH in the U.S.

in November 2023.

We have no other products approved for sale.

5 unchanged sentences

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

• whether any legislative 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;

• 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;

6 unchanged sentences

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.

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 or prevent 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.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Even if we achieve profitability on a quarterly basis in the future, we may not be able to sustain profitability for a full fiscal year.

Our failure to generate adequate revenue from product sales would likely depress our market value and could impair our ability to raise capital, expand our business, discover or develop other product candidates or continue our operations.

24 unchanged sentences

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

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:

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 or prevent 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 or prevent 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 extent to which access to XPHOZAH is restricted, regardless of insurance coverage, during and/or following any applicable TDAPA period, which may depend largely on the manner in which, XPHOZAH and other oral ESRD-related

drugs without an injectable or intravenous equivalent are bundled into the ESRD PPS, including, but not limited to, whether or not we file for TDAPA at a future date, whether or not TDAPA is granted, the length of any applicable TDAPA period, the amount of any applicable TDAPA payment, and the extent to which, the ESRD PPS base rate is adjusted following any applicable TDAPA period;

• 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;

9 unchanged sentences

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

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 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, 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.

1 unchanged sentence

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.

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.

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 along with 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.

2 unchanged sentences

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.

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 and would materially and adversely impact sales of XPHOZAH, 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 product sales, 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.

• the extent to which the elimination of 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 for XPHOZAH will continue to be made 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.

19 unchanged sentences

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

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.

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 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 no legislative, regulatory or judicial action is taken, 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.

See “— 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, 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.

41 unchanged sentences

Our operating activities may be restricted as a result of covenants related to the indebtedness under our loan and security agreement with SLR, as amended, and we may be required to repay the outstanding indebtedness in an event of default, which could have a materially adverse effect on our business.

On February 23, 2022, we entered into a loan and security agreement with SLR (Lender) pursuant to which the Lender agreed to provide us with a loan facility for up to $50.0 million with a maturity date of March 1, 2027, and on August 1, 2022, February 9, 2023 and October 17, 2023, we entered into amendments to the loan and security agreement (collectively, the 2022 Loan Agreement).

The loan was funded in the amount of $27.5 million on February 23, 2022 and additional amounts of $22.5 million and $50.0 million were drawn on October 19, 2023, and March 1, 2024, respectively.

In addition, subject to the Lender approval of its investment committee, we may be able to draw up to an additional $50.0 million by December 31, 2026.

On February 23, 2022, we entered into a loan and security agreement (2022 Loan Agreement) with SLR Investment Corp.

as collateral agent (Agent or SLR), and the lenders listed in the 2022 Loan Agreement (collectively, the 2022 Lenders).

The 2022 Loan Agreement was subsequently amended in August 2022 (the First Amendment), February 2023 (the Second Amendment), October 2023 (the Third Amendment) and October 2024 (Fourth Amendment).

The loan was funded in the amount of $27.5 million on February 23, 2022 and additional amounts of $22.5 million, $50.0 million and $50.0 million were drawn on October 19, 2023, March 1, 2024, and October 29, 2024, respectively.

In addition, we may be able to draw up to an additional $50.0 million by June 30, 2025.

Until we have repaid all funded indebtedness, the 2022 Loan Agreement subjects us to various customary covenants, including requirements as to financial reporting and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to enter into licensing agreements, to engage in transactions with affiliates, and to encumber our intellectual property.

Our business may be adversely affected by these restrictions on our ability to operate our business.

We are permitted to make interest only payments on the loan facility through December 31, 2026, with principal repayments commencing on January 1, 2027.

Under the Fourth Amendment, the maturity date for the term loans is extended to July 1, 2028 (Maturity Date).

We are permitted to make interest only payments on the loan facility through the Maturity Date.

In addition, we may be required to repay the outstanding indebtedness under the loan facility if an event of default occurs under the 2022 Loan Agreement.

33 unchanged sentences

GLPs and GCPs are regulations and guidelines enforced by the U.S.

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.

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.

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.

8 unchanged sentences

Additionally, over-the-counter products not indicated for IBS-C are commonly used to treat the constipation component of IBS-C, alone and in combination with the IBS-C-indicated prescription therapies.

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.

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.

141 unchanged sentences

Any delays in identifying suitable additional collaboration partners and entering into agreements to develop our product candidates could also delay the commercialization of our product candidates, which may reduce their competitiveness even if they reach the market.

There is no guarantee that our current collaboration partnerships or any such arrangements we enter into in the future will be successful, or that any collaboration partner will

commit sufficient resources to the development, regulatory approval, and commercialization effort for such products, or that such alliances will result in us achieving revenues that justify such transactions.

There is no guarantee that our current collaboration partnerships or any such arrangements we enter into in the future will be successful, or that any collaboration partner will commit sufficient resources to the development, regulatory approval, and commercialization effort for such products, or that such alliances will result in us achieving revenues that justify such transactions.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

59 unchanged sentences

Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Regulatory authorities may also impose significant restrictions on a product’s indicated uses or marketing or impose

ongoing requirements for potentially costly post-marketing studies.

Regulatory authorities may also impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-marketing studies.

Furthermore, any new legislation addressing drug safety issues could result in delays or increased costs to assure compliance.

154 unchanged sentences

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.

369 unchanged sentences

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