What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-31 compared with 2020-03-17 · 101 added, 140 removed, 109 unchanged (69% of the section changed)

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Overview and Recent Developments

We are a biopharmaceutical company dedicated to transforming anemia and improving outcomes for patients with anemia across the globe, with an initial focus on ESRD.

We are also a manufacturer of hemodialysis concentrates for dialysis providers and distributors in the United States and abroad.

We supply the domestic market with dialysis concentrates and we also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim.

Substantially, all of our sales have been concentrate products and ancillary items, though we initiated commercial sales of our proprietary therapeutic, Dialysate Triferic, during the second quarter of 2019.

Our mission is to transform anemia management in a wide variety of disease states across the globe while improving patients’ lives.

Accordingly, we are building the foundation to become a leading medical and commercial organization in the field of dialysis.

Triferic is the Company’s proprietary iron therapy that replaces iron and maintains hemoglobin in dialysis patients without increasing iron stores.

The Company has developed Dialysate Triferic (Ferric Pyrophosphate Citrate) as the only FDA approved product indicated to replace iron and maintain hemoglobin concentration in adult HDD-CKD hemodialysis patients, and is in the process of developing and seeking FDA approval for I.V.

Triferic, a novel intravenous formulation of Triferic that would be used for the same indication, if approved.

Descriptions of Dialysate Triferic and I.V.

Triferic are set forth below.

Dialysate Triferic

Dialysate Triferic, our dialysate formulation of Triferic, received FDA approval in 2015 and remains the only FDA-approved therapy indicated to replace iron and maintain hemoglobin in adult hemodialysis patients.

Dialysate Triferic received a reimbursement J-code on January 1, 2016 from the CMS, providing that Dialysate Triferic would be reimbursed for administration to dialysis patients within the existing fixed-price “bundle” of payments that CMS provides to dialysis providers.

On April 26, 2019, pursuant to a request we submitted earlier in 2019, we were notified of a preliminary recommendation by CMS to grant our powder packet formulation of Dialysate Triferic a separate J-Code, which became effective on July 1, 2019.

In June 2018, the Company determined, based on feedback provided from CMMI, that Dialysate Triferic was unlikely to obtain add-on reimbursement in the near term.

As a result, the Company changed its commercialization strategy to plan for the commercial launch of Dialysate Triferic with reimbursement within the bundle of payments to dialysis providers, while continuing to develop I.V.

Triferic (discussed below).

We commercially launched Dialysate Triferic in the May 2019.

While the Company was pursuing the earlier strategy of delaying commercialization until receipt of add-on reimbursement approval, we built up significant inventory of active pharmaceutical ingredient (“API”) and Dialysate Triferic finished goods.

However, due to the delays in launching and feedback received from CMMI in March 2018 regarding near-term approval, our inventory reserves for Triferic increased to $11.6 million as of December 31, 2018.

We had a total inventory reserve of $5.8 million as of December 31, 2018, net of inventory destroyed or used for samples during 2018 was $5.8 million.

As of December 31, 2019 , we had $0.6 million of Dialysate Triferic finished goods inventory that could expire within the next 12 months and against which we have reserved $0.4 million.

As of December 31, 2019, we also had approximately $2.9 million of API against which we have reserved $2.4 million and classified $0.4 million of API as non-current inventory.

Depending on the success of our commercialization of Dialysate Triferic, additional amounts or all of our current investment in Dialysate Triferic finished goods inventory and some or all of our API inventory may need to be written off.

Additional inventory write-offs will not have a material negative impact on our cash flow, but could have a material adverse impact on our reported results of operations and financial position.

We are also developing I.V.

Triferic, an intravenous injection of Triferic, for use by hemodialysis clinics in the United States as well as international markets.

Based on the data from a clinical equivalence study and feedback received during the pre-NDA meeting, on May 28, 2019, we submitted a NDA seeking FDA approval to market I.V.

Triferic in the United States for the clinical indication of replacing iron and maintain hemoglobin in adult dialysis patients.

We have a PDUFA date of March 28, 2020.

On November 1, 2018, CMS issued interpretive guidance on the availability of Medicare reimbursement for certain products indicated to treat renal disease.

As set forth in the CMS guidance, Dialysate Triferic would not be eligible for add-on reimbursement under the CMS TDAPA program.

However, based on the CMS guidance, we believed that, if approved by the FDA on or after January 1, 2020, I.V.

Triferic would be eligible for separate sole source payment with a separate J-Code for a two-year timeframe.

However, on October 31, 2019, CMS finalized revised guidance regarding the TDAPA program that significantly limited the eligibility of new products for TDAPA to only certain NDA types, as classified by the FDA.

Pursuant to the revised guidance, I.V.

Triferic will not be eligible for TDAPA.

While we intend to market and sell Dialysate Triferic and I.V.

Triferic directly in the United States, our international strategy is to partner with and license these products to established companies in other regions of the world to assist in the further development (primarily clinical trials and regulatory activities), if necessary, and commercialize in those regions.

We continue to pursue international licensing opportunities in a number of countries and specific regions.

Dialysis Concentrates

We manufacture, sell, deliver and distribute hemodialysis concentrates, along with a line of ancillary dialysis products abroad.

We use Baxter as our exclusive marketer and distributor in the United States and in select foreign markets.

Dialysate concentrates accounted for approximately 96% of our revenues for the year ended December 31, 2019, with ancillary products and Triferic accounting for most of the remainder.

We receive a pre-defined gross profit margin on our concentrate products sold pursuant to the Baxter Agreement, subject to an annual true-up of costs.

Calcitriol (Active Vitamin D) Injection

Calcitriol, an active Vitamin D injection for the management of hypocalcemia in patients undergoing chronic hemodialysis, is FDA approved under an Abbreviated New Drug Application.

To date, we have not commercially launched Calcitriol.

Following a strategic review of this product, including pricing, commercial distribution and marketing, manufacturing efficiencies and capacity (including potential capital investment), we have determined commercialization of Calcitriol in the U.S.

would not be viable at this time.

The decision was based, in part, on the fact that prevailing market prices for similar Vitamin D products are lower than our cost to produce Calcitriol on a dose-equivalent basis, and as a result it would be difficult for us to market Calcitriol profitably.

As a result of this decision, we recorded a full inventory reserve in the fourth quarter of 2018, reflecting the remainder of our Calcitriol inventory.

Clinical Development

Although Triferic is approved for commercial sale in the United States, it is not approved for sale in other major markets globally.

We have received regulatory guidance from the EMA regarding the clinical studies that are needed to file for approval of I.V.

Triferic in Europe.

At the present time, we do not intend to commence these clinical studies, absent finding a development partner in Europe or raising additional capital.

In conjunction with our licensee in the People’s Republic of China, Wanbang Biopharmaceutical, we completed two clinical pharmacology studies in China during 2019.

We expect Wanbang to initiate additional clinical studies during 2020 that are necessary to support a submission for regulatory approval in China.

As a post-approval requirement under the Pediatric Research Equity Act, we are required to conduct a further clinical study of the effectiveness of Triferic in a pediatric patient population.

We have reached agreement with the FDA on the design of this study and we expect to initiate enrollment in the study during 2020, assuming we have the liquidity and capital resources to do so.

We expect that the data from this study could be used as part of the overall clinical data package to support approval by the EMA, if and when we are able to complete the other clinical trials needed to support making such a filing.

Additionally, we believe that Triferic has the potential to be developed for use in other indications in which iron replacement is required.

In addition, we are assessing investing in potential clinical programs to evaluate other product presentations of Triferic within ESRD.

Rockwell Medical is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has significant potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives.

We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

Rockwell Medical has evolved its strategy over the past year to develop into a more medically-, scientifically- and data-driven company.

We believe future clinical, regulatory and commercial success requires us to generate compelling clinical data in each of our programs.

Our strategy is to accelerate Rockwell’s growth by creating and developing pharmaceutical products based on our FPC technology for disease states where patients can benefit the most from an effective treatment for iron deficiency, while concurrently refining our dialysis business to drive incremental growth and efficiencies.

We plan to leverage and build on the foundation provided by our current dialysis business serving kidney dialysis centers by developing a pipeline of additional potential drug therapies in multiple disease states.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform.

We are marketing both products to kidney dialysis centers for their patients receiving dialysis.

In 2021, we intend to advance our FPC platform strategy by starting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous medications in the home infusion setting.

In our R&D pipeline, we

are also exploring FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase II program in these patients in 2022.

Results of Operations

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For the Year Ended December 31,

2020 % of Revenue 2019 % of Revenue % Change

Net Sales $ 62,197 $ 61,303 1.5 %

Cost of Sales 59,472 95.6 % 58,464 95.4 % 1.7

Gross Profit (Loss)

Gross Profit 2,725 4.4 2,839 4.6 (4.0)

Research and Product Development 7,092 11.4 6,886 11.2 3.0

Selling and Marketing 7,871 12.7 9,050 14.8 (13.0)

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Settlement Expense, net of Reimbursement — — 430 0.7 (100.0)

Research and Product Development

Research and Development - Licenses Acquired (Related Party)

Operating Loss $ (28,420) (45.7) % $ (34,525) (56.3) % (17.7) %

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Net sales of hemodialysis concentrates to dialysis providers and distributors in the United States and abroad were $61.1 million for the year ended December 31, 2020 compared to $60.8 million for the year ended December 31, 2019.

The decrease of $2.3 million was primarily due to decreased sales to international customers offset by an increase in

sales pursuant to the Company’s contract with DaVita.

Net sales of Triferic were approximately $0.5 million for the year ended December 31, 2019 compared to $0.3 million for the year ended December 31, 2018.

The increase of $0.3 million was primarily due to increase in sales to our domestic customers offset by a decrease in international sales.

Net sales of Triferic (dialysate) were approximately $1.1 million for the year ended December 31, 2020 compared to $0.5 million for the year ended December 31, 2019.

For each year ended December 31, 2020 and 2019, Triferic net sales included approximately $0.2 million of deferred revenue recognized under the Company’s license in the People’s Republic of China with Wanbang.

Dialysate Triferic net sales for the year ended December 31, 2019 also included approximately $0.3 million of Dialysate Triferic product sales to United States customers.

Cost of Sales and Gross Profit (Loss)

Cost of sales during the year ended December 31, 2019 was $58.5 million, resulting in gross profit of $2.8 million during the year ended December 31, 2019, compared to cost of sales of $65.0 million and a gross loss of $1.6 million during the year ended December 31, 2018.

Gross profit increased by $4.4 million during the year ended December 31, 2019 compared to the year ended December 31, 2018, due primarily to a reduction in non-cash charges taken for inventory reserves of $7.6 million, partially offset by a gross profit decrease of $1.2 million in our dialysis concentrates products.

The decrease in gross profit for our dialysis concentrates products was primarily attributable to increased labor, materials and overhead costs.

Cost of Sales and Gross Profit

Cost of sales during the year ended December 31, 2020 was $59.5 million, resulting in gross profit of $2.7 million during the year ended December 31, 2020, compared to cost of sales of $58.5 million and a gross profit of $2.8 million during the year ended December 31, 2019.

Gross profit decreased by $0.1 million during the year ended December 31, 2020 compared to the year ended December 31, 2019, due primarily to an increase in labor and material costs of $0.3 million to address protocols put in place from the ongoing COVID-19 pandemic.

Gross profits are primarily related to our concentrates business at this time.

The Company anticipates that potential future sales of Triferic will positively impact future gross profits.

Research and Product Development Expense

Research and product development expenses were $7.1 million for the year ended December 31, 2020 compared with $6.9 million during the year ended December 31, 2019.

The increase of $0.2 million is related to clinical trials and other product development expenses for Triferic.

The Company is continuing to invest in its medical and scientific programs to support the continued data and phase 4 clinical programs for Triferic in dialysis and the advancement of our FPC technology platform.

Selling and Marketing Expense

Selling and marketing expenses were $7.9 million during the year ended December 31, 2020 compared with $9.1 million during the year ended December 31, 2019.

The increase of $8.1 million was due to the investments the Company made in developing a commercial platform to support the commercial launch of Dialysate Triferic, which included $4.4 million in marketing costs and $4.7 million in costs associated with hiring, training and educating new employees for the year ended December 31, 2019.

The decrease of $1.2 million is due primarily to the decrease in marketing costs of $2.3 million, partially offset by an increase in costs associated with hiring, training and educating new employees of

$1.1 million.

The fluctuation in these costs are mainly due to the timing of the Triferic (dialysate) launch in the third quarter of 2019.

We expect lower quarter-to-quarter fluctuations in sales and marketing costs going forward.

General and Administrative Expense

General and administrative expenses were $16.2 million during the year ended December 31, 2020 compared with $21.0 million during the year ended December 31, 2019.

The $1.1 million decrease is primarily due to the decrease in legal and related costs associated with various matters, including litigation activities, related to the departure of certain executives and directors that occurred in 2018.

Research and Product Development Expense

Research and product development expenses were $6.9 million for the year ended December 31, 2019 compared with $5.6 million during the year ended December 31, 2018.

The increase of $1.3 million was due to the Company’s commitment to investing in and building its medical capabilities mentioned above, including generating data from studies and real-world use of Dialysate Triferic to support medical education and development efforts for Dialysate Triferic, as well as the expansion of the Company’s internal medical affairs staff.

The Company expects its research and product development expenses to increase in the future due to additional clinical development of Dialysate Triferic and I.V.

Triferic, including the pediatric clinical trial for Dialysate Triferic, and investments we are making in our medical platform to support medical education efforts, the collection and analysis of real-world data for Dialysate Triferic and additional studies of Triferic in new indications.

The $4.8 million decrease was driven primarily by decreases to stock compensation, legal, recruiting and consulting fees, partially offset by an increase in labor costs.

The decrease in stock compensation primarily relate to the resignation of our former President and Chief Executive Officer, Stuart Paul, in April 2020 and former Chief Financial Officer effective July 2020.

Settlement Expense

Settlement expense was $0.4 million for the year ended December 31, 2019, compared to $1.0 million in for the year ended December 31, 2018.

Settlement expense for the year ended December 31, 2018 reflected the terms of the confidential settlement agreement and mutual release entered into with the Company’s former CEO, former CFO and a former and then current director.

Settlement expense for the year ended December 31, 2019 reflected the Company’s contribution of the Settlement Amount relating to the consolidated class action.

See Note 15 on the condensed consolidated financial statements herein for more detail.

Other Income, Net

Other income for each of the years ended December 31, 2019 and 2018 was $0.4 million and $0.3 million, respectively.

The amounts consist primarily of interest income.

Settlement expense was $0 for the year ended December 31, 2020, compared to $0.4 million in for the year ended December 31, 2019.

Settlement expense for the year ended December 31, 2019 reflected the terms of the confidential settlement agreement and mutual release entered into in August 2018 relating to the Company’s former Chief Executive Officer, and Director, Robert Chioini, former Chief Financial Officer, Thomas Klema, and a former and then current director.

Other Income (Expense)

Other income for the year ended December 31, 2020 was $246,000, consisting of interest income of $238,000 and $8,000 of realized gains on investments.

Other income for the year ended December 31, 2019 was $422,000, consisting of $392,000 of interest income and $30,000 of realized gains on investments.

Other expense for the year ended December 31, 2020 was $2.7 million, consisting of warrant modification expense of $0.8 million and interest expense of $1.9 million related to our debt facility (see Note 15 for more information on our debt facility).

Other expense for the year ended December 31, 2019 was $25,000 of interest expense.

Liquidity and Capital Resources

Since inception, we have incurred significant net losses and have funded our operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships.

At December 31, 2020, we had an accumulated deficit of approximately $337.4 million and shareholders’ equity of $34.2 million.

As of December 31, 2020, we had approximately $58.7 million of cash, cash equivalents and investments available-for-sale, and working capital of $56.7 million.

Net cash used in operating activities for the year ended December 31, 2020 was approximately $29.6 million.

On June 20, 2019, the Company closed a public offering of 5,833,334 shares of common stock at a

price of $3.00 per share.

On July 9, 2019, the underwriters of the public offering partially exercised their over-allotment option to purchase an additional 425,800 shares of common stock at a price of $3.00 per share, which closed on July 11, 2019.

On March 22, 2019, the Company entered into a sales agreement with Cantor Fitzgerald & Co.

(the “Agent”), pursuant to which the Company may offer and sell from time to time shares of the Company’s common stock through the Agent up to $40,000,000.

As of December 31, 2019, the Company sold 1,840,443 shares of its common stock pursuant to the Sales Agreement for gross proceeds of $5,383,079, at a weighted average selling price of approximately $2.92.

The Company paid $309,479 in commissions and offering fees related to the sale of the common stock.

As of December 31, 2019, approximately $34.6 million remains available for issuance under this facility.

On February 4, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co., as underwriter (the “Underwriter”), pursuant to which the Company (i) agreed to issue and sell an aggregate of 3,191,489 shares of its common stock (the “Shares”) to the Underwriter and (ii) granted the Underwriter an over-allotment option for 30 days to purchase up to an additional 478,723 shares that may be sold upon the exercise of such option by the Underwriter (the “Offering”).

The Shares were purchased by the Underwriter from the Company at a price of $2.22 per share.

The Offering closed on February 6, 2020.

On February 19, 2020, the Underwriter exercised its over-allotment option in full and an additional 478,723 shares were sold to the underwriter on February 21, 2020.

The Company raised a total of $8.0 million, net of estimated issuance costs of $0.2 million, relating to the Offering.

On March 16, 2020, Rockwell Medical, Inc.

and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP, as collateral agent and the lenders party thereto to obtain term loans in an amount up to $35.0 million.

$22.5 million was drawn under the Loan Agreement on the date of closing, and the remaining $12.5 million will be available for subsequent draws based on our achievement of certain milestones.

Net proceeds at closing were approximately $21 million after deducting estimated fees and expenses of $1.5 million.

Interest on the loans will accrue either in cash or a combination of cash and in kind interest, at our election.

Cash interest will accrue at a rate equal to the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75% plus 4.00%, for an initial interest rate of 8.75% per annum.

We have the option, under certain circumstances, to add 1.00% of such interest rate amount to the then outstanding principal balance in lieu of paying such amount in cash.

We are entitled to make interest-only payments for thirty months, or up to thirty-six months if certain conditions are met.

The Loan Agreement contains representations and warranties, affirmative and negative covenants, and events of default that are customary for credit facilities of this type.

The term loans will mature on March 16, 2025.

Based on the capital raise and debt financing noted above, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the commercialization of Dialysate Triferic and I.V.

Triferic, if approved, and executing plans for enhancing its medical capabilities and generating additional data for Triferic.

If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity or debt financing.

Based on the currently available working capital, capital raise and debt financing noted above, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

In February 2020, the Company sold 3,670,212 shares of its common stock for proceeds of $8 million, net of issuance costs.

On March 16, 2020, the Company closed a debt financing transaction with net proceeds at closing of approximately $21.2 million, net of fees and expenses (See Note 15 for further detail).

On September 23, 2020, the Company sold 23,178,809 shares of its common stock for proceeds of $32.7 million, net of issuance costs (see Note 11 for further detail).

During the year ended December 31, 2020, the Company sold 1,128,608 shares of its common stock as part of its sales agreement with Cantor Fitzgerald & Co.

for proceeds of $2.3 million, net of issuance costs.

Approximately $32.3 million remains available for sale under this facility.

See Note 11 for further detail.

The Company expects it will require additional capital to sustain its operations and make the investments it needs to execute its strategic plan, including the commercialization of Triferic (dialysate) and Triferic AVNU in dialysis, generating additional data for Triferic in dialysis, developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for our FPC platform.

If the Company is unable to generate sufficient revenue from sales of its commercial products and from partnerships, the Company will need to obtain additional equity or debt financing.

If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to, the expenses and revenue associated with the commercial launch of Dialysate Triferic and I.V.

Triferic, if approved, in the United States;

In addition, the Company is subject to certain covenants and cure provisions under our Loan Agreement with Innovatus.

As of the date of this report, the Company believes that it will either be able to satisfy such covenants or, in the event of a breached covenant, exercise cure provisions to avoid an event of default.

If we are unable to avoid an event of default, any required repayments could have an adverse effect on our liquidity (See Note 16 for further detail).

The COVID-19 pandemic and resulting domestic and global disruptions have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, and the operations of third parties upon whom we rely.

Quarantines, shelter-in-place, executive and similar government orders and the recent surge in infections domestically have negatively impact our sales and marketing activities, particularly as our sales representatives are unable to interact with current and potential customers to the same extent as before onset of the COVID-19 pandemic.

Our international business development activities have also be negatively impacted by COVID-19, especially with the recent surge in infections and resulting quarantines or shelter-in-place orders.

Depending on the severity of the impact on our sales and marketing efforts, the success of our commercial launch of Triferic AVNU could be delayed.

The COVID-19 pandemic, the recent domestic and international surge in infections and resulting global disruptions have caused significant volatility in financial and credit markets.

We have utilized a range of financing methods to fund our operations in the past;

however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding.

Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect our liquidity and capital resources in the future.

the timing and magnitude of cash received from drug product sales;

the timing and expenditures associated with the development of Triferic for international markets;

and the costs associated with ongoing litigation and investigatory matters.

the timing and expenditures associated with the development programs including our FPC technology for home infusion and potentially acute heart failure;

and the costs associated with our manufacturing and transportation operations related to our concentrate business.

We may elect to raise capital in the future through one or more of the following:

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Due to the fact that the assets used in our concentrate business currently constitute a substantial portion of the tangible assets we own other than our drug inventory, we may not be able to, or we may find it difficult, to obtain secured debt financing without the consent of Baxter.

We believe that our ability to fund our activities in the long term will be highly dependent upon our ability to successfully launch Dialysate Triferic and to obtain regulatory approval for, and successfully launch, I.V.

Our commercialization of Dialysate Triferic and I.V.

Triferic (if approved) is subject to significant risks and uncertainties, such that there can be no assurance that we will be successful in completing the commercialization in accordance with our plans, or at all.

If our commercialization of Dialysate Triferic and/or I.V.

Triferic should be delayed for any reason, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our research and development programs.

Even though we began commercialization of Dialysate Triferic as planned, if the results are unsuccessful, we may be unable to secure the additional capital that we will require to continue our research and development activities and operations, which could have a material adverse effect on our business.

We believe that our ability to fund our activities in the long term will be highly dependent upon 1) our ability to execute on the development of the FPC platform for new therapies, and 2) our ability to commercialize and increase adaptation of Triferic (dialysate) and Triferic AVNU.

Both of these strategies is subject to significant risks and uncertainties such that there can be no assurance that we will be successful is achieving approval of FPC in a new therapeutic area or that we will be able to have sustained commercial success with Triferic (dialysate) and Triferic AVNU.

If our planned clinical program is delayed or fails or if our commercialization of Triferic (dialysate) and/or Triferic AVNU should fail to increase sales, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our research and development programs.

Even though we began commercialization of Triferic (dialysate) and Triferic AVNU as planned, if the results are unsuccessful, we may be unable to secure the additional capital that we will require to continue our research and development activities and operations, which could have a material adverse effect on our business.

If we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately, cease operations.

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Net cash used in operating activities was $29.6 million for the year ended December 31, 2020.

The net loss for this period was higher than net cash used in operating activities by $6.8 million, which was primarily attributable to non-cash expenses of $8.8 million, consisting primarily of $5.0 million of stock-based compensation, $1.9 million of amortization of the right to use assets, $1.3 million of inventory reserves, $0.8 million of depreciation and amortization, and a $2.0 million net change in assets and liabilities.

The net loss for this period was higher than net cash used in operating activities by $1.3 million, which was primarily attributable to non-cash expenses of $4.2 million, consisting primarily of $1.5 million of amortization of the right to use assets, $0.8 million of depreciation and amortization, $0.8 million of warrant modification expense, $0.5 million of stock-based compensation, $0.3 million of inventory reserves, $0.3 million of debt financing cost amortization and accretion of discount , and a $3.0 million net change in assets and liabilities.

Net cash used in operating activities was $27.3 million for the year ended December 31, 2019.

The net loss for this period was higher than net cash used in operating activities by $11.7 million, which was primarily attributable to non-cash expenses of $15.1 million, consisting of, $8.8 million of inventory reserves, $4.4 million of stock-based compensation, $1.1 million of research and development licenses acquired, $0.7 million of depreciation and amortization, and $0.2 million of realized losses on sale of investments available-for-sale, primarily offset by an increase of $0.8 million in inventory, a decrease of $2.4 million in deferred revenue related to the recognition of revenue from our licensing agreements, an increase of $0.6 million in accounts receivable related to increases in revenues related to our international sales and an increase of $0.4 million in settlement fees related to the Settlement Agreement between the Company and its former directors and officers.

Cash (Used in) Provided by Investing Activities

The net loss for this period was higher than net cash used in operating activities by $6.8 million, which was primarily attributable to non-cash

expenses of $8.8 million, consisting primarily of $5.0 million of stock-based compensation, $1.9 million of amortization of the right to use assets, $1.3 million of inventory reserves, $0.8 million of depreciation and amortization, and a $2.0 million net change in assets and liabilities.

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $3.2 million during the year ended December 31, 2020.

The net cash provided was primarily due to the purchase of investments available-for-sale of $29.3 million, offset by $33.6 million sale of our available-for-sale investments and $1.0 million for the purchase of equipment.

Net cash used in investing activities was $4.7 million during the year ended December 31, 2019.

The net cash used was primarily due to the purchase of investments available-for-sale of $41.7 million, offset by $38.3 million sale of our available-for-sale investments, $0.6 million for the purchase of equipment and $0.8 million for the purchase of research and development licenses acquired from a related party.

Net cash provided by investing activities was $12.7 million during the year ended December 31, 2018.

The net cash provided was primarily due to the sale of our available-for-sale investments of $33.9 million, offset by $20.2 million used for the purchase of investments available-for-sale, $0.7 million for the purchase of equipment and $0.3 million for the purchase of research and development licenses acquired.

Cash Provided by Financing Activities

Net cash provided by financing activities was $63.3 million during the year ended December 31, 2020.

The net cash provided was primarily due to net proceeds of $17.3 million and $5.1 million from the sale of our common stock, related to our public offering and our at-the market offerings, respectively, partially offset by payment of $1.1 million related to a short term note payable.

The net cash provided was primarily due to net proceeds of $40.7 million and $2.3 million from the sale of our common stock, related to our public offerings and our at-the market offerings, respectively, net proceeds of $21.2 million from the term loan, partially offset by payment of $0.8 million related to a short term note payable.

Net cash provided by financing activities was $21.1 million during the year ended December 31, 2019.

The net cash provided was primarily due to the proceeds received from the issuance of the Company’s common stock of $21.9 million, net of issuance costs, and proceeds received from the exercise of employee stock options of $0.1 million.

Off‑Balance Sheet Arrangements

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Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Impairment losses on long-lived assets, such as real estate and equipment, are recognized when

events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable.

Impairment losses on long-lived assets, such as real estate and equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable.

Impairment losses are then measured by comparing the fair value of assets to their carrying amounts.

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The upfront fee was recorded as deferred revenue and is being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the Distribution Agreement.

The Company recognized revenue of approximately $2.0 million and $2.1 million related to the Baxter agreement during the years ended December 31, 2019 and 2018, respectively.

During the year ended December 31, 2016, the Company entered into a distribution agreement with Wanbang and received an upfront fee of $4.0 million.

The Company recognized revenue of approximately $2.0 million and $2.1 million related to the Baxter agreement for each of the years ended December 31, 2020 and 2019, respectively.

In 2016, the Company entered into a distribution and license agreement with Wanbang (the "Wanbang Agreement") and received an upfront fee of $4.0 million.

The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term.

The Company recognized revenue of approximately $0.3 million during the years ended December 31, 2019 and 2018, respectively.

Deferred revenue related to the Wanbang agreement totaled $2.9 million and $3.2 million as of December 31, 2019 and 2018, respectively.

The Company recognized revenue of approximately $0.2 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively.

Deferred revenue related to the Wanbang Agreement totaled $2.7 million and $2.9 million for the years ended December 31, 2020 and 2019, respectively.

On January 14, 2020, the Company entered into license and supply agreements with Sun Pharma (the "Sun Pharma Agreements"), for the rights to commercialize Triferic (dialysate) (ferric pyrophosphate citrate) in India.

Under the terms of the Sun Pharma Agreements, Sun Pharma will be the exclusive development and commercialization partner for Triferic (dialysate) in India, and the Company will supply the product to Sun Pharma.

In consideration for the license, the Company received an upfront fee of $0.1 million, and will be eligible for milestone payments and royalties on net sales.

A Joint Alliance Committee, comprised of members from the Company and Sun Pharma, will guide the development and execution for Triferic (dialysate) in India.

Sun Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities.

The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term.

The Company recognized revenue of approximately $10,000 during the year ended December 31, 2020.

Deferred revenue related to the Sun Pharma Agreement totaled $90,000 as of December 31, 2020.

On September 7, 2020, the Company entered into a license and supply agreements with Jeil Pharma (the "Jeil Pharma Agreements"), for the rights to commercialize Triferic (dialysate) (ferric pyrophosphate citrate) in South Korea.

Under the terms of the Jeil Pharma Agreements, Jeil Pharma will be the exclusive development and commercialization partner for Triferic (dialysate) in South Korea, and the Company will supply the product to Jeil Pharma.

In consideration for the license, the Company received an upfront fee of $0.2 million, and will be eligible for milestone payments and royalties on net sales.

A Joint Alliance Committee, comprised of members from the Company and Jeil Pharma, will guide the development and execution for Triferic (dialysate) in South Korea.

Jeil Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities.

The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term.

The Company recognized revenue of $2,500 during the year ended December 31, 2020.

Deferred revenue related to the Jeil Pharma Agreement totaled $197,500 as of December 31, 2020.

Stock-Based Compensation

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Per §229.305 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.

Financial Statements and Supplementary Data.

The Consolidated Financial Statements of the Registrant and other information required by this item are set forth beginning on page F‑1 immediately following the signature page hereof and incorporated herein by reference.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 7. Management’s Discussion and Analysis